Genki Forest Rising soft drink brand in China

Genki Forest: a Chinese soft drink brand planning to tackle Coca-Cola

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Genki Forest, founded in 2016, is a Chinese soft drink brand that specializes in sparkling water and instant tea. Because of the increased popularity of “low calorie” and less sugary food among Chinese people, Genki Forest’s relatively healthier products have successfully catered to a substantial target market.

According to Xinhua News Agency, the monthly sales of Genki Forest was 260 million in May 2020, which is higher than its total sales in 2018. In 2020, the brand had a market valuation of 14 billion RMB, and announced its plans to become the ‘Coca-Cola of China.

Based on the 11.11 sales data, the Chinese soft drink brand ranked 1st in the soft drink category both in Tmall and JD. In this case study, we investigated how Genki Forest, an only 4-year-old brand, gained phenomenal success by looking into its market strategy and challenges.

Source: Daxue Consulting and Double V. Training & Consultancy; F&B market in China report, timeline of Genki Forest’s major achievements

GENKI FOREST’s China market strategy

Compared to soft drink magnates in China like Coca-Cola and NongFu Spring, Genki Forest has no advantages in the production line, distribution channels and brand reputation. The reason why it can occupy Chinese soft drink market share is because of its strong market strategy which includes packaging design and pyramid promotion strategy.

Genki Forest has an aesthetically pleasing, Japanese style packaging

The target customer group of Genki Forest is the young generation who values product appearance. Japanese products, which are known to be high-quality while aesthetically pleasing, are very attractive to these consumers.  So, the Chinese soft drink brand designed neat Japanese style packaging to lead customers think it is a Japanese brand. Though misleading, this tactic of trying to pass as Japanese is not uncommon in China, another case is the Chinese retailer Miniso.

Source: Genki Forest; Genki Forest’s neat, Japanese style packaging. Though effective as a marketing tactic, has lead to issues with copyright infringements.

To enhance the Japanese image, it also invited KOL @Natto Grandma (纳豆奶奶) who lives in Japan and likes to share her life in Japan to endorse their ready-to-drink tea product. However, after Genki Forest gathered a following, it gradually stopped using these misleading methods to avoid being accused of plagiarism.

Natto Grandma’s Weibo, Recommend one of the Genki Forest’s products”

Source: Natto Grandma’s Weibo, Recommend one of the Genki Forest’s products”

Strategy 1: Cooperating with different levels of influencers

Source: Daxue Consulting and Double V. Training & Consultancy; F&B market in China report, Genki Forest cooperating with different tier of influencers

Genki Forest works with different tiers of celebrities, KOLs and KOCs to create that bandwagon effect which refers to the increased preference for a product as the number of people buying it goes up.

At the bottom of the pyramid, these are KOCs who share their feedback about the products in the most authentic way. They are able to penetrate niche consumer segments and are usually deemed more credible than KOLs despite their smaller follower base. Higher up, KOLs are usually bloggers, online celebrities and social media stars.

Two top KOLs Li Jiaqi (李佳琦) and Weiya (薇娅), both of whom are very sales-driven, have featured Genki Forest products in their live streams. Influential bloggers have also shared about the brand and products on Xiaohongshu (小红书) and Douyin (抖音) which attracted a large, potential target market who closely focus on their well-beings and refuse to gain weight. At the top of the pyramid, there are top celebrity who are actors, idols and singers. Genki Forest has worked with Zhang Yuqi (张雨绮) who is considered a top-tier actress in China, and this partnership has created momentum and huge traffic.

Search volumes of Genki Forest and Coca-Cola

Source: Baidu Index, Search volumes of Genki Forest and Coca-Cola

Celebrities & Variety Shows

To lead trends and create momentum, the Chinese soft drink brand invites A-list actors and singers to collaborate. For instance, Yuqi Zhang endorsed it after finishing a variety show called Sisters Who Make Wave (乘风破浪的姐姐) which made a phenomenal success in the women over 30 market.

 Yuqi Zhang endorsed GENKI Forest

Source: Genki Forest’s Weibo, Yuqi Zhang endorsed GENKI Forest

In addition, to build brand awareness, the Chinese soft drink brand has sponsored 4 popular variety shows so far, which include Me to Us (我们的乐队), Let’s Exercise, Boys (运动吧少年), The Irresistible (元气满满的哥哥), Youth on Record (青春在大地). The target audiences are the young generation which aligns with Genki Forest. And they all have a lively style which fits the soft drink brand’s young, energetic and innovative brand image.

KOLs

In addition, by cooperating with KOLs, Genki Forest benefits from their high-quality content and word-of-mouth marketing. The brand cooperated with internet sensation Li Jiaqi to promote its milk tea and sparkling water through live-stream broadcasting

KOCs

Finally, with the help of celebrities and KOLs, the Chinese soft drink brand can take advantage of the bandwagon effect to get countless in-person experiences shared by common users. On Xiaohongshu (RED), Genki Forest has over 20k posts.

Strategy 2: Genki Forest’s brand promise to create healthy soft drinks

Genki Forest has a brand promise of creating healthy soft drinks. Based on its promise, the marketing message is “0 sugar, 0 calorie, 0 fat”.

In order to create healthy soft drinks that cater the demand of consumers who are increasing focused on health and weight control, Genki Forest uses natural sugar substitutes such as erythritol to control the sweetness and calories. At the time when Japanese brands launched low sugar products in the Japanese market, Genki Forest’s “0 sugar 0 calorie” marketing concept was already very developed. In fact, it was one of the first to use this marketing concept in China.

Furthermore, to prove its soft drinks are healthy, it cooperated with a KOL @Dad’s Test-Dad Wei (老爸测评-魏老爸) who used professional testing methods to produce scientific data to show its soft drinks are really “0 sugar, 0 calorie, 0 fat”.

Strategy 3: Investing in healthier and tastier ingredients

Many soft drinks emphasize scale and profit and would choose cheaper ingredients. For example, Coca-Cola uses aspartame instead of the healthier but costlier alternative meso-Erythritol. Therefore, Genki Forest stands out in the competition by investing in healthier and tastier ingredients. It replaces sucrose with meso-Erythritol and sucralose because these two ingredients only contain 60-80% sweetness of sucrose. Additionally, meso-Erythritol contains almost 0 calorie.

Source: Daxue Consulting and Double V. Training & Consultancy; F&B market in China report, Genki Forest emphasizes the quality of ingredients in exchange for a lower gross profit margin

From the comparison above, we can see that Genki Forest has a higher production cost, lower price of distribution, and in turn has a lower gross profit margin than Coca-Cola. Genki Forest also has a list of ingredients that are carefully picked out, which are much healthier and tastier. As a result, although Genki Forest earns less profit per bottle sold, their products have high potential in a world where consumers are focused on quality of ingredients.

Strategy 4: Distribution through both convenience stores and e-commerce

Source: Deloitte, designed by daxue consulting; F&B market in China report, the breakdown of retail sales of Genki Forest products sold in each channel

If we breakdown Genki Forest’s retail channels, we can see that offline retail such as convenience stores, and the sum of supermarket, restaurants, school shops, vending machines and so on, account for 35% and 39% of total retail sales of Genki Forest, respectively. On the other hand, e-commerce shops including Tmall and JD flagship shops account for roughly 25% of total sales. Only 1% of sales come from large shopping malls.

Offline, the Chinese soft drink brand leverages the fast growth of chain convenience stores in China. Through convenience stores, Genki Forest becomes accessible to every-day shoppers like students and white-collar workers.

The advantage of chain convenience stores is that they have a standard management process. This streamlines purchasing and expedites the launch offline marketing. Also, having products sold offline in chain convenience store can creates a reliable brand reputation to customers, as they become familiar with the product through frequently seeing it on the shelves

For online, Genki Forest establishes a closed cooperation with Tmall. It joined Tmall’s marketing activities like Tmall’s Black Box, Super-Promising New Brands. It launches new products through the click-through rate and conversion rate in Tmall.

How Genki Forest compares with other soft drink brands on the market

Strengths

Being an “Internet brand”

Firstly, Genki Forest is considered an “internet brand”. An internet brand combines its brand culture with the internet and takes full advantage of the internet development in China. It uses the speed and breadth of information dissemination on the internet to improve its popularity. This is the basis of Genki Forest’s pyramid promotion strategy. Also, it uses the derivatives of the internet, the e-commerce and big data, to diversify its distribution channels. For Genki Forest, it builds its online distribution channel through Tmall.

Strong PR

Secondly, Genki Forest has a strong public relations capacity which can help it build great brand reputation and gain the trust of its customers. Recently, the Chinese soft drink brand recovered from a big mistake on its Tmall store. It published mini-sized milk tea but didn’t mention its volume when selling in bulk. At first, this caused a lot of negative feedback on ratings on Tmall.

Luckily, the brand had great crisis management by immediately apologizeing on all  official accounts and sent a free box of milk tea to each involved customer. As a result, the customers were satisfied with the handling of the mistake and accepted the apology, minimizing the loss for the Chinese soft drink brand.

 Genki Forest’s Weibo and WeChat Official Account, the Chinese soft drink brand apologized for its mistake

Source: Genki Forest’s Weibo and WeChat Official Account, the Chinese soft drink brand apologized for its mistake

Weaknesses

No consistent pricing system

The relatively high prices of Genki Forest products would potentially affect sales volume in Tier 3 and 4 cities. Additionally, Genki Forest doesn’t follow a strict pricing system, the sparkling water is ¥5 for 480ml while Coca Cola is ¥3.5 for 500ml. Its milk tea is ¥9.8 for 450ml while the milk tea of Uni-President China is ¥5 for 500ml. Additionally, it has been reported that customers found different retail prices of the same Genki Forest product in different convenience stores within a small geographical area.

Outsourcing production

By having production outsourced to other factories, Genki Forest cannot closely control the product quality, besides the higher product cost incurred. Although Genki Forest has started to build its own factory in September 2019, market demand still cannot be satisfied.

Misleading customers

When Genki Forest launched its milk tea (乳茶), it claimed that the product doesn’t contain sucrose, while it actually does. Although Genki Forest’s public relations team promptly apologized for the false product information, the damage to brand reputation is done.

Additionally, Genki Forest has been accused of misleading customers to think it is a Japanese brand and plagiarizing the packaging of Fujiya and LUPICIA. These irresponsible marketing behaviors are treated as deceiving consumers which might significantly damage its brand reputation.

Xinhua News Agency, daxue consulting design, how long can Genki Forest continue to go

Source: Xinhua News Agency, Genki Forest accused of plagiarizing Japanese brands

The business model is easily copied

The soft drink industry is already a stiff market competition in China as it doesn’t have obvious technical entry barriers, and any brand with sufficient capital can imitate the successful strategies of other brands and potentially succeed.

Furthermore, Genki Forest will be facing a fierce competition in the sparkling water market. The soft drink giant Coca-Cola recently created a new sparkling juice drink called Appletiser, Yili Group has established their own sparkling water line and HEYTEA’s sparkling water has already entered convenience stores. Genki Forest must come up with creative strategies to be able to compete with in the sparkling water market and earn a market share.

Opportunities

Genki Forest chose the right product lines, sparkling water and instant tea. Although the growth of Chinese soft drink industry became subdued in recent years, its market segment of sparkling water is still of the second largest volume. And its market segment of instant tea is full of opportunities. It will get an even bigger volume gradually as the result of Chinese people’s growing attention to health.

Chinese soft drink industry study

Source: Bexcel Management Consultants, Chinese soft drink industry study

Threats

The success of Genki Forest is perfectly imitable and substitutable. The Chinese soft drink industry doesn’t have obvious technical or market barriers to entry, and any brand with sufficient capital can imitate the pyramid promotion strategy of the Chinese soft drink brand. Even Genki Forest itself imitated Luckin Coffee partly by having multiple rounds of financing in order to gain adequate capital for marketing promotions.

In addition, Genki Forest is going to facing a fierce business competition in the sparkling water market. Chinese soft drink magnates and popular brands are starting to expand their product lines in sparkling water. For instance, Coca-Cola recently published a new sparkling juice drink called Appletiser; Yili Group established their own sparkling water; HEYTEA’s sparking water already entered convenience stores. Compared with Chinese soft drink magnates, Genki Forest has no price, production and distribution advantage.  And compared with popular brands, it only has equal or even less visibility.

What brands can learn from Genki Forest’s marketing strategies

Genki Forest has successfully earned its market share by having an aesthetically pleasing packaging, leveraging the strength of social media and working with different tiers of KOLs, as well as investing in healthier and tastier ingredients to match customer needs. However, Genki Forest also faces threats such as its success being easily copied and misleading its customers. To improve, Genki Forest should consider coming up with unique recipes or packaging that can’t be easily duplicated and publish correct ingredient information to save itself from potential health-related consumer complaints.

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