Report Producer:Galaxy**
The following is an excerpt from the original report.
1. Japanese experience: sugar-free tea has gone through a 40-year cycle, and the era of consumption grading is the most flexible.
1) Overview: Sugar-free tea - through the 40-year industrial cycle, the era of consumption grading is the most flexible.
1.Fundamentals: sales volume has increased by 185 times in the past 40 years, and the competition pattern is "one super and four strong".
From the perspective of industry space, in the past 37 years from 1984 to 2021, the sales volume of Japanese tea drinks (more than 85% of which are sugar-free teas, and the scope of the later study is tea drinks) has increased from 03.5 billion litres increased to 6.5 billion litres, an increase of about 185 times during the period;
From the perspective of the competition pattern, it presents the steady-state competition characteristics of the top four (about 86% of CR5 in 22 years), most of the card positions are 10 yen 100ml**, and a small number of brands do functional high-end subdivision products.
2.Stock price: Davis double-clicked to drive the leading stock price to the highest **2900%.
From May 28, 1992 to December 27, 2023, the share price of Itoen, a leader in the tea beverage industry, rose from 269 yen** to 4,170 yen, an increase of nearly 1,400% during the period, corresponding to an annualized yield of about 9%;The highest increase is about 2900%, which is significantly higher than the excess return of Orient Foods (about 2800%)Among them, there are three main periods: 1992-1999, 2003-2005 and 2013-2021.
3.Stage: 40 years through 3 cycles, the 1990s were the most resilient.
Looking back at the growth process of Japanese tea beverages, it can be divided into three stages according to the industry growth rate, category structure, and fierce competition.
Initial period (1980-1989): a niche category under the background of economic bubbles, with an increase of about 28 times in production and a CAGR of about 96%.
Growth period (1990-2004): Consumption grading and "replacement" led to a boom in the growth category, with an increase of about 3 times in output and a CAGR of about 10%.
Maturity period (2005-2022): fluctuating from high prosperity to pro-cyclical low growth rate, with output growth of about 16% and CAGR of about 1%.
3.Stage: 40 years through 3 cycles, the 1990s were the most resilient.
From the perspective of categories, it has experienced the evolution of oolong tea, green tea, green tea + barley tea, among which the proportion of green tea first increased rapidly and then remained stable for a long time, with the attributes of passing through a long cycle, mainly due to its unique and irreplaceable health attributes, and at the same time, the taste threshold is low, and compared with oolong tea, black tea and other consumption scenarios (especially bound to Heshiqiang);
From the perspective of volume and price, the volume increase brought by penetration rate is the core factor for the industry to maintain long-term prosperity, and with the intensification of competition and the increase in the proportion of low-level categories, the unit price has maintained a downward trend for most of the time, and the overall trend is basically consistent with the food and beverage CPI.
2) Initial period (1980-1989): Niche categories in the context of bubble economy.
In the 1980s, Japan was in a period of bubble economy, and tea drinks were mainly canned oolong tea, which belonged to a niche category, mainly due to: 1) the high economic prosperity promoted the vigorous catering, and the consumption of tea drinks was more concentrated in the catering end (mainly free of charge);2) The westernization of the diet and the long working time have led to a high boom in demand for coffee beverages, and tea beverages are facing a serious impact on coffee3) The consumption scenarios and consumer groups of tea beverages on the C-end are not clear.
3) Growth period (1990-2004): Consumption grading led to the rapid prosperity of the category.
1.Industry demand: The output has increased from 1 billion liters to 4 billion liters, and the category has ushered in a high degree of prosperity.
The penetration rate has increased rapidly, and the counter-economic cycle has been released. In 1990, Itoen launched a large-package PET bottle of green tea drink, based on the logic of rapid increase in category penetration, although Japan's economic bubble burst in the 1990s and entered a long-term depression, it can still promote the category into a new round of business cycle for up to 10 years, and through the further introduction of small packaging products, functional products and other products to achieve both volume and price rise.
Factor 1: After the bursting of the economic bubble, the demand for home drinks and the replacement consumption increased significantly.
In the 1990s, Japan's economic bubble burst, although per capita GDP and national net income were at the level of developed countries, but the growth rate has slowed down significantly compared with the 1980s, while the domestic unemployment rate continued to increase, and the short-term financial market brought huge pressure on residents' wealth, and residents as a whole entered a state of "balance sheet recession".
On the one hand, the relatively high income level on a global scale makes Japanese consumers still have high requirements for the quality of products (the so-called "from thrift to luxury, from luxury to thrift"), but unemployment pressure and weak income growth have led consumers to be more sensitive to cost performance and prefer "low price and high quality" products.
In the 1990s, there was a significant increase in demand for tea beverages at home.
The economic recession has driven the demand for tea to shift from catering to households: After the economic bubble burst, consumers contracted their spending on going out for food, and the rate of eating out in Japan showed an overall downward trend after the 1990s, while Japan has always had the consumption habit of drinking tea in restaurants to accompany meals, and this part of the demand has shifted to the family side, among which "Chinese food" (pre-made dishes, etc.) is an emerging consumption channel, and Itoen and other leading brands of green tea drinks have seized this opportunity and cooperated with convenience stores to deeply bind "green tea drinks + bento".
The "Return of Japanese Food" greatly expands the consumption scene of tea: Japanese cuisine is deeply tied to tea culture, and sushi and sashimi are usually eaten with green tea, and oily foods (Chinese food, fried food, etc. are usually paired with oolong tea). After 1990, the Japanese catering trend gradually changed from Western food + Chinese cuisine to Japanese cuisine, that is, the so-called "return of Japanese food".
In the 90s, there was a preference for "low-price, high-quality" replacement products
In the 1990s, unemployment pressure and sluggish income growth in Japan led consumers to be more sensitive to cost performance and prefer "low-cost and high-quality" products
In 1990, Itoen launched a large-package PET tea drink, which has obvious advantages over carbonated drinks, fruit juice drinks, coffee, vegetable drinks, etc.
Factor 2: Household miniaturization and outdoor consumption have given rise to the demand for convenient ready-to-drink packaging.
Household miniaturization: Between 1990 and 2005, the proportion of households with two or fewer people in Japan increased from 44% to 56%, and the miniaturization of households led to a more convenient "lazy economy" for consumers, and there were many inconveniences in making tea at home, such as precise control of water temperature and brewing time. The OI tea launched by Itoen can basically restore the taste of freshly brewed tea, lowering the taste threshold for product promotion.
Expansion of outdoor consumption: In the 1990s, outdoor consumption scenarios such as camping and golf continued to expand in Japan, giving rise to the demand for ready-to-drink packaging, and the health attributes of tea beverages are just right for these outdoor scenes that focus on health and vitality. For this reason, Itoen has held women's golf tournaments since 2000 as one of the most important promotional areas for its products.
Factor 3: Aging and increasing obesity rates have given rise to great health demands.
Aging population: After 1990, Japan's aging population has become increasingly severe, with the proportion of the population aged 45-64 rising from 21 in 19807% to 28 in 20002%, and according to the survey report of the Ministry of Internal Affairs and Communications of Japan, 50-59 years old is the highest group of tea beverage consumption, mainly due to the anti-cancer and anti-aging ingredients of green tea, and its health attributes are popular among consumers.
Obesity rate increased rapidly: Between 1990 and 2004, the obesity rate in Japan increased from about 21% to a maximum of 26%, and low calorie and low sugar became the core demands of consumers.
Factor 4: The liberalization of beverage packaging policies promotes the rapid beverage of tea.
At the end of the 80s, Japan restricted the production of PET bottles below 1 liter due to environmental concernsIn 1996, the manufacturers and individuals who failed to dispose of containers in accordance with the regulations were punished, and the production of 500mlpet bottles was liberalized, which directly promoted the tea beverage industry to enter the second period of rapid growth after 1996
3) Growth period (1990-2004): Consumption grading led to the rapid prosperity of the category.
2.Competitive landscape: oligopoly leads with moderate competition.
In 1990, Itoyuan took the lead in launching large-package PET green tea beverages, and the early technical threshold formed a certain barrier, and the rapid increase in scale formed a first-mover advantage, and at the same time, it continued to lay out the production of tea raw materials and open up the first chain, forming a certain scale advantage in terms of production costs, and the oligopoly position became more and more stable. In 2000, Kirin launched the main differentiated "raw tea", which caused a certain disturbance to the industry competition pattern, but the overall impact was not obviousAlthough Suntory launched its green tea beverage product in 1993, it was quickly eliminated from the market after a mediocre performance.
Why wasn't the tea beverage category so competitive before 2000?
The category is still in a high-growth stage, and the continuous expansion provides ample room for the brand to grow.
Compared with other beverage categories, the brand differentiation value of tea beverages is more prominent, and the channel is not the most important factor at some stages.
The pressure on the upstream raw material end of tea restricts the competitive elasticity.
4) Maturity period (2005-2022): fluctuating from high prosperity to pro-cyclical low growth rate.
1.Industry demand: follow the macro cycle into a stage of low growth fluctuations.
The industry has entered a stage of low growth and fluctuates in accordance with the macroeconomic cycle. After 2005, the dividends of Japanese tea drinks gradually disappeared, and the economic cycle entered a stage of low growth fluctuations, and the unit price will be affected by the competitive environment, and the sales volume will be affected by the substitution effect of mineral water (negative) and sports drinks (positive). Specifically, there are two major characteristics, one is that barley tea has become the fastest-growing sub-category of green tea, and the other is that it continues to extend the life cycle of the category through functionalization and health care products.
Why did the prosperity of tea drinks decline after 2005?
Factor 1: The rise of mineral water benefits from more advantages and category upgrades.
Factor 2: The aging population is further deepened, and people over 65 years old prefer to brew tea.
Factor 3: Catering and freshly ground coffee are booming again.
4) Maturity period (2005-2022): fluctuating from high prosperity to pro-cyclical low growth rate.
2.Competitive landscape: one super and many strong coexist, and the margin of competition is tightening.
At this stage, the industry competition pattern has switched from "oligopoly leading" to "one super and many strong", with Itoyuan, Suntory, Coca-Cola, Kirin, and Kao as the main players, and the overall competition in the industry is heating up, reflecting the continuous decline in the unit price of the category, and the obvious increase in advertising investment, but on the whole, it is relatively controllable, and the brands are relatively restrained, and it has not evolved into a very fierce ** war.
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