CONSUMER: Pepsi Rolls Out Oat Drink for China
Bottom line: Pepsi’s launch of a new oat-based dairy drink in China using an online promotion looks like a smart and savvy marketing move to tap growing consumer demand for healthier beverages.
PepsiCo (NYSE: PEP) is taking aim at increasingly health-conscious Chinese consumers with its introduction of a new oat-based dairy drink to the market. This particular new drink, which is called Quaker High Fiber Oats Dairy Drink, is also tapping Chinese fondness for online purchasing through a tie-up that will see it sold exclusively at first through a partnership with e-commerce giant JD.com (Nasdaq: JD).
This launch seems quite gimmicky, aimed as much at gaining publicity as it is at introducing a product that consumers will really want. But that said, Chinese consumers do seem to love a good gimmick, especially when it involves hip and trendy online activity. That fact has been reflected in the huge success of Single’s Day, an online shopping extravaganza created by Alibaba (NYSE: BABA), and the phenomenal success of smartphone maker Xiaomi, which for its first few years sold all of its products online only.
As to me personally, I was slightly puzzled on reading the reports about this new oat-flavored drink, as I’ve never heard of anything similar before and the taste sounds quite unusual. What’s more, anyone who is curious about the drink won’t be able to get satisfied quickly, at least not initially, since e-commerce deliveries take at least a few hours at the very minimum. But presumably Pepsi knows all this, and is betting the unique flavor and delayed gratification will only add to the product’s appeal.
All that said, let’s look more closely at the new product, which is being marketed under the Quaker name that is synonymous with rolled oats and oatmeal. (English article; Chinese article) Everything about the product is relatively normal in terms of size and price, with the drink being sold in 350 milliliter bottles costing 6.9 yuan each, or just over a dollar. Pepsi said the move marks the first time outside the US that it will sell a drink exclusively on the web initially.
Healthier Flavors
Pepsi and rival Coke (NYSE: KO) both offer juice-flavored drinks with their Minute Maid and Tropicana brands that would probably fall under the healthy beverages category, even though I doubt either is really that healthy and is mostly artificial flavors and colors. This Quaker product looks like a first real attempt to change that, since the reports say the new drink is dairy-based and one bottle will contain as much dietary fiber as 1.5 bowls of oats.
Pepsi and Coke are facing growing competition from both domestic and global companies eying the Chinese market for healthier drinks. US fruit and tea-based beverage giant Snapple (NYSE: DPS) has entered the market after reacquiring the Asia rights to its brand name 2 years ago. (previous post) The foreign players also face competition from China’s leading juice maker Huiyuan (HKEx: 1886), which Coke tried unsuccessfully to acquire 6 years ago.
Chinese consumers definitely have different tastes from westerners when it comes to sweetened products like drinks, and often prefer fruity and tea-based flavors. Coke discovered that fact with its Minute Maid Pulpy brand of orange-flavored drinks, which it developed specifically for the China market and become its first drink developed outside the US to top the $1 billion sales mark.
As to this new Pepsi drink, I’ll have to admit that despite its oddness I’m just slightly intrigued about the product and would consider tasting it. I’m not a big online shopper so I probably wouldn’t buy it via e-commerce. But it does look like the drink will eventually be sold in traditional stores after a 2 month online exclusive period with JD.com ends, so perhaps I’ll try it then. At the end of the day, this particular launch looks quite filled with gimmicks, but perhaps that’s a good strategy for this kind of new product in a market where people love such stunts.
