The beverage industry is shifting from selling water to selling emotional value. East Leaf relies on distribution and cash flow to hold its ground, while Genki Forest innovates through internet-style iteration. The three compete on patience, speed, and balance.
Based on data disclosed in 2025, the battle inside the convenience store cooler is no longer about "which one tastes better." As consumption enters a new cycle, the valuation logic of the beverage industry is shifting from "selling water" to "selling emotional value and experiences"—this is not a romantic narrative of consumption upgrading, but a comprehensive rewrite of product innovation, channel efficiency, and brand value.
The data reveals the true face of this transformation: against the backdrop of a markedly slowing sugar-free tea market, Nongfu Spring's Oriental Leaf still holds a 75% share of the sugar-free tea segment (source: Nongfu Spring 2025 annual report); Genki Forest posted overall revenue growth of 26%, with its vitamin water surging 128% year-over-year (Genki Forest official disclosure, 2025 data); and Heytea, under the pressure of a valuation pullback from 60 billion RMB and more than 650 franchise store closures in one year, has announced it will "not participate in scale-driven involution."
Three brands, three strategies, but all answering the same question: when beverages become vessels for emotion, who can lock consumers into a repurchase loop? Channels, brand, and supply chain—these three cards, when played right, form a moat; when played wrong, they create internal friction. The next round of the test is who can find a dynamic balance among patience, speed, and trade-offs.
Oriental Leaf: Deep Channel Cultivation and a Cash Flow Moat
In 2011, when Nongfu Spring launched Oriental Leaf, it was rated one of "China's five worst-tasting beverages." According to industry speculation, the product operated at a loss for a long period after its initial launch. But Nongfu Spring did not give up, nor did it change the formula to cater to the market.
This is not "going with the flow"—it is meticulously calculated strategic patience.
Nongfu Spring's 2025 annual report shows an overall gross margin of 60.53%, net profit of 15.868 billion RMB, and a net margin exceeding 30%. The confidence behind this profitability comes from the packaged water business—packaged water generated full-year revenue of 18.709 billion RMB, serving as a stable cash flow cash cow. It is precisely this cash cow that allowed Nongfu Spring to afford "nurturing" a loss-making sugar-free tea category for seven years.
Even more critical is its channel cultivation capability. Nongfu Spring maintains deep cooperative relationships with traditional distributor channels, and its systematic deployment of in-store coolers gives its brand matrix complete shelf coverage at the point of sale. When you walk into a convenience store, the most prominent spot in the cooler is always occupied by Nongfu Spring's product lineup—bottled water, Oriental Leaf, Tea π, and Scream—forming a complete price-band coverage.
Nongfu Spring's tea beverage products generated full-year revenue of 21.596 billion RMB, up 28.97% year-over-year, breaking the 20 billion RMB mark for the first time and becoming the company's largest revenue category. Against a clearly slowing overall sugar-free tea market, Oriental Leaf held a 75% market share—this is not a romanticized narrative of "waiting for consumers to grow up," but rather the construction of a competitive barrier that is difficult to replicate, built on a cash flow moat and deep channel cultivation.
The Oriental Leaf case demonstrates that in the fast-moving consumer goods industry, patience is a luxury—only players with ample cash flow and strong channel control can afford it.
Genki Forest: Applying Internet Efficiency Methodology to Fast-Moving Consumer Goods R&D
If Oriental Leaf is a market secured through a cash flow moat, then Genki Forest has captured certain white-space scenarios through faster iteration speed.
The explosion of vitamin water is not just about capturing the emotion of "compensating for staying up late"—it is a typical case of Genki Forest using the internet's "small steps, fast iteration" approach to build a differentiated advantage in R&D pace. Genki Forest's latest data shows vitamin water up 128% year-over-year, and behind this number lies a set of R&D mechanisms completely different from traditional FMCG.
Genki Forest built an innovation center in Xianning, internally codenamed "Creation Camp 2044"—young product managers take the stage to pitch ideas, with products like cooling tea, cola beer, probiotic sparkling drinks, and the sports-scenario "Genki Forest GO" rotating through trial and error. Tang Binsen's exact words: "Only through a sufficient sample of trial and error can innovation produce a systematic methodology." Translated plainly: use probability thinking to bet on hits, and spend trial-and-error costs to increase the odds of success.
Supporting this logic is real money: 200 million RMB for the Xianning Innovation Center, with a single mission—turning ideas into products that can be tested off the production line. With dual R&D centers in Beijing and Xianning, seven self-built factories with cumulative investment of nearly 8 billion RMB, and 1 million offline retail touchpoints covering more than 800 cities.
Online channels are not just for "selling"—they operate small storefronts on Tmall and JD.com for A/B testing, and only scale up broadly once the data hits targets. This playbook is familiar to internet companies, but few FMCG companies operate this way.
From "Subtraction" to "Addition": Creating New Consumption Scenarios
Genki Forest's overall revenue grew 26%, maintaining double-digit growth for three consecutive years. But what deserves more attention is the evolution path of its product matrix: from "sugar-free" sparkling water to vitamin-enhanced iced tea, from telling consumers "what not to drink" to telling them "what else you can drink"—this shift from "subtraction" to "addition" is essentially using product iteration speed to create new consumption scenarios that traditional giants have not yet covered.
The success of vitamin water is not simply "capturing market share," but rather pioneering an entirely new category: neither the "alertness boost" of traditional functional drinks, nor the "healthy and guilt-free" positioning of sugar-free tea, but rather "emotional compensation after staying up late"—a consumption scenario that did not previously exist.
Social Currency Play: Turning Consumers into Brand Advocates
The "DIY cocktail mixing" trend has gone viral across social platforms. According to Genki Forest's official data, videos related to its "cocktail relay challenge" have accumulated over 510 million views. The core of this play is not "great taste," but using social currency to get consumers to voluntarily spread the brand message—another innovation in how internet tactics penetrate traditional FMCG shelf space.
Genki Forest has achieved differentiation in R&D efficiency through a faster iteration cadence. Traditional giants have an established channel moat, but their R&D tempo is difficult to accelerate overnight.
Cold Perspective: The Other Side of Growth
The 128% growth in vitamin water is a fact, but the more pressing question is: when Nongfu Spring has built a moat with 21.5 billion RMB in tea beverage revenue and a 75% share of the sugar-free tea market, can Genki Forest's "new scenario creation" transition from "novelty-driven growth" to "habitual repurchase"? Internet methodology solves the problem of "speed," but the ultimate test in the beverage industry is "stability"—Nongfu Spring nurtured Oriental Leaf for seven years; does Genki Forest have enough patience to nurture multiple "vitamin waters"?
Additionally, the 128% growth may be affected by a base effect—since vitamin water was only heavily promoted starting in late 2023, a small base means the significance of a high growth rate needs to be discounted. The Creation Camp model can accelerate product iteration, but it carries higher trial-and-error costs and product survival rate challenges. Deploying to 1 million retail touchpoints (source: Genki Forest official disclosure) does not equal sell-through at those touchpoints; there remains a gap in inventory turnover efficiency between distribution and actual sales. The figure of Genki Forest's overall gross margin exceeding 60% is an industry estimate, as the company is not publicly listed and its specific financial data lacks official audited disclosure.
Heytea: A New Growth Path for Brand Value
On February 10, 2025, Heytea sent an internal all-staff email titled "Not Playing the Numbers Game or Scale Involution—Returning to Users and Brand." The letter sent shockwaves through the industry.
At that time, the new-style tea beverage industry was mired in a frenzied scale race. Mixue Ice Cream & Tea had approached 60,000 global stores, with full-year revenue of 33.56 billion RMB and net profit of 5.93 billion RMB (2024 financial data), but a net margin of only 17.5%, with average ticket prices compressed to 6–8 RMB. Guming posted revenue of 12.91 billion RMB and net profit of 3.11 billion RMB (both 2024 figures), with store count exceeding 13,000. Chabaidao generated revenue of 5.4 billion RMB (2024 data), with net store additions of only 226, essentially flat.
Heytea said: I'm out.
This is not aloofness—it is a shrewd asset defense strategy.
Heytea's valuation was pushed to 60 billion RMB in 2021, but subsequently experienced a revaluation pullback. With the lower-tier market locked down by the supply chain machines of Mixue and Guming, if Heytea continued price wars, it would only wipe out its brand premium. In 2022, Heytea opened franchising, hoping to push into more markets through scale expansion, but that expansion did not go smoothly.
Heytea's store count fell from more than 4,600 at the start of 2024 to approximately 3,930, with net closures of 680 stores in one year. Meanwhile, Heytea opened over 115 stores overseas, entering eight overseas countries—including Singapore, the UK, Canada, Australia, Malaysia, and the US—as well as Hong Kong and Macau. Domestic closures and overseas expansion are two sides of the same strategy: domestically, closing underperforming franchise stores to protect the brand floor; overseas, using high-end store formats like LAB stores to push brand premium higher in less saturated markets. However, the judgment that overseas LAB stores "rebuild brand premium" is an inference of this article, as there is currently no public data to support it.
According to franchisee reports, the initial investment for a store reaches up to 1.2 million RMB, with booming business often lasting only two months, and renewals may require an additional 600,000–700,000 RMB for refurbishment.
Heytea's management of franchisees is extremely strict. Product preparation follows a rigorous SOP with minimal tolerance for error. Franchisees must pass periodic assessments to qualify for material cost subsidies.
Behind this strict management is Heytea's use of store closures and brand consolidation to defend pricing power in the premium tea segment. This is not brand greed—it is the trade-off premium brands make between scale and quality: when brand premium is the only moat, any compromise on quality risks collapsing that premium. Heytea's store closures and pause on franchising have one core purpose: preventing the brand label from being devalued.
In July 2024, Heytea launched its "Super Plant Tea" series, with the first product, the Collagen Fiber Bottle, selling over 1.6 million bottles within 10 days and over 10 million bottles within a month and a half. This product tapped into dual motivations: on one hand, kale and beetroot offered functional expectations of "fat reduction and lightness"; on the other hand, niche ingredients themselves served as a taste statement of "I don't follow the crowd."
Heytea's choice reveals a reality: amid the noise of consumption downgrading, people willing to pay for "feeling" still exist, but the ceiling of this market is far lower than imagined. When you can't hold your brand premium, your only path is to seek growth through supply chain efficiency and scale—and that path has already been sealed off by Mixue and Guming.
The Business Logic Behind High Gross Margins
In a bottle of beverage, the cost of water and sweeteners is transparent. When consumers are willing to pay an extra 3 RMB for "emotion," how is that 3 RMB distributed among brand, platform, and supply chain?
Raw material costs in the beverage industry typically account for 30%–40% of revenue, with packaging (the bottle itself) representing the largest share. Taking Nongfu Spring as an example, its gross margin reaches 60.53%, meaning a bottle of water priced at 3 RMB costs approximately 1.2 RMB to produce, with a gross profit of about 1.8 RMB. But that 1.8 RMB gross profit must cover channel distribution, the brand's marketing expenses (Nongfu Spring's sales and distribution expenses account for nearly 20% of revenue), and ultimately net profit (Nongfu Spring's net margin exceeds 30%).
For "emotional value" brands, this profit distribution structure shifts. Genki Forest's vitamin water typically retails at 5–6 RMB, but its raw material cost (water + sweeteners + vitamins) may only be 0.5–1 RMB higher than ordinary sparkling water. In terms of profit distribution structure, the brand holds the dominant position in the emotional premium—the additional revenue is claimed by the brand in the form of R&D investment and marketing expenses. Genki Forest's overall gross margin exceeds 60% (an industry estimate, as the company is not publicly listed), and the brand remains the most powerful link in the profit distribution chain.
Heytea's situation is even more extreme. A cup of Heytea priced at 20–25 RMB has raw material costs of approximately 5–8 RMB, with extremely high fixed costs from store rent, labor, and decoration amortization. This is why Heytea franchisees struggle to profit even with booming business—because the brand extracts the majority of profit in the form of "brand usage fees" and "supply chain management fees" through rigorous SOPs, high decoration standards, and frequent new product launches.
The core argument here is: emotional value brands can sustain high gross margins, but the balance of profit distribution rights is the true commercial bottom line. When the distribution of benefits among brand, channel, and supplier becomes unbalanced, no margin can be sustained. Heytea's franchisee dilemma is essentially the trade-off premium brands make between scale and quality—to protect brand value, franchisees must be held to high standards, but this also compresses their profit margins.
Final Thoughts
Emotion is fickle. When the placebo effect diminishes, how can "emotional assets" without technological barriers face the next, even harsher cycle?
Oriental Leaf has proven that patience can buy a moat, Genki Forest has proven that speed can buy a ticket in, and Heytea has proven that contraction can buy pricing power. But none of these three cards is a wildcard. The next round will not be about one-time explosive strength, but about who can shift gears between patience, speed, and trade-offs at any moment.