Sales of the popular sugary "happy water" are stagnating, yet Coca-Cola remains incredibly formidable.

When some merchants post short videos claiming that carbonated drinks are "unwanted even for free", and the claim that "sugary carbonated drinks are on their last legs" is widely spread online, many people thought Coca-Cola's hard days were coming.

The facts are unexpected. Data shows that in the second quarter of this year, The Coca-Cola Company recorded revenue of 13.38 billion US dollars, a year-on-year increase of 7%, and net profit of 4.438 billion US dollars, up 17%.

Henrique Braun, CEO of The Coca-Cola Company, pointed out directly: "In the Asia-Pacific market including China, we have achieved overall volume growth in almost all beverage categories."

It is worth noting that since the first glass of Coca-Cola was sold in 1886, Coca-Cola has a history of 140 years. Its current performance is still so strong that it can indeed be called "terrifying".

In sharp contrast, the overall decline of sugary carbonated drinks has gradually taken shape, and the contraction of the domestic beverage market has also become a reality. Then why can Coca-Cola buck the trend?

Perhaps it is time to get to know Coca-Cola again.

01

The Top "Happy Water"

Looking back at the past summer, sugary carbonated drinks were not popular.

According to reports, the owner of a small supermarket in Hangzhou revealed that this summer, the sales of sugary drinks such as Coke and Sprite have dropped significantly compared with last year: "We can only sell more than one case a day, at least 1/3 less than last year."

The industry data for the first half of 2026 released by Euromonitor also shows that the overall sales volume of domestic carbonated drinks increased by 4.3% year-on-year, but all the increment came from sugar-free products, while the sales of sugary products continued to shrink.

In fact, this trend echoes the performance of the overall beverage market.

Nielsen IQ data shows that in May this year, the total channel sales of domestic beverages fell by 8.7% year-on-year, and offline channel sales fell by 10.1% year-on-year. Data from the National Bureau of Statistics shows that in June this year, the output of beverages of enterprises above designated size across the country was 17.45 million tons, down 3.2% year-on-year; the cumulative output from January to June was 90.273 million tons, down 0.5% year-on-year. This is the first year-on-year decline in half-year output in the domestic beverage industry in the past five years.

However, the poor performance of the overall beverage market and the unpopularity of sugary carbonated drinks do not mean that Coca-Cola has also been left out. In fact, Coca-Cola is still the top "happy water".

Recently, reporters from *International Finance News* visited dozens of supermarkets and convenience stores in Shanghai and Jiangsu, asking "what is the best-selling drink this summer", and got a highly unified answer: Coca-Cola, iced black tea and Oriental Leaf.

Looking at these three beverages, it is not difficult to find that each of them is a "super SKU" in its own track: Coca-Cola leads the carbonated beverage track, iced black tea leads the sugary ready-to-drink tea track, and Oriental Leaf leads the sugar-free ready-to-drink tea track.

The media survey is still a small-scale investigation, which leads to a question: in the carbonated beverage track, can Pepsi shake Coca-Cola's position?

Taking Master Kong, the company behind iced black tea, as an observation window, we can get a glimpse of the situation. In short, as the exclusive licensed bottler of Pepsi-Cola in Chinese mainland, Master Kong's sales of carbonated beverages and other businesses fell by 2.8% year-on-year in the first half of this year. In response to this, the vertical WeMedia "Southern New Consumption" said bluntly: "It basically means that Pepsi-Cola is not selling well in China."

The global market situation is roughly similar. In the second quarter of this year, Coca-Cola's carbonated beverage sales remained stable, with global case volume up 5% year-on-year, and sales in its North American home market up 3%, while Pepsi's global beverage sales only increased by 2%, and its carbonated beverage sales in its home market declined.

As for the brand itself, in the article *Why Did Coca-Cola Beat Pepsi?* published recently, American financial writer Jack Hoff mentioned: "Some studies using real-time brain scans show that even people who like Coke and Pepsi equally in blind tests will have the areas of their brain responsible for sensory pleasure light up when they see the Coca-Cola label."

All in all, Coca-Cola is worthy of the name of the top "happy water". It taps into the market through the combined efforts of products, brands and marketing, which is also a key reason why The Coca-Cola Company can buck the trend.

Even so, when the sugar reduction wave swept across, Coca-Cola had to take action in advance and start to reshape itself.

02

The Protracted Battle for Sugar Reduction

Coca-Cola has taken action on sugar reduction more than 20 years ago. To be exact, in 2005, Coca-Cola launched "Coca-Cola Zero", which used aspartame as a sugar substitute and acesulfame potassium to adjust the taste. In 2008, Coca-Cola promoted this product to the Chinese market.

In contrast, Pepsi-Cola moved at a slower pace, and did not launch its sugar-free cola until 2011, which means that the two sugary carbonated beverage giants are increasing their efforts in sugar reduction.

"Coca-Cola started earlier with its Zero product, and the product has stronger continuity, so it has an advantage. Today, the appearance of Coca-Cola Zero cans is almost exactly the same as that of regular Coca-Cola cans," Jack Hoff said bluntly: "Pepsi once took a strange detour, launching Pepsi Max which contains ginseng, extra caffeine, and a sweetener formula similar to Coca-Cola Zero, but it is hard to tell from the name that it is a zero-sugar drink."

Jack Hoff's words reveal Coca-Cola's first-mover advantage in sugar-free products, but it is undeniable that this advantage was not obvious for a long time. The reason is very simple: sugary carbonated drinks are still the absolute mainstream in the world.

In addition, the fact that "the appearance of Coca-Cola Zero cans is almost exactly the same as that of regular Coca-Cola cans" also shows that even when producing zero-sugar products, Coca-Cola has to make use of the consumer mind it built up with sugary carbonated drinks, and the two cannot be completely separated. In other words, it is difficult to form a direct and distinct perception among consumers.

"Retail Review by Business Review" believes that the real tipping point comes from the outside.

Simply put, on the one hand, because Genki Forest's "0-sugar" sparkling drink detonated the market, verifying the effectiveness of sugar-free products, the sugar-free category quickly gained momentum.

On the other hand, consumer concepts have undergone fundamental changes. Consumers pay more attention to the health of beverages, and sugar control, tooth protection and metabolic health have become the main reasons why the public actively gives up sugary carbonated drinks, so sugar-free products are favored by more consumers.

With the rise and explosion of the sugar-free category, Coca-Cola, which had already "laid an ambush", first felt the threat from new Chinese brands, so much so that in 2022 Coca-Cola released harsh words, claiming that it would definitely "defeat" Genki Forest that year.

Of course, "harsh words" cannot change the tide. With the increasing awareness of public health, the trend of sugar reduction is irreversible. It may be beyond the expectation of most people that after more than 20 years of protracted game, Coca-Cola has taken a big share of the sugar-free category market, completing the transformation from sugary drinks to sugar-free products.

In the second quarter of this year, the sales volume of sugar-free Coca-Cola increased by 16%, and the sales volume of Diet Coke, which is also a sugar-free drink, increased by 7%, both releasing positive signals.

This is in line with the overall trend of the sugar-free beverage market. The *2026 China Beverage Industry Development Status and Consumer Behavior Survey Data* released by iiMedia Research shows that the market size of China's sugar-free beverage industry reached 61.56 billion yuan in 2025, and it is expected to continue to grow in the next few years, with the market size expected to reach 81.56 billion yuan by 2028.

In other words, Coca-Cola will get a bigger share of the market from the sugar reduction trend.

03

The Core Priority of Taste

As a century-old multinational giant, being able to complete product transformation, face risks directly and go through cycles is the underlying logic that makes Coca-Cola "terrifying".

However, all adjustments need to be made dynamically according to the needs of consumers. In fact, sugar-free Coca-Cola has been iterated for multiple versions, the purpose of which is to meet the needs of the vast number of consumers.

Regarding the growth in sales of sugar-free Coca-Cola, the management said: "The current version of sugar-free Coca-Cola is very popular among consumers for the taste, and the reason behind it is not that complicated."

The key here is obviously "taste".

In the beverage market, taste is a more urgent demand than health. The aforementioned iiMedia Research report shows that in 2026, among the core influencing factors for Chinese consumers to buy beverages, taste accounts for the highest proportion of 40.85%; followed by ingredient safety, accounting for 35.44%; the third is health attributes (0 sugar, 0 fat, natural), accounting for 34.41%.

Consumers pay more attention to taste while also taking into account safety and health, which will inevitably provide more and larger development space for a large number of brands.

For example, "Retail Review by Business Review" found that in the prebiotic cola segment, compared with Coca-Cola's emphasis on "sugar-free", the new product launched by Pepsi in the Chinese market in July this year focuses more on low sugar, highlighting "prebiotics + natural sweetness + low sugar and light burden", trying to meet the diverse needs of consumers.

For another example, also in July, Genki Forest launched its new product "newater vitamin water". It is worth mentioning that this new product adds concentrated cucumber juice and lemon extract, and each bottle contains niacin and vitamin B6 that help the body metabolize substances, emphasizing "only water, fruit and vegetable ingredients, vitamins" to bring consumers a light taste.

In March this year, Nongfu Spring launched a new electrolyte water product, which does not use sugar substitutes, adopts a low-sugar formula, also adds niacin and vitamin B6, and uses a fresh fruit flavor to "eliminate" the strong sweet taste of traditional electrolyte drinks.

Zhejiang media "Chao News" also observed that: "In 2026, a large number of functional new products such as prebiotic soda, tea-flavored carbonated drinks, and electrolyte soda were launched, focusing on optimizing the taste with natural sugar substitute technology."

Correspondingly, in addition to the core priority of taste, at the marketing level, brands have abandoned the "sweet and refreshing" promotion, focusing on emotional values such as nostalgia and companionship to reduce consumers' health guilt; at the channel level, brands are deeply exploring the scenarios of instant retail via food delivery and household stockpiling, making efforts from multiple dimensions to strive to stabilize their market share.

Facing this competitive situation, Coca-Cola has to increase its investment, comply with consumer demand while engaging in multi-dimensional competition with local strong rivals such as Genki Forest and Nongfu Spring.

As everyone knows, in the fourth quarter of last year, in the Asia-Pacific market, both Coca-Cola's net revenue and operating profit declined, and the operating profit plummeted by 36%, the worst performance in a decade, which is closely related to its own price increase strategy and the fierce competition from strong rivals.

After all, Coca-Cola is still "terrifying", but high-intensity competition has never stopped, especially in the Chinese market - who wouldn't want to challenge or even defeat Coca-Cola?

This article is from the WeChat Official Account "Retail Review by Business Review", author: Xiang Ma, editor: Xiao Yu, authorized by 36Kr for release.