In a fourth-tier small city in China, the world beverage capital? Xianning adds another special factory.

(Translation by Liu Yuanyuan, Edited by Zhou Yuanfang)

When people talk about landmarks in the global beverage industry, they often think of Nestlé’s headquarters in Vevey, Switzerland, the Coca-Cola Museum in Atlanta, USA, or the mineral water source in Évian, France.

But little known is that the true origin of that can of Red Bull or that bottle of sparkling water in your hand—where it was produced—is likely in Xianning, Hubei—a small Chinese city located south of Wuhan with a permanent population of just over 200M.

This city has gathered over 600 domestic and international beverage brands, including Red Bull, Jinmailang, Yuanqi Forest, and Aorigeen, with an annual capacity of 7 billion cans (bottles), making Xianning a veritable “world beverage production hub.” When you open a functional drink in a Beijing office building or pick up a can of Chinese sparkling water at a convenience store in New York, the production base behind the label is very likely this central Chinese city.

However, the expansion of scale masks an awkward truth: this “world factory” capable of producing all kinds of beverages has yet to develop a truly popular formula that belongs to Xianning itself.

On March 30, with the hosting of the second “Yuanqi Forest Creation Camp 2044,” a “Xianning Innovation Institute” jointly funded by the Xianning municipal government and Yuanqi Forest was officially unveiled. This is not a factory focused on mass production efficiency, but a testing ground dedicated to “trial and error.” Formulas developed in the laboratory are first tested on small-scale production lines here, repeatedly refined, and only after fine-tuning are they considered for market launch.

Given that there are already over 600 brands producing 7 billion cans annually, why build an additional “non-mass production” innovation institute? Behind this lies a key leap for Xianning—from a “world factory” to an “innovation source.”

Product managers under 30 are the main players

To understand why the “Xianning Innovation Institute” was born, perhaps we should first look at another scene happening on the same day within the same park.

On the stage of the second “Yuanqi Forest Creation Camp 2044,” the ones speaking about products are not senior executives but a group of young people hoping to make changes in the traditional beverage track.

About a dozen product managers, all under 30, share their newly developed products—some are iterations of sparkling water and electrolyte water, while others are new faces like Cola Beer and Brown Rice Milk, which have never been launched before. Sitting below are industry experts and ordinary consumers, whose simple tasks are: tasting, evaluating, and voting.

This camp’s setup, to some extent, reflects the “front desk” function of the Xianning Innovation Institute. On one side are the product managers’ wild ideas; on the other is the flexible pilot line provided by the institute: the former responsible for “thinking,” the latter for “testing,” forming a closed loop from inspiration to product.

For example, in the “thinking” phase, the product manager of Qizizai Qingliang Tea posed a question: “If herbal tea was invented today, what would it look like? Do we really have to wait until hotpot to think of drinking it?”

After thinking, she brought a herbal tea brewed with six herbs, sweetened with yellow rock sugar and flavored with lemon and mint, attempting to pull herbal tea out of its traditional “fire-relief” scenario. She said, “What we want to do is not challenge the herbal tea industry but use love and innovation to meet today’s consumer needs.”

Another product, “Yuanqi Forest GO,” a carbonated electrolyte drink, is designed specifically for outdoor activities and high-intensity sweating scenarios, with formulas including zinc gluconate and B vitamins. The product manager’s idea is simple: “Just by ‘adding a little,’ we can help people recover faster and maintain vitality.”

In addition, there are new products like Cola Beer, Light True Brown Rice Milk, and Hawthorn Sanjunzi… all targeting specific consumption scenarios: social gatherings where people don’t want alcohol but want that feeling, mornings when there’s no time to eat but want something nutritious, or festive occasions during holidays.

Although most of these products are still in testing or have not yet been finalized for market release, the underlying shifts they represent are worth noting.

In recent years, China’s beverage market has experienced a cycle from the explosion of “sugar-free sparkling water” to the rise of segmented categories like electrolyte water and health drinks. As consumer health awareness continues to grow, ingredient transparency demands increase, and consumption scenarios become more fragmented, product innovation thresholds in the beverage industry are rising rapidly. When the benefits of a single blockbuster product strategy peak, the focus shifts to in-depth exploration of genuine user needs and more systematic product iteration capabilities.

A jointly built “test-only” factory?

If product managers’ ideas are just at the “thinking” stage, then the implementation of the Xianning Innovation Institute provides a space for “testing” those ideas.

According to publicly available information, the Xianning Innovation Institute was jointly funded by the Xianning municipal government and Yuanqi Forest, designed as a one-stop R&D and innovation testing base, specifically serving the incubation of innovative categories and the implementation of new processes. The first phase covers nearly 20k square meters and includes an experimental base, pilot factory, science popularization center, and other sections.

The pilot factory is equipped with a flexible production line capable of switching among 11 major categories and 49 subcategories of beverages, making it one of the most comprehensive health beverage pilot lines in China. The experimental base is equipped with over 200 devices, including high-performance liquid chromatography and atomic absorption spectrometers, supporting more than 100 R&D personnel simultaneously.

What makes this layout unique is that it breaks away from the traditional “laboratory + factory” operational mindset, integrating R&D, small-scale testing, pilot production, and continuous verification into one system.

For the beverage industry, the pilot stage is often the most “bottlenecked” in turning ideas into reality. Formulas successful in the lab may face flavor degradation, stability issues, or cost overruns during large-scale production. The flexible pilot line allows rapid validation of processes at a much lower cost than large-scale lines.

“Over the years, one of the challenges we’ve faced in making beverages is exploring many processes and trying many approaches,” said Tang Binsen, founder of Yuanqi Forest. “Many great things aren’t as impressive at the start as people imagine—they’re just simple, rough ideas. The original intention of the creation camp is to record these rough, early ideas. The Xianning Innovation Institute is built according to our ideals and future plans, as a future-facing experimental line.”

In his view, the innovation institute might seem “wasteful,” but it provides fundamental support for Yuanqi Forest’s encouragement of young people’s innovation and willingness to take risks. He believes that building this laboratory will give them more confidence and strength to continue creating better, more beloved products.

From a financial perspective, a 200 million yuan investment in a facility dedicated solely to R&D rather than mass production is uncommon in manufacturing. Tang Binsen calls this “a foolish thing,” but in fact, it is a key move for Yuanqi Forest’s transition from “fast innovation” to “systematic R&D.”

In recent years, Yuanqi Forest has been perceived as “fast”: rapidly launching new products, quickly expanding distribution, and rapidly increasing sales. But since last year, the company’s R&D efforts have become noticeably “heavier.”

It is reported that Yuanqi Forest has invested in seven self-built factories, with a total investment of nearly 8 billion yuan; its offline outlets have exceeded 1 million, covering over 800 cities nationwide. With both heavy assets and heavy R&D investments, its R&D system may become the core foundation supporting its breakthrough into “deep water.”

Xianning’s plan: from production base to R&D hub

For Xianning, the establishment of the innovation institute also has industrial significance.

This small city has quietly risen in recent years as an important production base for the beverage industry nationwide and even globally. Located along the “golden waterway” at 30 degrees north latitude, Xianning boasts 8 billion cubic meters of high-quality surface water resources, along with the natural advantages of being the “Osmanthus hometown” and “hot spring city,” providing ideal conditions for developing a “water economy.”

Since launching the “One Bottle of Water” project for the food and beverage industry in 2018, Xianning has continuously strengthened its supply chain, attracting over 600 well-known beverage brands including Red Bull, Jinmailang, Yuanqi Forest, and Aorigeen, forming a complete industry chain covering R&D, production, packaging, can-making, testing, and sales.

In 2024, the city’s food and beverage enterprises above designated size achieved a total output value of 33.8 billion yuan, with annual beverage production exceeding 7 billion bottles (cans). According to Xianning’s plan, by 2027, this figure will rise to 72 billion yuan, doubling in three years.

Among these, Yuanqi Forest invested in its fourth self-built factory in Xianning in 2021, with five production lines gradually coming online, reaching an annual capacity of 800 million units. At that time, Xianning served as a key node in Yuanqi Forest’s national capacity layout, mainly handling large-scale production. To date, Yuanqi Forest’s total investment in Xianning has exceeded 1.5 billion yuan.

Now, the establishment of the innovation institute marks Xianning’s transformation from a “beverage production base” to an “R&D hub,” extending into the upstream of the industry chain through pilot testing and incubation of new products. The products launched during the Creation Camp 2044, such as Yuanqi Forest White Birch Soda and Hawthorn Sanjunzi, will be first produced on the institute’s pilot lines.

According to official disclosures, over the next three years, the Xianning Innovation Institute’s testing base will serve 500 beverage companies, developing 2,000 new products; the pilot base will serve 500 companies and produce 15 million boxes of healthy drinks.

This means the innovation institute is not only an internal R&D platform for Yuanqi Forest but also plans to gradually open to the industry, becoming a regional public infrastructure for beverage innovation and helping Xianning become a well-deserved new product launch hub in Central China.

In today’s industry where competition increasingly focuses on R&D efficiency and process capabilities, this “heavy assets + heavy R&D” investment model is reshaping the competitive landscape of Chinese beverage companies. In the past, the moat of the beverage industry often lay in channel scale and brand recognition; today, the key variable for differentiation among leading companies is whether they can build a complete closed loop from user insights and technological R&D to process implementation in the “deep water” zone.

Looking back, the 200 million yuan joint construction of a “non-mass production” factory by Yuanqi Forest and Xianning may not be complicated: using “clumsy effort” to fill the R&D gap, giving product managers under 30 more space to experiment. Whether these trials and tinkering can ultimately turn into market hits remains to be seen over time.