Nongfu Spring couldn’t sit still after China Resources Beverage, the parent company of Pure Water Brother Ipoh, handed it to the Hong Kong Stock Exchange. On April 23rd, beijing business today reporter learned that Nongfu Spring launched "Green Bottle" pure water, claiming to be the natural water source from ten water sources including Qiandao Lake, Emei Mountain and Danjiangkou. Nongfu Spring’s move or breaking into the hinterland of pure water is a declaration of war against brands such as Wahaha and Ipoh.
Industry analysts pointed out that Nongfu Spring’s main drinking water growth is weak, so launching new products to make up for the market vacancy is essentially an all-round and all-category competition with competitors. In addition, Wahaha and Ipoh also launched mineral water before, and Nongfu Spring needs to find new competitive advantages.
Invest in pure water
"Today, I still insist that mineral elements in water are vital to human health, which is why I insist on producing natural water." Just over a month after Zhong Shanshan, the founder of Nongfu Spring, released "Three Things between Zong Er and me", Nongfu Spring invested in pure water.
On April 23, a propaganda picture of "Nongfu Spring Pure Water" was circulated on the Internet. In the picture, Nongfu Spring changed the classic red bottled water packaging, and the new packaging was green with a net content of 550ml. According to the propaganda map, the purified water of Nongfu Spring comes from ten water sources, including Qiandao Lake, Danjiangkou and Emei Mountain in Sichuan.
At the same time as the publicity map was released, Nongfu Spring purified water has not been put on the shelves of major e-commerce platforms, and it has not been seen in offline stores. The staff of several water stations told beijing business today that this product is not available in the store, and will be notified as soon as it arrives.
According to official website, there are eight types of water business in Nongfu Spring, including drinking natural water, Changbai Mountain natural snow mountain mineral water, drinking natural water (suitable for infants), drinking natural mineral water (lithium-containing), drinking natural mountain spring water (for making tea), natural mineral water (sports cover), natural mineral water (glass bottle) and natural mineral water (zodiac bottle).
This is the second time that Nongfu Spring has introduced pure water after 24 years. In 1997, with Qiandao Lake in Zhejiang as the water source, the first packaged drinking water of Nongfu Spring was put on the market. Until 1999, Nongfu Spring was still producing pure water. In 2000, Zhong Shanshan "shelled" pure water, saying that it contained no minerals, so it was not good for people’s health, and announced that it would no longer produce pure water and instead produce natural water. After it was announced that pure water would be discontinued and all natural water would be produced, a new classification of natural drinking water appeared in the domestic bottled water market.
After 24 years, why does Nongfu Spring produce pure water again? A related person from Nongfu Spring said, "The natural water of Nongfu Spring has not changed and will continue to produce. Pure water also uses natural water sources, but the filtration form is different. "
However, according to Zhan Junhao, a well-known strategic positioning expert and founder of Fujian Huace brand positioning consulting, the weak growth of water business may be a factor for Nongfu Spring to consider launching pure water. With the improvement of consumers’ requirements for drinking water quality, the pure water market still has certain growth potential. Nongfu Spring’s move may be to seize more market share and improve overall performance.
Last year, the total income of Nongfu Spring was 42.667 billion yuan, a year-on-year increase of 28.4%. Among them, packaged drinking water increased by 10.9% year-on-year. In the whole revenue structure, the revenue proportion of packaged drinking water fell below 50% for the first time.
The opponent is pressing hard
Nongfu Spring, which has occupied the first market share of packaged drinking water, is facing the pressure of competitors.
In the field of natural mineral water, Ipoh and Wahaha were both laid out earlier. In 2023, Ipoh launched the natural mineral water brand "Benyou", and Wahaha also launched natural mineral water products in 2022. Together with Baisui Mountain, which has been deeply cultivated in this field, the brand competition is fierce.
In addition, there are many companies that cross borders. For example, Yuanqi Forest launched "mineral" natural soft mineral water, Yili Group launched "Yike Huoquan" natural mineral water, and pharmaceutical companies () spent 500 million yuan to build Mingyue Renhe mineral water plant project.
According to the consulting report, China Resources Ipoh’s parent company, China Resources Beverage, is the second largest packaged drinking water enterprise in China and the largest purified drinking water enterprise in China (according to the retail sales in 2023). The retail sales of the company’s "Yibao" brand drinking pure water products reached 39.5 billion yuan in 2023, making it the first brand in the drinking pure water market in China. According to the report, in 2023, the market share of China Resources Beverage in packaged drinking water market and purified drinking water market will be 18.4% and 32.7% respectively.
On April 23rd, 2024, China Resources Beverage submitted an application for listing to the Hong Kong Stock Exchange, and the co-sponsors were BOC International, CITIC Securities, Bank of America Merrill Lynch and UBS Group AG. In terms of performance, from 2021 to 2023, the revenue of China Resources Beverage was about 11.340 billion yuan, 12.623 billion yuan and 13.515 billion yuan respectively. The profits in the same period were about 858 million yuan, 989 million yuan and 1.331 billion yuan respectively. The gross profit margin in the past three years was 43.8%, 41.7% and 44.7% respectively.
Wahaha’s revenue in 2021-2022 was 51.915 billion yuan and 51.202 billion yuan respectively, and its performance was relatively stable, and its revenue further increased in 2023. Jingtian’s mineral water brand "Baisui Mountain" achieved sales of 11 billion yuan in 2021.
According to Euromonitor international data, from 2017 to 2022, the top five bottled water markets were Nongfu Spring (12.2%), Ipoh (8.3%), Jingtian (5.3%), Master Kong (3.2%) and Wahaha (2.2%).
Zhu Danpeng, a food industry analyst in China, said, "It is normal that Nongfu Spring’s drinking water growth is weak, because the whole has reached the ceiling. In the future, from the development trend of the whole industry, beverages will account for the bulk, especially table drinks have great room for development. Master Kong and the unified growth are all beverage sectors. "
Make up for market vacancy
For Nongfu Spring, natural water and purified water are two different categories, and purified water is a big field that has not yet been laid out.
In the past, Nongfu Spring mainly promoted natural water and naturally resisted other categories. Now, natural water has become bigger and it is reasonable to expand the product line. According to the research report of Academia Sinica Puhua Research Institute, Chinese consumers are still dominated by pure water and natural water. In 2019, the retail sales of pure water alone accounted for 60.4% of the total retail sales of bottled drinking water.
Song Liang, a senior dairy analyst, said, "Nongfu Spring pushes pure water. First, the main mineral water business may have a significant market decline, so some new products are introduced to make up for the market vacancy; Second, Wahaha and Ipoh have also pushed mineral water before, and the advantages of Nongfu Spring’s natural water are no longer there. In the end, they will all fall into involution and compete with competitors in all directions. Third, it may be considered from the perspective of cost. At present, the price of drinking water is generally low. Launching a purified water product may launch a price war with several enterprises at the same time, which should be a strategic weapon. "
Chen Fangchao, general manager of Junzhi Strategic Consulting Industry Department, said, "There is no clear distinction between mineral water, natural water or pure water in the cognition of ordinary consumers. At the terminal, all kinds of bottled water are collectively referred to as mineral water. At this time, it is feasible for Nongfu Spring to expand its pure water business on the cognitive side because it recognizes the big brand of bottled water. The introduction of purified water with higher quality-price ratio by brand advantage can hit down some markets of Ipoh and Wahaha, and form better competition and coordination of multi-category and multi-price belts on the product line. The introduction of pure water is conducive to alleviating the downward trend of the Group’s drinking water business and bringing confidence to investors and distributors to inject new business, thus further expanding the drinking water business. "
However, Zhan Junhao also said that Nongfu Spring also faces certain risks and challenges in launching pure water. "First of all, pure water brands such as Ipoh and Wahaha already have a certain market share and consumer base, and Nongfu Spring needs to make more efforts to compete for market share. Secondly, consumers are increasingly demanding the quality and taste of pure water, and Nongfu Spring needs to ensure that the quality and taste of products can meet the needs of consumers. "
Beijing business today reporter sent an interview letter to Nongfu Spring by email about the reasons for producing pure water and the retail price of the terminal, but no reply was received before the press release.
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