Text | Market Cap List, Author | Wu Zhanguo, ed He Yueyang
Air and water are not scarce resources, but the business of delivering water from mountains, rivers, lakes and seas to those who need it is invaluable.
The water business has a very large profit, and Nongfu Spring's gross profit margin is 60%, which is not much lower than the gross profit margin of the luxury LV Group.
Consumer goods are also an important track for the birth of the richest man, China at different stages of development, different industries have given birth to different richest people, most of the industries are short-lived, bottled water is the only small track that has produced more than two richest people, the other two are real estate and the Internet.
In 2010, Zong Qinghou became the richest man in China, and in 2020, Zhong became the richest man with the IPO of Nongfu Spring, accounting for 61% of the income from selling water.
As a commodity, in addition to making money, water is just needed and has a long enough life cycle. So this track is also crowded with powerful players.
From Wahaha to Master Kong, to Nongfu Spring and Cestbon , the competition in the bottled water industry is extremely fierce.
Since the beginning of this year, the drinking water industry has been even more lively, Wahaha Zong passed away after Qing, Nongfu Spring relaunched the pure water that had been dissed by itself, Master Kong and Cestbon reduced prices, and Fat Donglai also joined the battle.
This article will focus on the competition of bottled water in the past 40 years, including price wars, water source wars, positioning wars, etc., and try to clarify what is the key logic behind the competition behind bottled water.
Forty years of fighting, each with its own magical powers
Twenty-four years ago, in April 2000, Nongfu Spring suddenly announced that it would no longer produce pure water and would start producing all natural water. Nongfu Spring simultaneously broadcast an advertisement on TV for a "Daffodil Growth Comparison Experiment" to illustrate a problem - pure water is not good for health.
In 1989, Cestbon produced its first bottle of purified water, which was previously represented by the 70-year-old Laoshan mineral water, also known as state banquet water. Since then, disputes between mineral water, purified water, natural water, etc. have not stopped.
Nongfu Spring's several experiments pushed the dispute to a climax and made him famous.
At that time, environmental protection did not keep pace with the pace of industrialization, and water pollution incidents were frequent, such as the water pollution of the Huai River in 1994 and the Sanmenxia Reservoir of the Yellow River in 2003, which led to a decline in tap water quality and even endangered safety. On the other hand, as per capita income grows, people are more willing to spend money on healthier water.
At the same time, even bottled water manufacturers, there are some non-compliant production enterprises, such as the Beijing Municipal Health Bureau announced in September 2001 that Jiudu Bridge brand mineral water, pure water, and Lingshan brand mineral water are unqualified "dirty water".
The public's demand for water quality and health is getting higher and higher, which has become the historical background for Nongfu Spring to launch natural mineral water.
Nongfu Spring's comparative experiment seems to be discontinuing its own bottled pure water, but in fact it stands on the opposite side of all pure water production enterprises, including Wahaha, the former leader of the bottled water industry.
With the fermentation of the incident, Wahaha reported to the relevant departments, sued Nongfu Spring in court on suspicion of unfair competition, and convened 69 pure water production enterprises to jointly denounce Nongfu Spring, and hundreds of media across the country gathered at the headquarters of Wahaha in Hangzhou. Hangzhou is also the headquarters of Nongfu Spring, and on the same day, the Hangzhou Metropolis Express published "Friends from afar, happy", calling on "friendly businessmen" to openly debate in front of the media.
At that time, in the market, there were pure water production enterprises such as Cestbon, Jingtian, Wahaha, etc., as well as mineral water production enterprises such as Laoshan.
In this debate, it doesn't matter if you win or lose, the important thing is that "nature's porter" and "a little sweet" have been deeply rooted in the hearts of the people, and people also believe that natural mineral water should be more expensive.
Nongfu Spring mineral water was positioned as a high-end when it was listed, with a retail price of 2.5 yuan to 3 yuan, although in the melee in order to seize the market, it also fought a price war for many years, but after the market share was stable, it took advantage of the wave of price increases after 2010, and rose back to 2 yuan.
There is also Master Kong who has eaten the "mine" dividend.
After that round of scuffle, Master Kong gave up the production of pure water and launched "mineral water" priced at one yuan in 2006, becoming the leader of bottled water in China for four consecutive years. Later, someone (Master Kong pointed out that this person is the deputy manager of media planning of Nongfu Spring Advertising Center) sneaked into Master Kong's Hangzhou factory and took a lot of photos, and then a post on the Internet said: The "high-quality water source" claimed by Master Kong is nothing more than tap water, and the minerals are all artificially added.
After Master Kong admitted and apologized, the brand image was tested and sales declined.
In 2013, Nongfu Spring told a story about pH, "popularizing science" to customers that Nongfu Spring is weakly alkaline, and the human body also needs to maintain a weakly alkaline state.
The boss of pure water is Cestbon, which is characterized by money, many water plants, and the advantages of transportation efficiency and cost, but it is always overpowered by Nongfu Spring. At that time, in the popular science of pH, Cestbon was used as a negative teaching material, and Cestbon could not beat Nongfu Spring, so it is difficult to say that there is no reason for this.
After 2015, the industry pattern gradually stabilized, and Nongfu Spring became the No. 1 bottled water sales in China for many years. From 2021 to 2024, Zhong Sui has been the richest man in China for four consecutive years with the big sale of Nongfu Spring.
Dongxing Securities defines the past development of bottled water in China as divided into four stages, namely the embryonic period (1930-1932), the rise period (1982-1990), the rise period (1990-2007) and the development period (2007-2017), and then gradually entered the differentiated prosperity period.
From the embryonic stage to the development stage, according to the four major water quality categories, purified water, natural water, mineral water and natural mineral water have become important increments in the bottled water market. According to the sales volume, the top three in the industry are Nongfu Spring, Cestbon and Jingtian (Baisui Mountain), and the terminal prices of the three are 2 yuan, 2 yuan and 3 yuan respectively, of which Nongfu Spring and Baisui Mountain are natural mineral water.
In 2018, Dongxing Securities made a judgment that the high-end of water has become an important trend.
Mineral water is high-end, selling lifestyle
Ten years ago, when Xu Jiayin stood in his office on the top 43rd floor of the Evergrande Center overlooking Guangzhou, Evergrande Ice Spring should have been his "proud stroke" at that time.
On November 9, 2013, in the AFC Champions League final, the Evergrande football team wore a uniform printed with the words "Evergrande Ice Spring", and the 5-second Evergrande Ice Spring advertisement was frequently broadcast during the broadcast of the game between Central Channel 5 and Guangdong Satellite TV.
Since then, Evergrande Ice Spring has been born, but the real estate marketing method has not made Evergrande Ice Spring a lasting success. In the marketing of high-end water, Evian, a global high-end mineral water brand, is more experienced.
In 1790, a France count with kidney disease came to Evian, often drank the local spring water, and his kidney disease cured, so he began to spread the effect of Evian spring water, and began to operate spring water physiotherapy and sell spring water in cans and other places.
This legend about Evian mineral water is widely spread.
In 1970, Danone acquired Evian, and in 1986, Evian entered China. Evian uses Alpine snow melt water filtered through glacial rock formations for at least 15 years, and the advertising films are usually lifestyle marketing, covering high-end channels such as five-star hotels, high-end clubs, A-list stars, and golf courses.
Laoshan mineral water is the earliest high-end mineral water brand in China, and the high-end mineral water brands that do well in China include Kunlun Mountain and Tibet 5100.
Similar to the lifestyle marketing of Evian mineral water, Kunlun Mountain has reached offices, conferences, fitness venues, bars and other channels, for example, Kunlun Mountain has become the water for high-end occasions such as the Great Hall of the People, the Guangzhou Asian Games, the China Tennis Open, and the APEC China Summit. The main channel customer of Tibet 5100 mineral water is high-speed rail.
These brands either have a strong history or a higher degree of globalization, and compared to these brands, the price of new high-end water launched in China is not so cold.
In 2013, Evergrande launched Evergrande Ice Spring, priced at 5 yuan.
In 2015, Nongfu Spring launched three high-end water products, namely high-end water in glass bottles, baby water and high-end water for students. The main target group of glass bottled high-end water is high-end conferences, banquets and other consumption scenarios, 350 ml and 750 ml, the retail price is 30 yuan and 45 yuan respectively, and the retail price of 1 liter of infant drinking water is 9 yuan.
In 2022, Cestbon will launch Cestbon Dew, priced at 12.5 yuan per bottle.
High-end mineral water seems to be very priced and profitable, and many brands are entering the high-end market, but high-end water is not so easy to do.
First of all, there is little difference in water, everyone is natural high-quality mineral water, whether it is the Tibetan plateau, the Kunlun Mountains, or the Alps mineral minerals are richer, more high-quality, better for the human body, no one can say clearly, and the minerals needed by the human body can also be obtained through other foods.
After all, what mineral water you drink and what diseases you cure are legends.
Secondly, the highest cost link in the bottled water industry chain is transportation, once the sales place is more than 500 kilometers away from the production place, the transportation cost will squeeze profits, and the price is priced at 1-2 yuan, the company has no money.
Natural mineral water companies, in order to create scarcity, most of them only have one water source, and the transportation radius is usually more than 500 kilometers, so they can only take a road of high prices.
Evergrande Ice Fountain seems to have a beautiful opening, but consumers do not recognize the high price, and Evergrande can only end up at a loss.
In addition, Tibet 5100, a high-end water brand that did better in the early days, also fell into a loss because of the introduction of low-cost water through the high-speed rail channel of its important customer.
Low-end bottled water is a scuffle
On February 25 this year, 79-year-old Zong Qinghou passed away due to lung cancer, and after online mourning and the fermentation of the past, the founder of Nongfu Spring, Zhong Sui, was labeled as "ungrateful" by netizens, and Wahaha's sales soared.
After Zhong was pushed to the forefront of public opinion, he responded to the controversy with an article "I Have Three Things with the Elder Zong", saying that the first pot of gold was in the cloth business, and he had not received a salary in Wahaha, and there was no such thing as dismissal.
A month later, Nongfu Spring launched purified water again after 24 years, packaged in green. Since then, Nongfu Spring has stepped up its propaganda offensive, set off a price war at a low price of 9.9 yuan/bag, and began to distribute goods in a large area, and some channels are even as low as 8.9 yuan/bag, equivalent to about 0.74 yuan/bottle.
Nongfu Spring suddenly announced its entry into the pure water market, the most important reason is that the core hinterland has been attacked by many competitors, and Master Kong, C'estbon and others have also launched a bottle of natural mineral water for 2 yuan. In March last year, Master Kong launched a new natural mineral water product - "Drink Mineral Spring", and in September, Cestbon launched the natural mineral water brand "Benyou", with a price of 2 yuan.
In addition, Baisui Mountain, a subsidiary of Jingtian, firmly occupies the 3 yuan natural water market with the advertisement of "water aristocracy", and the market share continues to grow, which also puts some pressure on Nongfu Spring.
On July 11, Macquarie Bank forecast that Nongfu Spring's sales growth is expected to slow to 7.6% in the first half of 2024, and net profit will fall by 4.6%.
Nongfu Spring entered the field of traditional pure water of Cestbon and Master Kong, and it became logical.
From the perspective of the overall market size of bottled water, the industry, especially the low-end market, will become more and more involuted.
Euromonitor data shows that the growth rate of bottled water sales has declined sharply in recent years, before 2014, the growth rate of bottled water in China was as high as more than 15%, and then it can maintain a growth rate of about 8%, and by 2019-2023, the compound annual growth rate is only 3.6%. In 2023, the market size of bottled water will be 226.6 billion yuan, and the growth rate has dropped to less than 2%.
Referring to foreign experience, United States in the early industrialization of the 19th century, bottled water began to rise and became the most suitable substitute for municipal water supply, and in the early 20th century, United States began to improve the water purification system, improving the safety of tap water, and the market demand for bottled water declined.
However, the bottled water industry in Japan is generally small, and its per capita consumption is even lower than that of China, mainly because Japan provides tap water treated with ultra-high water purification technology. Events such as tap water pollution in Japan in 1990, severe summer heat in 2005-2006 and the earthquake in 2011 will increase bottled water sales.
In the foreseeable future, China is becoming more environmentally conscious, the quality of water is getting higher and higher, and with the acceleration of the construction of piped direct drinking water, the living space of low-end bottled water may be squeezed.
The competition for low-end bottled water will become more and more fierce, and companies will have to go to the road of volume prices.