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On July 10, 2024, in Shenyang, Liaoning, Nongfu Spring launched its first promotion, offering a limited-time special of 9.9 yuan per pack of 12 bottles of Nongfu Spring pure water. Visual China Photo

As summer approaches, the demand for drinking water is at its peak. Recently, many netizens have discovered that the price of drinking water has gone up. Packaged drinking water from brands such as Nongfu Spring (9633.HK), Yibibao, and Wahaha have started discount promotions, and the price of bulk and large-packaged purified water has dropped to less than 1 yuan per bottle.

On July 17, The Paper reporter visited supermarkets and convenience stores near several residential areas in Shanghai, including FamilyMart, 7-ELEVEN, and Coca-Cola. In the above-mentioned stores, Wahaha's purified water products were rarely seen, while the retail price of Nongfu Spring and Yibibao purified water was stable at 2 yuan per bottle. Uni-President and Baishuishan mineral water were also available, and the price was basically above 3 yuan.

In online channels, the price of a bottle of large-packaged purified water of different brands is basically below 1.5 yuan. Among them, the price of Nongfu Spring's green bottle purified water is more "radical". This is a new product launched by Nongfu Spring, which has always produced natural water. According to media reports, in some channels, a bottle of green bottle purified water is as low as 0.66 yuan.

Zhu Danpeng, a Chinese food industry analyst, told The Paper that the market had predicted a price war when Nongfu Spring launched its green bottle pure water. “This is a traffic-oriented product. One is to cope with the listing of C’estbon parent company China Resources Beverages in Hong Kong, and the other is to compete with Wahaha.”

Nongfu Spring purified water as low as 1 yuan or less

Purified water is one of the subcategories of packaged drinking water, and in this field, Yibao is firmly in the top spot. The prospectus disclosed by Yibao mentioned that the retail sales of Yibao purified water products of the company reached 39.5 billion yuan in 2023, making it the number one brand in China's drinking purified water market. In the packaged drinking water industry, the company is the second largest packaged drinking water company.

Nongfu Spring switched from producing purified water to producing natural water in 2000. From 2012 to 2019, Nongfu Spring ranked first in China's packaged drinking water market share for eight consecutive years. Last year, Nongfu Spring's total revenue was 42.667 billion yuan, of which the revenue from packaged drinking water was about 20.262 billion yuan, accounting for 47.5% of the company's total revenue.

In recent years, although there are many players in the packaged drinking water market, Nongfu Spring has always been at the top of the industry. According to a research report by Haitong International, packaged water and ready-to-drink tea will account for 35.6% and 18.7% of the total soft drink market in 2023, respectively. Among packaged water, Nongfu Spring, Yibibao and Jingtian rank in the top three, and Wahaha ranks fourth. However, compared with the former, Wahaha has a solid position in the sinking market and has a slightly weaker influence in first- and second-tier cities.

When Yilibao submitted its prospectus in April, Nongfu Spring, which had been producing natural water, launched green-bottled purified water, and the advertising slogan on the streets became "Green is a little sweet, red is healthier", even though it was not yet the peak promotion season for drinking water, some business people pointed out that the summer water war had started early.

Pan Jun, director of product strategy consulting at a well-known consulting firm, told The Paper: "Nongfu Spring has always focused on natural water. It believes that purified water may have an impact on health. The re-promotion of purified water can be said to be an attempt and innovation in Nongfu Spring's market strategy. It is not ruled out that this method is used to highlight the higher value of natural water."

The reporter of The Paper noted that in the brand flagship store of the e-commerce platform, 24 bottles of 550ml Nongfu Spring purified water (green bottle) are priced at 23.5 yuan, and each bottle is about 0.98 yuan; with the same specifications, Yilibao purified water is superimposed with the live broadcast room discount, and each bottle is about 1.25 yuan; Wahaha 24 bottles of 596ml purified water are about 1.5 yuan per bottle, and the price of third-party merchants has dropped to 1.04 yuan. In Hema, the price of 12 bottles of 550ml purified water of Nongfu Spring and Yilibao is 12.8 yuan, and each bottle is 1.06 yuan. A bigger discount is in the Douyin flagship store of Nongfu Spring, where the green bottle purified water (12 bottles, 550m) is discounted at 9.9 yuan, and the price of each bottle is about 0.82 yuan.

A staff member of a Nongfu Spring water station told the reporter from The Paper that Nongfu Spring invoices the terminal at 20 yuan per box (24 bottles). If it is a wholesaler, two boxes will be given for every 10 boxes bought. "Because it is a new type of water, 12 boxes cost 200 yuan, so it is about 0.7 yuan per bottle."

Other media pointed out that on Yonghui Supermarket’s online mini program, the price of Nongfu Spring green bottled purified water is as low as 0.66 yuan per bottle after adding coupons.

Regarding this summer's pure water price war, a water station worker who sells multiple brands of packaged water told The Paper: "Only the wholesale price of Nongfu Spring's green bottled pure water has become a little cheaper. The purchase price of Baishuishan and Wahaha's bottled drinking water has not changed, and Yilibao's sales are also stable."

Some water station staff also told the reporter from The Paper: "Nongfu Spring is trying to boost sales. Other brands may also make concessions, but they won't be as outrageous as Nongfu (Spring). In March and April this year, Wahaha's sales were very high."

The purified water market is growing significantly, will the price war continue?

"Purified water is a very standardized product. Almost every brand's taste is similar, so it is difficult to differentiate. In terms of publicity, Nongfu Spring's purified water emphasizes natural water standards. This marketing approach has certain feasibility, and the low-price offensive can also produce certain effects, forcing Yilibao and Wahaha, which are in the purified water field, to respond. It can be foreseen that competition in the purified water market will become more intense," said Pan Jun.

As for how long the price war will last, Zhu Danpeng believes that it will last for two to three years. "Not only packaged drinking water, but also the fast-moving consumer goods industry, including catering, are engaged in price wars. Consumers may see the cost-effectiveness from the price war, but for channel dealers, it is exhausting."

In the opinion of the above-mentioned person, in addition to hoping to expand its consumer base and squeeze out competitors through a low-price strategy, Nongfu Spring also deserves attention for the growth in the scale of the pure water market.

The prospectus of China Resources Beverage, the parent company of "C'estbon", cited a report by Frost & Sullivan, saying that the size of China's ready-to-drink soft drink market in terms of retail sales will reach 909.2 billion yuan in 2023, of which packaged drinking water is the largest category in terms of retail sales. In 2023, the market size of drinking purified water will account for 56.09% of packaged drinking water, with a market size of 215 billion yuan. The compound annual growth rate from 2023 to 2028 is expected to be 7.9%, which is the fastest growing category among all ready-to-drink soft drinks, and the growth rate will be higher than that of natural mineral water.

In comparison, Nongfu Spring's 2023 financial report shows that the company's beverage business, including tea drinks, functional drinks, and juice drinks, accounted for 51.7% of total revenue, surpassing drinking water for the first time. Packaged drinking water accounted for 47.5% of the company's total revenue, compared with 54.9% in 2022. Data released by Nielsen in August 2023 showed that Nongfu Spring's Oriental Leaves has been growing rapidly for three consecutive years, with a compound growth rate of over 90%; Oriental Leaves, together with Tea Pi, contributed more than 60% of the growth in the entire ready-to-drink tea market.

Wahaha's products include packaged drinking water, protein drinks, carbonated drinks, tea drinks, fruit and vegetable juice drinks, etc., with more than 200 varieties in more than ten categories. However, to this day, when people mention Wahaha, most of their impressions are still Nutri-Express and AD calcium milk. In the eyes of the outside world, whether Wahaha can face the competition and increase its market share during the peak season for drinking water consumption, and whether Nongfu Spring can recover its original market share are worthy of attention.

According to Dazhihui VIP, as of the close of the market on the 17th, Nongfu Spring rose 2.00% to HK$33.200 per share, with a total market value of HK$373.4 billion.