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Source: Times Finance Author: Xing Wenwen

The production of purified water has been stopped for 24 years.Nongfu SpringIt returned to this track and launched a "price war" for bottled water this summer.

"Nongfu Spring's 'green bottle' is having a promotion. 12 bottles for 10 yuan, a little over 80 cents per bottle, very cost-effective." In a chain supermarket store in Panyu, Guangzhou, a Nongfu Spring salesperson is promoting the newly launched "green bottle" purified water to consumers. The "green bottles" beside him are piled up to half a person's height, and the supply is sufficient.

As industry giants that have long been in the top two spots, C'estbon and Nongfu Spring, one focuses on purified water and the other focuses on natural water. After 24 years, Nongfu Spring returned to the purified water market. After C'estbon's parent company China Resources Beverages (Holdings) Co., Ltd. (hereinafter referred to as "China Resources Beverages") submitted its application to the Hong Kong Stock Exchange, it quickly launched a new purified water product that "looks like" C'estbon, and launched a 9.9 yuan price reduction promotion.

Why did they start producing purified water again? In the CCTV program "Dialogue" broadcast on the evening of August 10, Nongfu Spring founder Zhong Shanshan explained the reason.

"In the past, my mistake was to deprive consumers of the right to choose. Since consumers want to choose, I will give the opportunity back to you. I will launch this water this year (2024), and I still tell everyone that if you like it a little sweet and taste good, then drink this (purified water). If you want to be healthy, then drink this (natural water)." Zhong Shanshan said.

As one of the giants, Nongfu Spring, which has returned to the pure water market, has undoubtedly stimulated the entire bottled water market. Another giant, Yilibao, has also taken action. China Resources Beverage recently sent more than 700 people to Changsha to stock up more than 10,000 terminal stores in 8 districts (cities) such as Tianxin District and Yuhua District. It also launched the "unboxing gift" campaign in many regions across the country to promote sales.

In addition, other players such as Wahaha, Master Kong, and Jingtian did not dare to relax and joined the price war one after another, and the entire bottled water market returned to the 1 yuan era.

Bottled Water Coupon Prices

From chain supermarkets and convenience stores in first-tier cities to various terminal channels in lower-tier cities, Nongfu Spring's green-bottled purified water is making a concentrated attack in less than four months since its launch on the market.

On August 8, Times Finance visited several supermarket chains in Guangzhou and found that Nongfu Spring's green-bottled purified water and red-bottled natural water were both on sale at low prices.Yonghui SupermarketFor example, in one store, the price of green bottles is 9.9 yuan/12 bottles (550ml), equivalent to 0.825 yuan/bottle, which is much lower than the market average price. The price of red bottles is slightly higher, at 11.9 yuan/12 bottles, equivalent to 0.99 yuan/bottle.

The store staff said that the red bottle promotion will last for nearly a month from July 17 to August 13, and the green bottle promotion is expected to last longer. "We have not received any notification on the end time of the green bottle promotion."

In a small convenience store in the suburbs of Guangzhou, consumers can see that the display of Nongfu Spring green bottles occupies half of the aisle as soon as they enter the store. The owner of the convenience store said that the Nongfu Spring salesperson came to restock the stock that morning and told him that the company will mainly promote green bottles in the future, and the quantity of red bottles will gradually decrease.

In addition, the head of a community supermarket in Zhengzhou, Henan, revealed to Times Finance that the purchase price of green bottles is 0.6 yuan per bottle, and red bottles are 0.9 yuan per bottle. In offline terminal stores in many regions in the north and south, such as Beijing, Zhejiang, and Heilongjiang, you can see Nongfu Spring green bottled purified water at a price of less than 1 yuan per bottle.Meituan, Douyin, Taobao and other major e-commerce platforms have also joined the promotion channels.

Obviously, Nongfu Spring is currently allocating more resources to support green-bottled purified water in order to seize the purified water market.

In addition to offering price concessions, China Resources Beverage is also actively distributing its products to maintain its position as the leading pure water brand.

Recently, China Resources Beverage sent more than 700 people to Changsha, its second largest sales market in the country, to carry out a collective market expansion operation. The personnel were divided into 299 teams, covering more than 10,000 terminal stores in eight districts (cities), including Tianxin District, Yuhua District, Wangcheng District, and Ningxiang City. The teams focused on organizing shelves and displaying merchandise, and learned about current market demands from store managers.

Previously, in order to promote sales, China Resources Beverages also launched the "Unboxing Gifts" campaign in multiple sales regions to encourage terminal stores to unbox more. Specifically, one carton of any product under China Resources Beverages can be exchanged for two bottles of 555ml C'estbon water, and one label film can be exchanged for two bottles of 555ml C'estbon water.

"Two bottles of water are worth 4 yuan. Depending on the number of boxes unpacked, distributors will exchange them for Yilibao water with China Resources Beverages or calculate expenses. The company will choose to ship the goods or pay the distributors." said a distributor.

Consumer loyalty is waning

Before the price war, whether it was purified water or natural water, the retail prices of mainstream drinking water brands such as Nongfu Spring, Yilibao, Wahaha, and Jingtian were fixed at around 2 yuan. Each brand cultivated its own loyal customer base through subtle differences in taste, differentiated brand positioning and product quality.

Nowadays, in the face of low prices, the "contempt chain" of drinking water is collapsing, and some consumers' loyalty to drinking water brands is beginning to loosen.

A white-collar worker in Guangzhou CBD told Times Finance that many of his colleagues have recently switched to buying Nongfu Spring green bottles. A consumer from Zhejiang also told Times Finance that in the supermarkets he frequents, Nongfu Spring green bottles are as low as 6.8 yuan per 12 bottles, equivalent to 0.57 yuan per bottle, "less than 60 cents per bottle, and old ladies are rushing to buy them when they see such a low price."

With the ultra-low price, Nongfu Spring's sales have increased rapidly. According to the sales data of the "618 Shopping Festival" released by Nongfu Spring, the cumulative sales of new pure water products exceeded 1 million units from May 31 to June 3.

Faced with the relentless advance of Nongfu Spring, Yilibao, Wahaha, Jingtian and others also faced the challenge head-on, lowering prices, and the bottled water market returned to the 1 yuan era.

On the Meituan platform, the price of a bottle of mainstream brand purified water is currently less than 1 yuan. Among them, Yilibao is as low as 11.5 yuan/12 bottles (555ml), Wahaha is as low as 10.9 yuan/12 bottles (596ml), Jingtian is as low as 11.9 yuan/12 bottles (560ml), and Master Kong is as low as 8.8 yuan/12 bottles (550ml).

Is there money to be made from selling water for one yuan?

With the price dropping to below 1 yuan, how much profit margin is left for bottled water products?

According to observations by Times Finance, compared with large supermarkets and wholesalers that mainly sell in large quantities, convenience stores serve a smaller population and have thin operating profits. They cannot afford the high promotional costs and can only maintain the original selling price of 2 to 2.5 yuan.

Chen Rong (pseudonym), who has been running convenience stores in Guangzhou for many years, revealed that the purchase price of 550ml Nongfu Spring in his store is nearly 1 yuan per bottle. Excluding rent and labor costs, the profit is very thin, but he said that he would not purchase goods through these promotional channels.

"These are small profits. It takes a lot of time to study which channels have cheaper prices. Individual convenience stores like us generally don't do that." Chen Rong believes that the current promotions by giants are all for attracting traffic and cultivating consumer habits. After a period of time, the price of purified water will still slowly rise.

Previously, market insiders had calculated that a bottle of Nongfu Spring bottled water, which sells for 2 yuan, has an ex-factory price of about 0.6 yuan. For each bottle of water sold, the manufacturer can earn a gross profit of about 0.36 yuan, which means that the cost is only about 0.24 yuan.

According to Nongfu Spring's 2023 financial report, its packaged drinking water product revenue exceeded 20 billion yuan for the first time, an increase of 10.9% from 2022, accounting for 47.5% of total revenue. This year, Nongfu Spring's gross profit margin increased from 57.4% in 2022 to 59.5%.

The prospectus of China Resources Beverage also shows that the revenue from packaged drinking water products will reach 12.447 billion yuan in 2023, accounting for 92.1% of the company's total revenue; from 2021 to 2023, the gross profit margin of China Resources Beverage will be above 40%, at 43.8%, 41.7% and 44.7% respectively.

It can be seen that the profits of the entire packaged water product are quite considerable. Zhu Danpeng, a Chinese food industry analyst, pointed out that the green bottle launched by Nongfu Spring is the icing on the cake for its profits. The price war it has launched in the drinking water industry will make the Matthew effect in the drinking water industry more obvious. Small and medium-sized drinking water companies may gradually withdraw. In the future, the drinking water industry will be a game for giants, and the segmentation track of the packaged drinking water market will be further strengthened.

In the "Dialogue" program, Zhong Shanshan also responded to the topic of Nongfu Spring launching different product lines. He pointed out, "Not everything has to make money. Some are strategic losses. There must be strategic loss-making cultivation projects. Our tea (tea beverage products) have been around for more than ten years since 2012 and 2013. We did not make money in the first six years, but in 2021, this growth curve (came up)."

In 2023, Nongfu Spring's tea beverage revenue exceeded 10 billion for the first time, reaching 12.659 billion yuan, a year-on-year increase of 83.3%, accounting for 29.7% of the total revenue. In Zhong Shanshan's plan, tea beverages may be the next key industry for Nongfu Spring.