In recent years, with the improvement of the income level of Chinese residents and the rise of health awareness, more consumers tend to choose natural, healthy, sugar-free, additive-free beverage products, and the growth rate of healthy drinks represented by packaged drinking water has increased significantly.
The proportion of natural mineral water continues to increase
Sullivan divides packaged drinking water into four subcategories: natural water, natural mineral water, purified drinking water, and other drinking water.
Among them, natural water and natural mineral water come from natural water sources and contain minerals or trace elements that are beneficial to the human body. Due to their health properties, the retail price of natural water and natural mineral water is usually 2 yuan or more per bottle, which is higher than pure water and other drinking water.
Chart: Product Classification of China's Packaged Drinking Water Market 2019
Source: Frost & Sullivan, CICC Research Department;
Note: Market size and share data are 2019 data Natural mineral water is different from other types of bottled water.
According to information from the European Bottled Water Industry Association, consumers prefer natural (mineral) water over other types of bottled water, mainly for specific mineral ingredients, quality assurance, and special taste.
The natural mineral water market is growing faster than the industry average
In recent years, the growth rate of natural water and natural mineral water has exceeded the growth rate of overall packaged drinking water.
According to Sullivan, the retail sales of natural water and natural mineral water in 2014-2019 reached 24.8% and 18.4%, respectively, and their combined sales accounted for climbing from 15.7% in 2014 to 25.9% in 2019, and are expected to rise further to 31.3% in 2024. We believe that natural (mineral) water will continue to outperform the industry due to its health attributes.
Chart: Consumption upgrade trend in China's packaged drinking water market
Source: Frost & Sullivan, CICC Research Department
Consumers are willing to pay a premium for natural mineral water
According to Euromonitor Consulting data, Nongfu Spring has a leading position in the entire industry. Companies in the natural (mineral) water segment, such as Nongfu Spring and Baishishan, have grown faster in the past two years, indicating that consumer awareness of drinking natural (mineral) water is gradually increasing. In addition, the chart below shows that consumers are also willing to pay a premium for natural (mineral) water. The retail price of natural mineral water is between 3-12 yuan per bottle, while the price of pure drinking water is only 1-2 yuan per bottle.
Chart: Comparison of different drinking water brands
Source: Euromonitor Consulting, CICC Research;
Note: Retail Sales refers to retail end-market sales; all retail sales and retail sales growth data are from Euromonitor Consulting; and price information is as of July 2020
Source: CICC Research Department
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