"Nongfu Spring is going to make pure water. ”
A sentence of just ten words has caused an uproar among major media platforms and enterprises.
According to multiple sources, the promotional image of Nongfu Spring's pure water has been circulated in WeChat Moments, Weibo, Xiaohongshu and other places, and there are many employees of Nongfu Spring who have forwarded it.
In the poster, Nongfu Spring Pure Water continues to use the classic advertising slogan of "Nongfu Spring is a little sweet", but the bottle body has changed from the red packaging that the public was familiar with before, but "exploded" to green, and many netizens said that it imitates the taste of Cestbon green.
This is not the first time that Nongfu Spring has aroused public opinion because of pure water, and the last dispute with Wahaha also had the participation of pure water. According to the rumors circulating on the Internet, Zhong Sui had two things that did not stand up to Zong Qinghou, one was that when he was an agent of Wahaha, he sold low-cost oral liquid in Hainan to Guangdong through "channeling", and the other is that after founding Nongfu Spring, he stepped on Wahaha's main pure water with the concept of "natural water", and finally broke out in an "unfair competition" lawsuit.
In the battle between pure water and natural water, Nongfu Spring won a big victory. After many years, it was turned back again, and the power was still undiminished, but the person with the muzzle pointed at it changed direction.
What is Nongfu Spring, which has just touched this "bad head", thinking? Why should he abandon his vow to remake pure water? A seemingly small change may rewrite the course of China's beverage market.
Nongfu Spring, which made its fortune on "concept".
From the news that Nongfu Spring was going to re-enter the pure water track, to the media discovering that pure water began to be distributed offline, it took less than 3 days.
Nongfu Spring's intraday share price fell in response, falling by 2.3% compared with the average of recent times, and then slowly climbed back to around HK$44.5 per share.
The reason why the crowd is excited is inseparable from what Nongfu Spring has done before.
Carefully tracing the story of Nongfu Spring and pure water, the timeline may have to be pulled back more than 20 years ago. Founded in 1996, the company, now known as Shuimao, started as a modest player in the drinking water market and is now one of China's largest packaged drinking water companies.
How does the change happen? Looking at the history of Nongfu Spring, the concept of speculation is perhaps the most important move.
Drinking water is a typical market for rigid demand, and before Nongfu Spring entered the market, Wahaha, Master Kong, Coca-Cola, Uni-President, C'estbon and other brands that now sound well-known have flooded the drinking water market. There are well-known overseas brands and local production enterprises, and the competition in the drinking water business is basically saturated, leaving little time and space for Nongfu Spring.
In 2000, Nongfu Spring put forward the banner of "natural water", and Zhong announced at a press conference held at the Qiandao Lake production base that after rigorous scientific arguments, they had come to the conclusion that drinking pure water is not good for human health. Therefore, Nongfu Spring decided to stop producing pure water and instead produce natural water that is "rich in minerals and trace elements, with natural weak alkaline".
This conclusion undoubtedly slapped the face of the pure water industry, and Wahaha directly united with 69 pure water companies such as Shanghai Zhengguanghe, Robust, and Jingtian to collectively condemn it.
The smoke of gunpowder gradually dispersed in the dust of history, but by proposing concepts to attract attention and grab the subdivision track, it has become a tried and tested method of Nongfu Spring in the long process of development.
A typical case is Nongfu Spring's high-end water, seizing the name of "natural", Nongfu Spring has launched many sub-categories since 2015, such as "Changbai Snow" from Changbai Mountain Snow Mountain, low-sodium baby water designed for infants and young children, and Wuyi Mountain Spring Water specially designed for making tea......
The price of these products is at least 50% more expensive than the ordinary 2 yuan Nongfu Spring, and market research data shows that Nongfu Spring's most expensive "Mo Ya Spring" 750ml can be sold for 45 yuan.
"Except for the packaging, I really don't see any difference with the 2 yuan ordinary version. "Consumers' criticism of high prices and no high value is a long-term problem encountered by Nongfu Spring.
Another classic case is Nongfu Spring's new series of "isotonic" for screaming, which itself is a medical term used to describe the state when the osmotic pressure of a solution is similar to that of blood.
Nongfu Spring brings this concept into the drinking water circle, playing the banner of health, by meeting consumers' needs for beverage functional characteristics, trend attributes and added value outside product attributes, supplemented by high-frequency marketing and publicity exposure and large-scale distribution of goods through traditional channels, and focusing on publicity and promotion resources in exchange for new products to explosive models.
But even a skilled player like Nongfu Spring often encounters times when the horse stumbles. In the past two years, we can see that Nongfu Spring has actually seen a large number of innovative and failed products.
For example, lithium water launched for the health segment, many consumers refuse to buy this product because they are worried about excessive heavy metal intake.
Another example is the high-end water such as Changbaixue mentioned above, and the high-end mineral water that goes well with meals in high-end restaurants is still imported high-end brands such as VOSS and Puna. How to tell the story of cocktails and the Alps like Perrier and Evian is a huge test for Nongfu Spring.
Nongfu Spring's long-standing sparkling water ranks with Yuanqi Forest are even more known as "epic failure plans".
In 2021, when Nongfu Spring promoted the dawn white peach-flavored soda bubbles, it played the slogan of Fukushima, Japan, which is the origin of Fukushima, Japan, with the intention of competing with Tang Binsen for the Japanese beverage market, but because of the nuclear leakage accident, consumers objected, and then quickly responded that the public relations of not using imported raw materials from Fukushima made consumers suspect that it was false propaganda, which aroused public anger for a while, and this product has now disappeared.
Insist on "marketing" out of the circle
Nongfu Spring often has failed innovation cases, in fact, to a certain extent, it explains why it chose to return to the pure water track at the moment, "slap yourself in the face" is not something that everyone can do, Nongfu Spring personally flew this boomerang, consumer industry researcher Kang Ping believes that the core reason is Nongfu Spring's anxiety about performance.
As mentioned earlier, the competition in the drinking water industry has been fierce for a long time, and the popularity of products is often inseparable from the investment in marketing and promotion, which also leads to the fact that Nongfu Spring's profitability has been pulled by marketing expenses.
According to the financial report data of previous years, Nongfu Spring's sales and distribution expenses in 2023 will be 9.284 billion yuan, a year-on-year increase of 18.71%, and from 2020 to 2022, Nongfu Spring's marketing expenses have increased year after year, spending 5.511 billion yuan, 7.233 billion yuan and 7.821 billion yuan respectively in three years.
As early as 2019, Nongfu Spring's marketing expenses have reached nearly 1/4 of its net profit. According to the net profit attributable to the parent company of 12.08 billion yuan this year, Nongfu Spring's sales expenses in 2023 will account for more than 70% of the net profit.
Household slogans such as "Nongfu Spring is a little sweet" and "We don't produce water, we are just nature's porters" are deeply rooted in the hearts of the people, on the one hand, it is the credit of its simple image and accurate positioning of its marketing communication concept, and on the other hand, it is also due to Zhong's ability to invest heavily in marketing and overwhelming publicity.
Ma Muzhi, founder and chief brand officer of Puzhen Think Tank, said that from the point of view of giving up pure water and relying on the mental cognition of natural water, Nongfu Spring is undoubtedly a first-class water drink brand.
"But brand marketing is the algorithm of people's hearts, and no matter how prominent it is, brands should not forget to be in awe of people's hearts. Nongfu Spring failed to refresh the true character of the national brand, but there was an anti-ugly struggle outside of business, and the successor abandoned his nationality, which was unexpected. ”
Success is also marketing, failure is also marketing. Nongfu Spring, which has grown rapidly in revenue and net profit, is helpless in the face of consumer uprisings, even if it invests huge sums of money in marketing every year.
This is the difference between marketing and public relations, under the pressure of huge negative public opinion, the rhythm of adaptation of the brand department and the marketing department is disrupted, learning to use the power of media voice, learning to appease the words and after-sales processing, is a long-term shortcoming for traditional enterprises like Nongfu Spring, especially consumer goods companies in traditional enterprises.
The day after the release of the annual report, Nongfu Spring, which performed well, fell in stock price, closing at HK$41.25 per share. However, for investors, aside from marketing considerations, Nongfu Spring is not a target worthy of long-term investment.
Kang Ping analyzed that Nongfu Spring's current market value is 504.4 billion yuan, compared with 49.7 billion yuan of Master Kong, Nongfu Spring's valuation is high, and the national brand and the so-called high-quality water resources cannot constitute a competitive barrier.
In addition, Nongfu Spring's inventory turnover rate is also noteworthy.
According to the financial report, Nongfu Spring's inventory turnover rate in 2023 will be 6.64 times, a decrease of 8% compared with 7.22 times in 2022.
Kang Ping also reminded that the dynamic price-earnings ratio of Nongfu Spring is higher than that of Kweichow Moutai, and it is also much higher than that of other well-known beverage listed companies at home and abroad, and may face pressure to return to the mean in the future, which means that the stock price is likely to be difficult to continue to rise.
The battle for drinking water continues
As mentioned earlier, the competition on the drinking track is to the death. Although the concentration of packaged drinking water in China is increasing in terms of retail sales. The total market share of the top five companies increased slightly from 56.2% three years ago to 58.6% last year, but from the perspective of fellow travelers, the rivals behind Nongfu Spring have increased instead of decreasing.
China Resources Beverage has submitted a statement to the Hong Kong Stock Exchange, and if he can successfully hit the Hong Kong stock market, China Resources Beverage will follow in the footsteps of Nongfu Spring and become the second domestic packaged drinking water company listed on the Hong Kong Stock Exchange.
Judging from the prospectus of China Resources Beverage, in 2021~2023, the revenue of its packaged drinking water products will also increase year after year, with 10.818 billion yuan, 11.906 billion yuan and 12.447 billion yuan respectively. During the period, the net profit margin increased from 7.6% to 10%, and the revenue from other beverage products also increased from 522 million yuan to 1.351 billion yuan.
The 2023 annual performance report shows that the turnover of Master Kong's instant noodle sector has decreased by 2.84%, and finally it was able to have a total revenue of 80.418 billion yuan and record growth, contributing to the beverage sector.
During the reporting period, the revenue of Master Kong's beverage segment was 50.939 billion yuan, an increase of 5.39% year-on-year. It accounted for 63.34% of total revenue.
In terms of segmentation, Master Kong's ready-to-drink tea, fruit juice and carbonated and other beverages, drinking water and other major sub-categories have improved. The fastest-growing drinking water business increased by 9.78% year-on-year, and the ready-to-drink tea business, which accounted for the largest proportion, increased by 6.96% year-on-year.
None of this is good news for Nongfu Spring, but it's not necessarily bad for Zhong, who has a big family.
Ma Muzhi mentioned that compared with China Resources C'estbon, which has long relied on drinking water to generate income, Nongfu Spring's diversified products are more well-known.
For example, after the arrival of summer, the freezer is the best position for various beverage retailers to compete for, and the giants often provide equipment to seize the position, this kind of "exclusive cabinet" can only place the products of the same group, Nongfu Spring's Oriental Leaf, vitamin water, tea pie, screaming and other familiar brands are enough to support a whole freezer, but for only Cestbon China Resources Beverage, this trick is not used.
Kang Ping also said that the value of parallel packaging is low, the weight is large, and the more factories are built and denser, the easier it is to achieve scale effects and reduce production and logistics transportation costs.
According to the existing public information, Nongfu Spring has 106 drinking water production lines and 31 beverage production lines, respectively.
CR Beverage's production lines are divided into two types, one is its own production line, which currently has 47, and the other is a cooperative production line, which has 81 production lines. Looking at its own drinking water production line, China Resources Beverage is less than half of Nongfu Spring.
"Building a production line is actually a good thing to do early, because the financial report of the production line is calculated according to the construction time of depreciation and amortization, after the amortization is completely completed, this part of the fixed assets will become a pure money-making machine, which can bring more help to the future production development. ”
From this point of view, Nongfu Spring has earned itself the capital to breathe.
As a leading enterprise in the field of packaged water and beverages, Nongfu Spring's performance is still stable, and many brokerage institutions continue to be optimistic. The fact that the new product is about to be launched and can spark so many discussions is already a testament to the brand's power, and the process of Nongfu Spring rising to the wind is still a good story worth looking forward to.
Author | You Glass