"The first batch of green bottle Nongfu Spring has been sold out."
Nongfu Spring is making waves again in the drinking water market.
Half a month ago, Nongfu Spring announced the resumption of the purified water business and the launch of new green bottle packaging. Recently, an interesting report visited and found that Nongfu Spring Green Bottle Pure Water has officially entered the market, and it has been supplied online and offline simultaneously, and the first batch of supplies has been sold out at some water stations.
But if you go back a little bit in time, in 2000, a health battle between pure water and natural water broke out in the head brand of drinking water. And Nongfu Spring is the brand that took the lead in holding a press conference to "criticize" pure water.
24 years later, how can the somewhat sweet Nongfu Spring bring back the story of pure water?
The "contradictory" Nongfu Spring
"The first batch of 200 boxes of green bottle Nongfu Spring was sold, and all of them were sold out in about a week, and we are currently waiting for the second batch of supplies to be in place." The person in charge of the Shuiduoduo chain water station on Chaoyang Road, Beijing, said to the interesting report.
This interesting report visited 4 water stations in Beijing, and 2 of them have new pure water products.
The person in charge of this water station located on Chaoyang Road said that he is more confident in Nongfu Spring pure water, and will carry out normalized cooperation with 100 boxes as the benchmark for the amount of goods in the future.
The attitude of the female owner of another water station near Jiaxin Jiayuan in the grass house community is more cautious, she said that the first batch only entered a dozen boxes, and 4 or 5 customers quickly bought them, and everyone has a certain curiosity about the new products. But at the same time, she also introduced that the best selling boxed water at the water station is still Wahaha.
Interesting report was also found in a supermarket in Tongzhou Nongfu Spring pure water, the production date is April 21, the price is the same as the red bottle natural water, both are 2 yuan per bottle.
Source: Interesting report
Supermarket employees said that there are not many people who buy green bottle pure water at present, and many people do not know that there is this new product, and everyone is more inclined to choose Cestbon, Red Bottle Nongfu Spring and Wahaha, which they are used to drinking.
The new product has yet to be verified by the market and time, but for Nongfu Spring, the launch of the new product is to give the choice to consumers. It said on the marketing poster, "I have an obligation to inform, and you have the right to choose." One more option, one more comparison. ”
But 24 years ago, Nongfu Spring refused to offer that option.
In the year 2000, the battle between pure water and natural water in the market entered a white-hot stage.
In April of that year, Nongfu Spring took the lead in holding a press conference, saying that scientific experiments had shown that pure water was not beneficial to human health, so the company would no longer produce pure water, but would instead produce all natural water. In a series of advertisements in newspapers, television, etc., the growth rate of daffodils was watered with pure water and natural water respectively, and the results showed that the growth rate of daffodils maintained by natural water was more advantageous.
Source: Interesting report
Soon, a number of pure water manufacturers couldn't sit still. In June of the same year, 69 companies, including Wahaha and Jingtian, jointly issued a statement, saying that the "daffodil experiment" was a fool and misleading to consumers, and that it was unfair competition to deny and belittle pure water as a whole by means of stealing beams for pillars and pseudoscience.
Subsequently, Wahaha and Nongfu Spring both sued each other in court. In the end, this huge "water war" ended with Nongfu Spring paying a fine of 200,000 yuan.
However, the name of Nongfu Spring natural water has left a deep impression on consumers. In the following 20 years, Nongfu Spring has been singing all the way and gradually secured the top spot in the packaged water industry.
The change happens in 2024.
On March 3, Nongfu Spring's actual controller, Zhong Sui, posted an article "Three Things with Zong Lao" to mourn Zong Qinghou, the founder of Wahaha, and emphasized: "To this day, I still insist that the mineral elements in water are essential for human health, which is why I insist on producing natural water." ”
From a health point of view, scholars and experts have long debated which is better, natural water or pure water. But just a month after the release of the long memorial post, Nongfu Spring brought back to the market the purified water that it once "disliked", as if to supplement the hints of Zhong's long article to consumers.
Affected by this news, since April 22, Nongfu Spring's share price has ushered in an 8-day consecutive rise, with a peak of 48 Hong Kong dollars per share.
From taking the initiative to stop production to killing a horse gun, why does Nongfu Spring want to "self-deny"?
Big business behind small bottles of water
Looking at Nongfu Spring's 2023 financial report, the answer seems to be in it.
In 2023, Nongfu Spring will achieve operating income of 42.667 billion yuan, a year-on-year increase of 28.4%; The net profit attributable to the parent company was 12.079 billion yuan, a year-on-year increase of 42.2%.
However, specifically, the revenue of packaged drinking water products accounted for 47.5% of the total revenue, and the revenue of beverage products accounted for 51.7% of the total revenue, which is the first time that aquatic products have been surpassed by beverage products since Nongfu Spring was listed in Hong Kong.
In fact, extending the timeline to the last 4 years, it has become an indisputable fact that Nongfu Spring's packaged drinking water has reduced its contribution to the company. From 2020 to 2023, its revenue will be 13.966 billion yuan, 17.058 billion yuan, 18.263 billion yuan and 20.262 billion yuan respectively, accounting for 61%, 57.4%, 54.9% and 47.5% of the company's total revenue, respectively, decreasing year by year.
Nongfu Spring 2023 Annual Report
The lower contribution rate of products and the development of new categories to increase revenue are beneficial to Nongfu Spring's stable market position.
And Nongfu Spring's new product line is not a random selection. At present, the packaged drinking water market in mainland China is mainly divided into five categories: drinking natural mineral water, drinking pure water, drinking natural spring water, drinking natural water, and other drinking water. In addition to drinking purified water, other types of Nongfu Spring have been involved before.
According to the CIC report, the size of China's packaged drinking water market will be 215 billion yuan in 2023, with a compound annual growth rate of 7.1% from 2018 to 2023, and is expected to reach 314.3 billion yuan by 2028. Purified drinking water is the largest market segment, with retail sales of 120.6 billion yuan in 2023, accounting for 56.1% of China's packaged drinking water market, and is expected to reach 197.8 billion yuan in 2028.
CIC Consulting Report (Screenshot of CR Beverage Prospectus)
A cake with broad market prospects is in front of us, and it is reasonable for Nongfu Spring to want a piece of the pie.
In 2023, C'estbon will achieve sales of 39.5 billion yuan with its strong product Cestbon, winning 32.7% of the market share of the pure water market, exceeding the total retail sales of the four purified water companies from the second to the fifth.
Although there is still a gap between the 18.4% market share of China Resources Beverage and the 23.6% market share of Nongfu Spring in all categories of packaged drinking water, in the near future, China Resources Beverage can reserve more grain and grass in one fell swoop through listing. Nongfu Spring is taking precautions at this time, which can also alleviate the pressure of industry competition that it is facing.
According to Zhu Danpeng, an analyst of China's food industry, China's drinking water has entered the all-water operation node, and Nongfu Spring's revenue of 40 billion yuan is about 20 billion drinking water and 20 billion beverages, and the drinking water part has reached the ceiling. Therefore, in order to break through the ceiling, increase revenue, and increase profits, it is almost inevitable that Nongfu Spring will choose to launch pure water products and carry out all-water operations.
Xiao Zhuqing, a consumer goods marketing expert in China, believes that Nongfu Spring's promotion of purified water to market can also share channel costs. In the past, Nongfu Spring did not have pure water, and a large number of consumption scenarios and sales opportunities were occupied by Wahaha and Cestbon, but now there are new pure water products, which is conducive to increasing the sales scale of Nongfu Spring and sharing marketing costs.
In other words, Nongfu Spring has invaded the hinterland of pure water this time and declared war on brands such as Wahaha and Cestbon.
The pressure of the "richest man".
Bottles of natural water transported from nature have achieved a market value of 521.3 billion Hong Kong dollars (about 482.797 billion yuan, as of the closing price on May 13, 2024) of Nongfu Spring, and also achieved a net worth of 450 billion yuan for Zhong.
According to the Hurun Rich List, from 2021 to 2023, Zhong Sui has been firmly in the position of China's richest man for three consecutive years, followed by Tencent Ma Huateng, CATL Zeng Yuqun, and ByteDance Zhang Yiming.
"2023 Hurun Report"
However, in 2024, due to the death of Wahaha founder Zong Qinghou, Nongfu Spring and the founder Zhong Sui were also involved in the whirlpool of public opinion, and Nongfu Spring's online reputation dropped from 58.1 on March 1 to 32.0 on March 12, and the stock prices of listed companies also entered a volatile range.
In this context, Nongfu Spring is also facing a lot of pressure at this time.
The first is the competitive pressure from peers. In the field of packaged drinking water, Nongfu Spring has been in the top spot for many years, and has opened a significant gap with China Resources Beverage, Jingtian, Wahaha and other enterprises. Now that the top five water companies such as Cestbon, Wahaha, and Jingtian have won 54.1% of the market share, Nongfu Spring's new products entering the market may also face the same difficult catch-up problem.
In this regard, Zhu Danpeng analyzed that the overall price of Nongfu Spring pure water should be unchanged at the retail price of two yuan, but in terms of the entire shipping price, it is a little lower than Cestbon, and it is expected that the sales volume will not be too large, but it can grab a part of the market share.
Competition at the market level is one aspect, and how to tell a new story to consumers is even more critical.
Since 2000, in order to enhance the market popularity and reputation of natural water, Nongfu Spring has carried out a series of so-called "pure water is not beneficial" publicity. At present, how to make consumers who have agreed that "mineral water is better than pure water" accept new products is a problem that Nongfu Spring urgently needs to solve.
It may not be that easy, but more importantly, it is still self-inflicted.
Bai Wenxi, chief economist of IPG China, said that Nongfu Spring adjusted its business strategy and relaunched purified water products, which may confuse consumers' perceptions and increase the difficulty of market education to a certain extent. In addition, this strategic adjustment may also attract the attention and discussion of public opinion, which will put certain pressure on Nongfu Spring's brand image and market strategy.
The good news is that Nongfu Spring's margins are thick enough to afford the marketing of purified water.
Shen Meng, director of Xiangsong Capital, said that in order to rapidly expand its share in the pure water market, Nongfu Spring has the ability to use the income of natural water to support price competition in the pure water market, and the consumer demand in the pure water market is highly sensitive to price, coupled with the brand of Nongfu Spring, it is entirely possible to expand a certain share in a short period of time.
Source: Interesting report
"Perhaps Nongfu Spring will be scrutinized by online public opinion, and pure water consumers will also be affected emotionally. But in the end, it is the price that determines consumer behavior, so targeted promotion can eliminate some of the impact. Shen Meng added.
The next key is to see how Nongfu Spring fulfills this story.
Resources:
China Resources Beverage, the parent company of "Cestbon", submitted its Hong Kong IPO, Retail Business Finance, 2024-04-24
Behind the Wahaha and Nongfu Spring turmoil, those untold stories, Zinc Finance, 2024-03-07
2024 "Nongfu Spring Public Opinion Turmoil" Public Opinion Monitoring and Analysis Report, iiMedia Consulting, 2024-03-19
Source: WeChat public account "Interesting Report"
Author: Su Ying
Editor: Jing Chen
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