Reporter Sun Jizheng reports from Beijing
Since April this year, Nongfu Spring, which has withdrawn from the pure water market for more than 20 years, has begun to re-produce green bottles of pure water products. At the same time, Zong Fuli, who took over Wahaha, began to distribute goods on a large scale offline, and in Beijing's large and small supermarkets and convenience stores, Wahaha's AD calcium milk and purified water are reoccupying the counter.
As one of the earliest FMCG brands in China, Wahaha once became the first in many industries in China; Although Nongfu Spring was founded more than ten years later than Wahaha, it has grown rapidly and become one of the most promising domestic brands comparable to Coca-Cola. Wahaha and Nongfu Spring were both born in Hangzhou, but since their birth, they have faced completely different market conditions.
Specifically, when Wahaha was founded, it was in the embryonic stage of exploring the domestic market economy, and the success of Wahaha made it possible for many brands to "cross the river by feeling the stones"; At the time of its establishment, foreign brands began to fully enter the Chinese market, and the market economy had already taken shape, and Nongfu Spring stood out among emerging brands with its marketing capabilities and product creativity. Finally, at the beginning of the 21st century, the two sides began to compete in multiple market dimensions and became each other's most respected rivals.
The battle for pure water is back burned
The development history of Nongfu Spring and Wahaha runs through the development history of packaged water in China. A conflict between Wahaha and Nongfu Spring opened the prelude to the development of China's bottled water market segment.
When it comes to the relationship between Nongfu Spring and Wahaha, it can be traced back to the unfair competition lawsuit initiated by Wahaha and many brands against Nongfu Spring in 2000 and Nongfu Spring's counterclaim against Wahaha. Although the two sides eventually shook hands and made peace, there is a view that it is precisely because of the advertising that "Nongfu Spring's natural water is healthier than pure water" that the pure water category has gradually declined in the packaged water market, and at the same time, it has also helped Nongfu Spring to gradually grow in the packaged water market. But in fact, even today, pure water is still a category with a large share of packaged water. According to Haitong International Research Report, purified water will account for 35.6% of the total soft drink market in 2023.
According to public data, in 2000, the sales scale of Wahaha pure water reached 2 billion yuan, ranking first among packaged water brands that year. But it was in this year that with the emergence of various channels such as convenience stores, airport high-speed rail stations, and highway gas stations, concepts such as natural water and mineral water began to rise in China. In the years that followed, a number of brands stepped into the space.
Due to the lack of public data of the current leading enterprises in that year, from the available data, in 2011, Nongfu Spring became the first place in packaged water sales, followed by Master Kong. However, AC Nielsen data shows that by December 2015, the market share of Cestbon and Nongfu Spring was 20.4% and 20.1% respectively, and Cestbon surpassed Nongfu Spring by a slight advantage and was promoted to the industry leader for the first time. Subsequently, Nongfu Spring regained the top spot again in the following years, and the two sides engaged in a long struggle in public opinion and litigation.
Under Danone's control and "snow storage" and other operational methods, the early brands such as Robust and Yili gradually withdrew from the market, while emerging brands began to emerge. In the more than 10 years since 2000, new players have entered the packaged water market and tried to hit higher-end product lines. Such as Evergrande Ice Spring, Tibet 5100 and so on. However, Evergrande Ice Spring finally failed to hit the 5 yuan price band, and then reduced the product to 2 yuan, while Tibet 5100 lost its exclusive high-speed rail channel supply, and its sales fell sharply.
"Wahaha has been developing steadily for more than 10 years with 2 yuan bottled water as the foundation, and from the statistical point of view, Wahaha's market share is gradually surpassed. In the era of TV commercials, Wahaha and Nongfu Spring met each other in marketing and publicity, and both sides had their own characteristics. However, it is worth noting that Wahaha did not start with packaged water since its inception, but after it became the first place in the packaged water market at that time, it quickly tilted its resources to other drinks. In particular, Nongfu Spring has focused on developing the bottled water business for a long time, which also provides conditions for it to surpass Wahaha in the market share of the bottled water business. Brand marketing expert Lu Shengzhen said.
In addition to the most common red bottle packaging, Nongfu Spring also has a large number of packaged water at different price points, including glass bottled water, which provides water for high-end occasions, but Wahaha's bottled water product line is relatively monotonous.
Some media said that Cestbon purified water is similar to Wahaha in terms of water source, which is filtered, distilled and purified for tap water. C'estbon, on the other hand, has adopted the "mushroom strategy" created by China Resources in the operation of the beer industry. The specific approach is to find local factories in different regional markets, concentrate resources to expand market share within the scope of factory radiation, and then connect independent regional markets together. Subsequently, Cestbon came from behind and surpassed Wahaha with the same pure water products.
Zhu Danpeng, an analyst of China's food industry, believes that the main reason for Wahaha's overtaking is that Wahaha took Nutrition Express and AD calcium milk as the main products in the later product structure adjustment, and the two did become tens of billions of yuan single products at that time. Later, Wahaha frequently crossed borders and did not pay enough attention to bottled water.
In the era of the rise of TV advertising at the beginning of the 21st century, Wahaha has become a well-known national brand through the advertising and marketing of TV stations. However, after entering the Internet era, Wahaha's voice in marketing has gradually decreased. At this year's Spring Festival Gala, Wahaha appeared on the screen in a high-profile manner, and some netizens called Wahaha back, but it also shows that in mainstream media channels, Wahaha has been out of the public eye for a long time.
Nongfu Spring has always been active in the public eye, whether it is conventional advertising or public opinion collision with other brands, Nongfu Spring has always been the most talked about brand in the industry. "Nongfu Spring's biggest advantage lies in its marketing capabilities, and as an entrepreneur from the media, Zhong attaches great importance to marketing. Nongfu Spring and many leading brands have faced off on public opinion topics, earning enough eyeballs and attention. Sun Wei, a brand marketing consultant at Tsinghua University, said that at present, the most outstanding in marketing are Nongfu Spring and Jingtian, Jingtian has built Baisui Mountain into a high-end mineral water brand through marketing, and Nongfu Spring has spread brand awareness to the north and south of the river.
According to the CIC Consulting report, among the packaged aquatic products in 2023, Nongfu Spring, Cestbon and Jingtian ranked the top three in terms of market share, and Wahaha ranked fourth, but China Resources C'estbon followed closely by purified water products. According to the CIC report, the retail sales of Cestbon drinking purified water products reached 39.5 billion yuan in 2023, making it the No. 1 brand in China's drinking purified water market.
Wahaha, on the other hand, has neither deeply cultivated natural water and mineral water, nor innovated in products and channels, but has focused on the beverage business.
It is worth noting that in April this year, Nongfu Spring once again launched pure water products, which means that Nongfu Spring once again competed with Cestbon and Wahaha on the same track. After more than 20 years, Nongfu Spring once again benchmarked with Wahaha with the same type of products.
"Nongfu Spring's goal is to become a Coca-Cola-style beverage brand covering all categories, so it is only a matter of time before the purified water product line is replenished." Lu Shengzhen said.
The decisive victory of the channel
In March and April this year, Zong Fuli, who took over Wahaha, announced in an internal open letter that she would go all out to put the freezer and form a force to raid the terminal distribution. This marks the "first shot" after it fully took over Wahaha. The reporter confirmed from a number of dealers that Wahaha's freezers have been fully promoted in Zhejiang, and more actions have begun in the catering channel.
For a long time before, Wahaha has always been cautious about the placement of freezers. "In first- and second-tier cities, most of the terminal freezer delivery channels are occupied by brands such as Nongfu Spring, Cestbon, Master Kong, Coca-Cola, and Pepsi. In the post-Zong Qinghou era, Wahaha was more cautious about the delivery of freezers, and in its channel system, the priority of the delivery of freezers and personnel maintenance was low. A regional-level water distributor told reporters.
"Prior to this, Wahaha's channels adhered to the concept of taking root in every corner of the country, so although we can see Wahaha's products anywhere in the country, we have never been able to systematically present the products in front of consumers." Sun Wei said that the advantage of freezers is that they can systematically display the product matrix of a certain brand in front of consumers, although this method is very old-fashioned, but practice has proved to be effective. As a fast-moving consumer goods brand with Internet genes, Yuanqi Forest finally chose to join the "freezer war", which is enough to show that it does have irreplaceable terminal advantages.
"Wahaha's channel ability in many central cities is weak, and Wahaha has not cultivated some central cities as key markets, which makes Cestbon with provincial capitals, first- and second-tier cities as key markets, and finally forms a situation where the two major brands of Nongfu Spring and Cestbon compete in convenience store channels in first- and second-tier cities." Zhu Danphong said. Due to the high cost of entering convenience stores, and Wahaha has long regarded mom-and-pop stores as its main terminal channel, Wahaha's channel distribution advantage in first- and second-tier cities is not obvious.
"In the 90s of the 20th century, most of the FMCG companies' channels and marketing were limited to large and medium-sized cities, in fact, it was difficult to reach remote areas and rural markets, and the rural areas at that time, both in terms of population and market size, were the main body of the Chinese market, but Wahaha, as a FMCG company, was the first to touch the sales channels to the rural market. With the development of China's commercial economy, the strong consumption power of the rural market has laid the foundation for Wahaha to stand on the domestic market. Zhu Danpeng said that Zong Qinghou's vision and judgment at that time were ahead of the industry, but after completing the penetration of towns and villages, Wahaha did not invest more resources in first- and second-tier cities, which also led to Wahaha's relatively weak product channels in first- and second-tier cities.
Since March this year, Wahaha's products have gradually appeared in consumers' field of vision in convenience stores in Beijing, Shanghai and other places. But it's still hard to stand out from the crowd. "The public opinion in March did give Wahaha a large amount of marketing potential, but the impact of this event cannot last for a long time, and Wahaha still needs to make more voices to the outside world." Lu Shengzhen thinks.
Although purified water has always had the limitation that it is difficult to reach the high end of the pricing in the field of packaged water, as the overall growth of the packaged water market approaches the ceiling, the competition between the top brands will become more intense. In the use of the funds raised in the IPO, China Resources Beverage, the parent company of Cestbon, has made it clear that it will strategically expand and optimize production capacity, accelerate the expansion of sales channels and improve channel efficiency.
It is also worth noting that Nongfu Spring has built a back-end procurement platform for dealers very early, so that the sales data and profits of channels at all levels can be transparently and intuitively reflected at the decision-making level. In 2012, the price of Nongfu Spring packaged water increased from 1.5 yuan to 2 yuan, and the increased retail sales were passed on to distributors, further consolidating the channel. According to the 2012 CCB International Research Report, Nongfu Spring's dealer gross profit margin reached 25%, while the gross profit margin of Master Kong's dealers was only 14% during the same period, giving the channel higher profits and enabling it to gain more advantages at the dealer level. In addition, Nongfu Spring is also the first company to enter the e-commerce field, although the current e-commerce platform accounts for a relatively small proportion of the overall performance sales, but it also reflects that Nongfu Spring has always paid more attention to emerging channels.
From the perspective of products, at present, the products of Cestbon, Jing Tian, Master Kong, and Coca-Cola all show a trend of pure water and natural water going hand in hand. For Wahaha and Nongfu Spring, Wahaha's natural mineral water only appeared during product displays, and the product was not sold in its offline channels or flagship stores. It has been more than 20 years since Nongfu Spring left the pure water business, the former needs to maintain its position in the pure water market, while the latter wants to make up for the shortcomings of its own product line, and from the perspective of the upstream industry, there are no technical difficulties. "The key is how much energy is invested in each other's shortcomings." Sun Wei said.
Wahaha and Nongfu Spring have the advantage of being compared with Cestbon and Jingtian that they have the beverage industry as a strong follow-up force. Taking Nongfu Spring as an example, the financial report shows that in 2023, Nongfu Spring packaged drinking water products recorded revenue of 20.262 billion yuan, an increase of 10.9% over 2022, accounting for 47.5% of the total revenue in 2023; Tea beverage products continued to grow, recording annual revenue of RMB12.659 billion, an increase of 83.3% over 2022 and accounting for 29.7% of the total revenue in 2023. Judging from the data, Nongfu Spring's main growth core is tea beverage products, but packaged water is still the largest business segment. Therefore, Nongfu Spring's strategy is obviously to maintain the basic plate of packaged water, with beverages as the driving force for growth.
Although Wahaha did not disclose the specific classification data of turnover to the outside world, from the perspective of marketing direction in recent years, it also focuses on releasing marketing information to the outside world with beverages such as AD calcium milk as its flagship products.
From the perspective of channels, after Zong Fuli took office, Wahaha quickly made up for some of Wahaha's shortcomings, and showed explosive growth. Not long ago, Wahaha announced that it had completed sales of 50 billion yuan in the first three months of this year. And in 2023, Wahaha's annual sales will be 51.7 billion yuan. In three months, the sales of the whole of last year were completed, and the growth rate was staggering. Although Wahaha did not announce the sales volume of 50 billion yuan in the terminal and the inventory ratio of dealers at all levels, this data reflects the recognition and support of consumers and dealers around the world.
From bottled water to beverages
"There is no so-called technical barriers in the beverage industry, and it is very common for brands to learn from each other. For new categories, Wahaha has been taking a preemptive approach for a long time, while Nongfu Spring is willing to be the first to eat crabs first. Lu Shengzhen believes that there is no good or bad for these business models, and there is no so-called right or wrong.
Counting Wahaha's major products, from AD calcium milk to nutrition express, these products are not Wahaha's first products, they are all launched by Wahaha, and then these products are operated into tens of billions of single products. Nongfu Spring is the opposite, many products are the first to be launched in China and have been in operation for many years, and many subdivided products have been in continuous operation for many years, and finally incubated some explosive products. For example, oriental leaves.
In 2016, Zong Fuli founded KELLYONE, a high-end beverage brand, and launched personalized customized fruit and vegetable juices, becoming the first brand in China to launch the concept of beverage customization. This product is the first attempt to introduce concepts such as central kitchens to the beverage industry. But in the end, the product faded out due to mediocre response, and the industry generally believed that Zong Fuli's concept of the product was too advanced, and in a short period of time, the consumption logic of the domestic beverage market was difficult to match it.
In 2008, Nongfu Spring took the lead in the industry to launch water-soluble C100, creating a new category of beverages supplemented with vitamin C. The following year, Wahaha followed suit and launched the benchmark product HELLO-C. According to media reports, in April of that year, Wahaha HELLO-C sales reached 1.5 billion yuan, while Nongfu Spring water-soluble C100 sales reached 600 million yuan. One year after the launch of the product, Wahaha relied on its huge distribution network to achieve the latecomer's superiority. Although HELLO-C surpassed it at that time, it is almost difficult to find this product in offline terminals at the moment.
However, the reporter noticed that in 2023, Nongfu Spring's water-soluble C100 suddenly became popular on social platforms, and many consumers dubbed it "fairy water". Although water-soluble C100 has not completely occupied this segment for a period of time, and was even surpassed by Wahaha's related products, water-soluble C100 has always been operated by Nongfu Spring, and has a high priority in Nongfu Spring's local products, which also provides conditions for water-soluble C100 to become popular again.
Wahaha has actually been looking for blue ocean categories, and from the perspective of the categories it has, Wahaha includes almost all types of drinks, whether it is cola or milk drinks, Wahaha has dabbled in. Although Nongfu Spring has many products, the main offline channel resources are still concentrated in a few fist products.
Although Wahaha has won many victories in the competition with competing products, in recent years, when it surpasses its opponents, there are few cases where it continues to expand its subdivided categories. "Wahaha is relatively conservative in decision-making, and it is enough to have products that can be benchmarked against competitors, and not to invest too much in a certain category, but to put more eggs in different baskets, but in the end, it is difficult to breed new fist products." Zhu Danphong said.
"Nongfu Spring's innovation model actually tests the ability of decision-makers to gain insight into the industry. Taking Oriental Leaves as an example, the background of the emergence of the product is that the beverage market is dominated by high-sugar drinks. At that time, the product concept of Oriental Leaf was too advanced, so the market was not optimistic about Oriental Leaf at that time, but with the change of consumers' demand for drinks, the reputation of Oriental Leaf began to reverse and gradually became a new big item. The product has been losing money for a long time but still being able to persevere, which actually tests the decision-making ability and patience of the top management. Sun Wei said.
"When Zong Qinghou took the helm of Wahaha, there were endless doubts about the aging of Wahaha's brand and products, but Wahaha never had fundamental innovation and change. After Zong Fuli entered the management, she did have a great breakthrough in marketing, but there was no big breakthrough in the product at present. Zong Fuli is also well aware of the current shortcomings of Wahaha, and it remains to be seen how Wahaha will change in the future. Sun Wei said.
"At present, Wahaha has gained a wave of emotional recognition and support in brand building, and whether it can follow up in terms of product and channel capabilities in the future will become the key to the release of performance." Zhu Danphong said.