Text: Pai Finance, Author: Luo Li
"Nongfu Spring has become green, and C'estbon has become transparent."
Recently, in offline convenience stores, Nongfu Spring with green packaging has been quietly launched, next to green C'estbon, with a specification of 550ml of green bottled pure water and a retail price of 2 yuan per bottle, which is on par with C'estbon.
At the same time, on May 9, the new packaged mineral water of the Cestbon brand made its debut, and the unique transparent design attracted the attention of countless people.
Source: Screenshot of Xiaohongshu
Some netizens commented, "Cestbon new packaging, suspected of being robbed of clothes by Nongfu Spring?" ”
In late April, Cestbon's parent company, China Resources Beverage, just disclosed its prospectus, and the Hong Kong stock market is about to usher in the second packaged water drinking water company in China. According to the prospectus, China Resources Beverage is the second largest packaged drinking water company in China (second only to Nongfu Spring), and the revenue of packaged drinking water products accounts for more than ninety percent of the total revenue; In 2023, C'estbon will sell 14.6 billion bottles of drinking purified water products, with a retail sales of 39.5 billion yuan, ranking first in China's drinking purified water market with a share of 32.7%.
Immediately afterwards, the news that Nongfu Spring was about to launch green packaged water spread far and wide, and soon the green bottles were spread to the national market. At the end of April, an industry insider close to Nongfu Spring told the media that the Nongfu Spring pure water project was very urgent, and the initial shipment was about tens of millions of bottles.
It can be seen that in the face of the listing news of Cestbon, Nongfu Spring is uneasy, and the launch of green packaged water is a rainy day. In Nongfu Spring's new promotional slogan, it reads, "I have the obligation to inform, and you have the right to choose." One more option, one more comparison. ”
You must know that after the "Water War of the Century" in 2000, Nongfu Spring has not produced pure water for many years. In the early years, Nongfu Spring relied on the promotion that pure water is unhealthy and does not produce pure water, and fought its way out of many pure water brands and became the big brother of the drinking water industry.
At present, the bottled water market has once again quietly entered a new round of business war.
After 24 years, the packaged water business has once again entered a melee
At present, the concentration of the bottled water industry in mainland China is relatively high, and the market share of Nongfu Spring has reached 26.5%, ranking first; followed by China Resources C'estbon, with a market share of 21.3%; then Master Kong, accounting for 10.1%; The market shares of Wahaha, Baisui Mountain and Binglu were 9.9%, 7.4% and 5.3% respectively. The market share of the six brands is as high as 80.5%.
In terms of market share, the bottled water business in mainland China has long been divided into two factions: natural water and pure water, Nongfu Spring focuses on natural water, Cestbon, Wahaha, Master Kong, Robust and other pure water, in addition, Baisui Mountain's main natural mineral water is a high-end water track.
Intuitively, the difference between the two is that the water source and various physical and chemical indicators often need to be clearly listed on the bottle packaging of natural water.
In addition, the core difference between the two is also reflected in the raw materials. Unlike pure water, which can be extracted from tap water, natural water, as a national mineral resource, is more scarce. The threshold for natural water extraction is high, and it not only needs to be sampled and monitored for many years, but also needs to be auctioned. In 2014, a public auction of prospecting rights at the foot of Changbai Mountain called Baizhiquan was held, and after 777 rounds of fierce bidding, the final winning bid price was a record 156.77 million.
Nongfu Spring has opened 12 water sources across the country, covering the main consumer markets in the country, and has become a hegemon of "natural water" at a civilian price of 2 yuan.
To this day, when it comes to the packaged water business, "we don't produce water, we're just nature porters." This advertising slogan from Nongfu Spring is still deeply rooted in the hearts of the people.
The business world is never static, and the battle between pure and natural water never stops.
For pure water, Nongfu Spring used to refuse to produce it.
Around 2000, it was the early stage of the development of China's drinking water market, and it was an era when pure water was the mainstream. The market has long been occupied by brands such as Wahaha, Uni-President, Master Kong and Coca-Cola.
In April 2000, Nongfu Spring made a high-profile announcement that broke the tranquility of the market, took the lead in provoking a "water war of the century", and openly confronted Wahaha, a well-known pure water brand at the time.
At that time, Nongfu Spring held a press conference and said 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 that is "rich in minerals and trace elements, and has natural weak alkaline".
Subsequently, through a series of advertisements in newspapers and television, the growth rate of daffodils was watered with pure water and natural water, and the results showed that the growth rate of daffodils maintained by natural water was more advantageous.
Two months later, 69 companies, including Wahaha and Jingtian, jointly issued a statement, saying that the "daffodil experiment" was a fool and misleading of consumers, and that it was unfair competition to deny and belittle pure water as a whole by means of stealing beams and changing pillars and pseudoscience.
In the end, Nongfu Spring was fined 200,000 yuan for "unfair competition", but Nongfu Spring's move implanted the perception that "pure water is not beneficial to the body" into the cognition of many consumers.
On March 3 this year, 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 to human health, which is why I insist on producing natural water. ”
Nongfu Spring, which has now launched a green bottle of pure water, is somewhat a slap in the face.
The first head-to-head confrontation between Nongfu Spring and Cestbon was in 2013. In that year, Nongfu Spring conducted a PH value test on Nongfu Spring and Cestbon that had torn off the labels in a promotional event in Guangzhou, so as to popularize Nongfu Spring to the public as a weakly alkaline water and a healthier label for the human body.
In response, Cestbon complained directly to the Guangzhou Industrial and Commercial Bureau, which avoided the pH of the water, saying that Nongfu Spring "belittles competitors through comparison". After an investigation by the Industrial and Commercial Bureau, although the promoter tore off the packaging of the bottle, the cap of the bottle was still printed with the trademark of Cestbon, which was indeed depreciating, and finally ended with a fine of 100,000 yuan on Nongfu Spring.
Since then, Nongfu Spring and Cestbon have each stood on the top of a mountain and become the first brother of "natural water" and "pure water".
The debate over which pure water or natural water is more beneficial to health has not yet been conclusive, and it has been a topic of debate among scholars and experts for a long time.
Revenue is single, and the growth of the beverage business is uncertain
If Cestbon's parent company, China Resources Beverage, is successfully listed this time, it will once again fight side by side with the "boss" Nongfu Spring.
According to the prospectus of China Resources Beverage, in the packaged drinking water market, China Resources Beverage ranks second with a market share of 18.4%, lagging behind the first place (Nongfu Spring) with 23.6%.
From the perspective of the entire packaged water market, under the intensified market competition in the water business, the market share of C'estbon, the "second millennium", has been continuously divided. According to the official "China Resources C'estbon Social Responsibility Report 2018", in 2018, China Resources C'estbon had a market share of more than 22% in the packaged water market, ranking second. In 2023, that number has slipped.
However, in the pure water track, "Cestbon" is indeed firmly in the top spot. In 2023, CR Beverage sold more than 14.6 billion bottles of "Cestbon" brand aquatic products, with retail sales reaching 39.5 billion yuan. According to a report by CIC Consulting, CR Beverage is the largest drinking water company in China (in terms of retail sales in 2023).
From the perspective of packaged drinking water, the gap between the second China Resources Beverage and the boss Nongfu Spring is not large, Nongfu Spring's related revenue in 2023 will reach 20.26 billion yuan, and the revenue of China Resources Beverage's related business in the same period will be 12.45 billion yuan.
The gross profit margin of packaged drinking water products is very considerable, which is the consensus of the industry. The gap between the gross profit margin of Nongfu Spring and China Resources Beverage is not large.
In 2023, Nongfu Spring's gross profit margin will reach 59%, while the gross profit margin of China Resources Beverage will be 44.7%.
But what widens the gap between the two is the profit margin, Nongfu Spring's net profit margin is as high as 28.3%, while Cestbon's net profit margin is only one-third of Nongfu Spring's, 9.9%.
The reason why Cestbon has a low net profit margin is not unrelated to its heavy reliance on drinking water as a single product, and the failure to form an evenly matched product matrix to improve the channel reuse rate.
CR Beverage Family Bucket, with packaged drinking water C'estbon as the core, supplemented by other beverage businesses, covering tea drinks, fruit juice drinks, coffee drinks, etc. At present, CR Beverage has a total of 13 brand product portfolios, namely Cestbon, Zhiben Qingrun, Honey Water Series, Holiday Series and Zuowei Tea, etc., with 56 SKUs.
According to the prospectus, ninety percent of China Resources Beverage's revenue in 2023 will come from packaged drinking water. Although CR Beverage is actively expanding other beverage products, it has also successfully launched some hot-selling products, such as "Zhiben Qingrun" chrysanthemum tea. However, the revenue of the beverage business still cannot support the second growth curve, and the diversified business development has become the biggest obstacle for CR Beverage on the way forward.
In contrast, the revenue mix of its peers is healthier, supported not only by the drinking water business, but also by other beverages.
In 2023, Nongfu Spring's revenue from beverage products will be about 22.406 billion yuan, accounting for 51.7% of the total revenue; Master Kong's beverage revenue was 50.939 billion yuan, accounting for 63.34% of the total revenue.
According to the prospectus of China Resources Beverage, in the ready-to-drink beverage industry, including carbonated drinks, fruit juices and milk drinks, China Resources Beverage ranks fifth with retail sales of 42.3 billion yuan and a market share of 4.7%. The top three are Wahaha, Master Kong, and Nongfu Spring, with retail sales of 94.4 billion yuan, 87.7 billion yuan, and 87.5 billion yuan respectively.
From the perspective of popularity, when it comes to star drinks, Nongfu Spring owns tea π, farmer's orchard, and Oriental leaves; Wahaha has AD calcium milk, nutrition express, and eight-treasure porridge; Master Kong's representative products are iced black tea and green tea.
Since 2011, CR Beverage's multi-brand layout has successively launched brands such as Afternoon Milk Tea, Fire Coffee, and Magic. In 2018, the Honey Lemon series was launched, and the overall SKU was expanded to 19 models, and in 2023, it will be further expanded to 13 categories with a total of 56 SKUs.
But as of 2023, the total sales of the beverage business have just reached 1 billion yuan. Cestbon has always been slow in the development of beverage brands, and 6 years after the launch of Nongfu Spring's Oriental Leaves, Cestbon realized the trend of sugar-free tea and launched the sub-brand "Zuowei Tea" in 2019.
Among the multi-brand lines of China Resources Beverage, the most successful is "Zhiben Qingrun" chrysanthemum tea, with retail sales of 756 million yuan in 2023, ranking first in China's chrysanthemum tea beverage market, but it still cannot be compared with Oriental Leaves, which has been rising year after year.
According to data released by Nielsen in August 2023, Oriental Leaf has grown rapidly for three consecutive years, with a compound growth rate of over 90%; Oriental leaves, together with tea π, contribute more than 60% of the increase in the entire ready-to-drink tea market. According to this calculation, the retail scale of Oriental Leaves may reach 10 billion in 2023, and it will become a large single product with a retail scale of more than 20 billion in 2026.
According to the prospectus, from 2021 to 2023, the R&D costs of China Resources Beverage will be 48.979 million yuan, 49.179 million yuan and 61.510 million yuan respectively. In comparison, the R&D costs of Nongfu Spring in the same period were 125 million yuan, 277 million yuan and 349 million yuan respectively.
It can be seen that China Resources Beverage's multi-brand strategy is still too conservative.
In order to further improve the gross profit margin, China Resources Beverage also launched a high-end mineral water series product, "Cestbon Lu", in 2022, but it is still a step late. According to China Resources Beverage, the "Cestbon Lu" series products are taken from the water source of Jialin Mountain at a depth of 120 meters underground, with stable metasilicic acid content and excellent water quality, which are tailored for high-end consumption scenarios such as high-end business venues, bars, star-rated hotels, high-end restaurants and cafes.
According to the research report of Dongxing Securities, taking Nestle's drinking water as an example, ordinary bottled water is priced between 1-3 yuan, and the average profit margin is only 3.85%; With its high price, the gross profit margin of high-end bottled water is 6-7 times that of ordinary bottled water.
At present, the high-end mineral water brand market already has Jingtian's "Baisui Mountain", which is known as the "aristocracy in the water", and Nongfu Spring has already launched a series of high-end water in glass bottles in 2015.
Cestbon's entry was too late.
Backed by the big tree of China Resources Group, it is still not bold enough
Also as packaged water, the gap between Nongfu Spring and Cestbon is shown in the upstream supply chain. As a product with low value and large weight, the more intensive the factory opens, the lower the logistics cost. In the bottled water industry, there is a theory of "500 kilometers transportation radius", that is, if the price of water is 2 yuan, and the sales place is more than 500 kilometers away from the production site, the transportation cost will seriously erode profits, and the company can only work for high-speed toll stations and gas stations.
From the perspective of the density of drinking water factories, CR Beverage has the largest layout, with a total of 128 production lines, of which only 47 are self-owned production lines, and the other 81 production lines are carried out through the form of "1+N" cooperation, finding foundries in different regions for processing, and concentrating resources within the scope of factory radiation to expand market share. This is also the "mushroom tactic" used by China Resources' Snow Beer.
The so-called mushroom tactics refer to first occupying small regional markets to form small 'mushrooms', and in the process of integration, these 'small mushrooms' grow up, and eventually become a 'big mushroom'.
From the perspective of its own production line, the number of CR beverages is only half of that of Nongfu Spring. As of 2023, Nongfu Spring has 106 drinking water production lines and 31 beverage production lines, and Wahaha has more than 80 production bases.
However, under the mushroom tactic, CR Beverage needs to pay OEM fees to partners. In 2023, CR Beverage's fees to OEMs will reach 2.067 billion yuan, accounting for 15.3% of total revenue. To a certain extent, the expenditure of this part of the cost has pulled the gross profit margin of China Resources Beverage.
Next, packaged drinking water is still the key direction of CR Beverage's refilling. According to the prospectus, in 2024 alone, China Resources Beverage is expected to have four new factories put into operation, and the vast majority of the capacity is used to package aquatic products, and it also plans to put into operation and expand two factories in Changsha and Chengdu within the year.
The advantage of Cestbon is that it is backed by China Resources Group and has strong industrial resources. More than 8% of CR Beverage's revenue comes from distributors. The company has cooperated with more than 1,000 dealers across the country, covering more than 2 million retail outlets in China.
According to the prospectus, China Resources Beverage has more than 1,000 cooperative distributors and 8,700+ front-line salesmen, covering more than 2 million retail outlets, of which more than half are in third-tier cities and below.
However, according to Nongfu Spring's prospectus, as of the end of May 2020, Nongfu Spring had 4,454 dealers across the country, covering more than 2.43 million terminal sales outlets, in addition to 247 direct customers. This figure has surpassed that of China Resources Beverage.
In the sinking market, C'estbon's bigger competitor is Wahaha, at present, Wahaha has more than 7,000 cooperative dealers and more than 3 million terminal outlets.
In the prospectus, CR Beverage emphasized that it will continue to deepen the cooperative relationship with terminal retail outlets to lay the foundation for multi-category expansion. For example, the proportion of retail outlets that sell packaged drinking water and beverage products at the same time will increase from 50.6% in 2021 to 67.1% in 2023.
In the prospectus, CR Beverage also mentioned that one of its core advantages and development strategies is sports marketing. "We have developed a marketing strategy with a focus on sports marketing to match the overlap and correlation between product consumption scenarios and sporting events."
It is understood that since 2012, China Resources C'estbon has taken advantage of the explosive growth of China's marathon to cut into the sports sector, and then expanded to popular sports events such as cycling and football. In 2019, CR C'estbon officially became a partner of the Chinese national team/TEAM CHINA. In the sports marketing market, it also faces competition from Nongfu Spring and Baisui Mountain.
However, the layout of the latter two is different from that of Cestbon, and Nongfu Spring mainly focuses on road running, swimming, basketball and other fields. For example, in the field of swimming, Nongfu Spring is a long-term partner of the China Swimming Association, and is the official supplier of drinking water and functional drinks for the national diving team, swimming team and synchronized swimming team. Baisuishan has an earlier layout, mainly focusing on badminton events, as well as international leagues, such as the CBA League, the Basketball World Cup, the China Tennis Open, etc.
From the perspective of marketing investment, Nongfu Spring and Cestbon in the sports marketing sector were not announced separately in the financial report, but from the perspective of overall investment, Nongfu Spring is more willing to spend money.
According to the annual report data, Nongfu Spring's sales and distribution expenses will be 9.284 billion yuan in 2023, and 5.511 billion yuan, 7.233 billion yuan and 7.821 billion yuan from 2020 to 2022, respectively. From 2021 to 2023, the distribution and sales expenses of CR Beverage will be 3.757 billion yuan, 3.878 billion yuan and 4.087 billion yuan respectively; Among them, marketing and promotion expenses amounted to MOP 1,047 million, MOP 963 million and MOP 1,074 million respectively, accounting for 9.2%, 7.6% and 7.9% of the total revenue for the same year.
China Resources Beverage, which is about to enter the Hong Kong Stock Exchange with bottled pure water "Cestbon", may need to be more bold in innovation if it can further wrestle with Nongfu Spring.