CIFA, April 23 (Reporter Xu Cihao) The drinking water market is generating “ripples.”

A reporter from New Consumer Daily learned that Nongfu Spring plans to introduce pure water. A promotional image related to “Nongfu Spring Pure Water” was distributed in the WeChat circle of friends and Weibo, and the retweeter included Nongfu Spring insiders.

It is worth noting that Zhong Yuyi, the founder of Nongfu Spring, once claimed that scientific experiments have proven that drinking pure water for a long time is not beneficial to human health. Since then, Nongfu Spring no longer produces pure water, but only natural water.

Meanwhile, China Resources Drinks (Holdings) Co., Ltd. (hereinafter referred to as “China Resources Drinks”), the largest purified drinking water company in China, recently submitted a statement to the Hong Kong Stock Exchange. According to China Resources Beverage's prospectus, the retail sales volume of China Resources Drinks' main Yibao brand drinking pure aquatic products in 2023 was RMB 39.5 billion, accounting for 32.7% of the market share.

If China Resources Drinks successfully hits Hong Kong stocks, the company will become the second domestic packaged drinking water company to be listed on the Hong Kong Stock Exchange after Nongfu Spring.

Does Nongfu Spring also need to be made pure water?

Nongfu Spring was founded in 1996 and started in the packaged drinking water business. It is currently the largest packaged drinking water leading enterprise in China. Packaged drinking water has always been the category that contributes the most to Nongfu Spring's revenue.

In 2000, Nongfu Spring introduced the concept of “natural water” to make a strict difference from “pure water” from other companies, and claimed that “pure water is groundwater, and natural water is water from natural resources.” Meanwhile, Zhong Yuyi, the founder of Nongfu Spring, once claimed that scientific experiments have proven that drinking pure water for a long time is not beneficial to human health. Since then, Nongfu Spring no longer produces pure water; it only produces natural water.

In April of that year, Zhong Yuyi held a large-scale press conference at Qiandao Lake. At the conference, Zhong Yuyi said that after scientific verification, pure water is harmful to the health of drinkers and is a national health concern. Since then, Nongfu Spring has stopped producing pure water; all of it has been produced as natural water.

For a while, sales of Nongfu Spring increased dramatically. Meanwhile, Wahaha also formed an alliance with six large pure water companies, including Shanghai Zhengguanghe and Le Baishi, to jointly criticize Nongfu Spring. As a leading figure in the pure water industry at the time, Zong Qinghou led Wahaha to file a lawsuit with the Hangzhou Municipal Court, accusing Yangshengtang Drinking Water Company (the parent company of Nongfu Spring) of unfair competition.

A number of pure water brands have jointly filed a complaint about “unfair competition” in Nongfu Spring. Nongfu Spring also showed no sign of weakness, and sued Wahaha in court, saying that the other party was spreading false facts.

Meanwhile, in Nongfu Spring's response, Zhong Yuyi revealed during this big discussion with a pure water brand led by Wahaha, “We both had mutual lawsuits, but in the end, Zong Lao and I shook hands and made peace under the witness of the main leaders in Hangzhou at the time. ”

However, looking at it now, Nongfu Spring's pure water market is also based on current business considerations.

Data show that from 2020 to 2022, Nongfu Spring's packaged drinking water revenue was 13.966 billion yuan, 17.058 billion yuan, and 18.263 billion yuan respectively, accounting for 61.0%, 57.4% and 54.9% respectively. In the same period, Nongfu Spring Tea Drink's revenue was 3,088 billion yuan, 4.579 billion yuan, and 6.906 billion yuan respectively, accounting for 13.5%, 15.4%, and 20.8%, respectively.

Notably, financial data shows that in 2023, the Nongfu Spring packaged water business contributed less than 50% of revenue for the first time. Meanwhile, revenue from Nongfu Spring packaged drinking water products exceeded 20 billion yuan and reached 20.062 billion yuan for the first time in 2023, an increase of 10.95% over the previous year, and its share of revenue fell to 47.5%.

According to Chinese food industry analyst Zhu Danpeng, Nongfu Spring needs to find growth points other than natural water, and definitely needs to be made into different types of water.

Yibao is on the market! There is still plenty of room in the drinking water market

China Resources Drinks (Holdings) Limited (hereinafter referred to as “China Resources Drinks”) has recently submitted a statement to the Hong Kong Stock Exchange. In the prospectus, China Resources Drinks quoted the Insight Consulting Report as showing that China Resources Drinks was one of the earliest companies in China to specialize in the production of packaged drinking water.

According to the prospectus, up to now, China Resources Drinks mainly has a product portfolio of 13 brands including “Yibao”, “Pure Clean Water”, “Honeywater Series”, “Holiday Series” and “Tea with Flavors”, with a total of 56 SKUs. Of these, China Resources Drinks sold more than 14.6 billion bottles of Yibao brand aquatic products in 2023, with retail sales reaching RMB 39.5 billion. In 2023, China Resources Drink's market share in the packaged drinking water market and the pure drinking water market was 18.4% and 32.7% respectively.

Looking specifically at financial reports, in 2021, 2022 and 2023, China Resources Drinks' packaged drinking water products achieved revenue of approximately 10.818 billion yuan, 11.906 billion yuan and 12.447 billion yuan respectively; other beverage products achieved revenue of 522 million yuan, 717 million yuan and 1,351 million yuan respectively.

Notably, the concentration of the packaged drinking water market in China continues to increase. In terms of retail sales, the total market share of the top five companies increased from 56.2% in 2021 to 58.6% in 2023. According to the Insight Consulting Report, in terms of retail sales, China Resources Drinks ranked second in the Chinese packaged drinking water market in 2023 and number one in the Chinese drinking pure water market.

Among them, pure drinking water is the largest segment in the packaged drinking water market. According to data from the Insight Consulting Report, in terms of retail sales, China's packaged drinking water market accounts for 56.1%; according to the compound annual growth rate, pure drinking water is also the fastest growing segment in the Chinese packaged drinking water market. The compound annual growth rate from 2018 to 2023 is 7.7%, and is expected to accelerate to 8.3% from 2023 to 2028. In terms of retail sales, the share of China's packaged drinking water market will increase to 57.2% in 2028.

According to Master Kong's financial report, Master Kong's packaged water revenue in 2023 was 5.375 billion yuan, an increase of 9.78% over the previous year.

According to Zhu Danpeng, Nongfu Spring plans to launch pure water to try Wahaha and Yibao. At that time, the overall price and promotion of pure water should be quite strong.