Source | Snow Leopard Finance Young people who don't like drinking water have made new friends Rejecting sugar but wanting flavored water, consumers' consensus on sugar reduction and demand for light wellness converge on the need for "8 glasses of water a day." Homegrown wellness water is a remake of the unsweetened tea story, and its rise is also putting pressure on the unsweetened tea market. A report predicts that the market size of Chinese-style wellness water will reach about 10.8 billion yuan by 2028. As the main battlefield of water substitutes shifts from unsweetened tea to wellness water, the latter will only face more intense competition than the former. In mid-June in Beijing, the highest temperature had already reached 30 degrees Celsius. At the bottled water shelf in a Hema offline store, a man in his 30s picked up a bottle of Shuqing Yuanqi Water, turned it over to look at the ingredient list, and then put it into his shopping basket. This Chinese-style wellness water, whose ingredient list includes seven ingredients such as American ginseng, Lophatherum gracile, Ophiopogon japonicus, and Dendrobium officinale, has no efficacy claims on the bottle, but in the APP product introduction, there are words like "heat-clearing soup" and "ancient formula with modern application." Shuqing Yuanqi Water and Wuzhi Yin are new wellness water series products launched by Hema in cooperation with the time-honored Chinese medicine brand Li Liangji, and they are also the 3.0 version of Hema's wellness water series. In terms of quantity, Hema has launched more than 20 wellness water products. From the 1.0 version focusing on medicine and food homology, such as Apple Astragalus Water and Chenpi Sishen Water, to the 2.0 version of Light Nourishing Water, and then to the 3.0 version of classical formula wellness water, Hema's approach to wellness water has gradually shifted to the "water substitute" business. Water substitutes are more flavorful than water and healthier than traditional sugary drinks, with no guilt when drinking. This concept, which emerged at the end of 2023, has gradually become an ecological niche that unsweetened tea drinks, Chinese-style wellness water, unsweetened soda water, lemon water, and other categories are vying to occupy. They can replace sugary drinks on one hand and mineral water on the other. The wide coverage and blurred boundaries of water substitutes theoretically allow them to penetrate all packaged soft drink consumer groups. The towering ceiling and broad innovation space attract both new and old brands to continuously increase investment, making the water substitute business visibly more competitive. Wellness water drinks on Hema shelves The wind is coming In the unsweetened tea and wellness water tracks, "waiting for the wind" is a time-honored story template. In 1980, Ito En launched the first unsweetened canned oolong tea in Japan, and it took 10 years to enter a growth period. Its junior, Suntory, entered the Chinese market in 1997 with unsweetened oolong tea, claiming to be "a new generation beverage beyond water," but it didn't make much of a splash. Oriental Leaf, which came out five years later, sat on the bench for another eight years. In 2017, sugary tea drinks entered low-speed growth, and unsweetened tea began to be accepted by the public, with the market size gradually growing from 1.81 billion yuan that year to 7.38 billion yuan in 2022. By 2023, unsweetened tea drinks began explosive growth. According to Nielsen IQ, the number of new unsweetened tea products nationwide reached 157 that year, compared with 93 the previous year. The hot wind blew over unsweetened tea and then quickly blew toward wellness water. Data from the FMCG offline retail monitoring agency MaxWin shows that the growth rate of ready-to-drink tea (unsweetened tea) slowed to 4.1% in Q3 2024, while the plant-based beverage category, where Chinese-style wellness water belongs, grew by 37.64%, becoming the fastest-growing beverage segment. Homegrown wellness water is also a remake of the unsweetened tea story. In 2018, Keyang launched red bean water, which remained lukewarm for the next five years. During this period, only four brands in China laid out Chinese-style wellness water, and the market size of Chinese-style wellness water only grew from 0.1 billion yuan to 0.1 billion yuan. In 2023, Genki Forest launched Yuanqi Zizai Shui, Keyang's sales soared, and the market size of Chinese-style wellness water jumped to 450 million yuan, a growth of over 350%. In just the first five months of 2024, 10 new players entered the industry. According to industry insiders, as the TOP1 single product in the wellness water industry, the total market size of red bean and coix seed water has reached 2 billion yuan. A report from the Prospective Industry Research Institute shows that the compound annual growth rate of the Chinese-style wellness water market is expected to be about 88.9% from 2024 to 2028, and its market size will reach about 10.8 billion yuan by 2028. The long process of waiting for the wind makes "leading consumer trends" a false proposition; following the trend is the truth. Rejecting sugar but wanting flavored water, when consumers' consensus on sugar reduction and demand for light wellness converge on the need for "8 glasses of water a day," it is natural that unsweetened tea drinks and Chinese-style wellness water are chosen as representatives of water substitutes. Although their user profiles overlap to a considerable extent, compared with unsweetened tea, wellness water has an advantage in taste diversity. Even without efficacy claims, the concept and psychological experience of "light wellness" can provide additional emotional value to fragile office workers. Therefore, the rise of wellness water has also brought pressure to the unsweetened tea market. The "2024 China Chinese-style Wellness Water Industry Development Trend Insight Report" predicts that by 2028, the substitution rate of Chinese-style wellness water for unsweetened beverages will exceed 30%. Water substitute threshold: palatable and affordable Under the premise of health, a good water substitute needs two basic elements: not unpleasant to drink and not expensive. Laoshan White Flower Snake Grass Water, born in the 1960s, can be called the ancestor of Chinese-style wellness water. After 2016, it gradually jumped from a "niche dark drink" to an internet-famous divine water, but its unique taste destined it not to become a popular water substitute choice. In October 2024, Hema launched Apple Astragalus Water and Chenpi Sishen Water, which quickly entered the top 3 of plant-based beverage sales rankings upon launch and doubled sales within two months. Many consumers bought them out of curiosity about the "fruit + traditional Chinese medicine" combination, and they quickly sparked heated discussions on social media, with some loving them and others complaining about the strange taste. Now, Chenpi Sishen Water, which has more controversial taste, has been taken off the shelves, and Apple Astragalus Water's default ranking under the alcohol and beverage category on the Hema App is also quite low. "Their palatability is indeed a bit worse," admitted Qing You, Hema's water beverage R&D and procurement manager, "but whether in terms of buzz or sales, they actually played a role in breaking the deadlock." After the two medicine and food homology wellness waters, Hema reflected internally: "As a water substitute, plant water needs to be drinkable in large quantities, with repurchase and penetration, so that the output of a single product can be guaranteed." Subsequently, Hema launched the "Light Nourishing Water" series and officially established its product positioning as a "water substitute," making palatability the core indicator for product development. The effect was immediate. According to Hema, in April this year, the sales of Fig and Flaxseed Water in the Light Nourishing Water series "have already surpassed the red bean and coix seed water of major KA," ranking first in Hema's plant-based beverage sales. In addition to palatability, price is another key factor determining whether a water substitute drink sells well. The 4-7 yuan price range is the mainstream price band for unsweetened tea drinks, but this price band is moving down. According to MaxWin data, from February to July 2024, the average price per 100ml of unsweetened tea continued to decline at a month-on-month rate of about 2%. The price of wellness water is also a threshold for water substitutes. The once-popular "One Whole Root" ginseng water, whose fleeting fate was due to channels, products, and other reasons, also suffered from low repurchase caused by the high price of 19.9 yuan per bottle. Haowangshui, which previously focused on sparkling juice and took a mid-to-high-end route, launched the "Care Series" in March 2024 to enter the Chinese-style wellness water track. Currently, on e-commerce platforms, its wellness water series products such as wolfberry water, coix seed water, and longan water are generally priced between 2-5 yuan for 500ml. Hema is also extremely reducing costs. The 1.0 version of Chenpi Sishen Water and Apple Astragalus Water was priced at 5.9 yuan for 500ml, while the 2.0 version of Fig and Flaxseed Water, Double Leaf and Double Melon Water, and Five-leaf Gynostemma and Brown Rice Water has been reduced to 4.9 yuan for the same bottle type. The 3.0 version of Wuzhi Yin and Shuqing Yuanqi Water was initially priced at 7.9 yuan but was reduced to 5.9 yuan shortly after launch. "We don't blindly pursue low prices, but we do pursue quality-price ratio. The cost reduction in cooperation with Li Liangji is also a process of exploration," Qing You said. "To be a true water substitute, we need to bring down the price, with the goal of not being much more expensive than water." New ways to play the water substitute business The early movers who patiently waited for the wind or hit the trend and won still hold the first-mover advantage. However, the water substitute business is welcoming a steady stream of new players. In May alone, Lotus Holdings' Lotus Water Industry and snack brand Laiyifen entered the wellness water market, and herbal tea brand Heqizheng also launched the "Yiji Water" series of wellness water. Old players are also constantly developing new products and expanding boundaries, seeking differentiation among sub-groups. Competing on efficacy, taste, creativity, scenarios, and channels has become the new way to play the water substitute business. At the beginning of this year, Oriental Leaf launched a 1.5L large package, improving cost-effectiveness while targeting family and party scenarios. Suntory launched nearly 10 new products at once, including unsweetened tea, and also announced a new Chinese-style wellness drink brand "Huanfang," with two new products focusing on "replenishing qi and blood" and "nourishing qi and beauty." Master Kong also launched two new products this year, Cassia Seed and Barley Drink and Wolfberry Chrysanthemum Tea, featuring "0 sugar, 0 caffeine + dual herbal formula." Hema is also making efforts in both unsweetened tea and wellness water. According to Chuan Fu, Hema's room-temperature food R&D and procurement manager, in 2025 Hema will continue to upgrade and iterate unsweetened tea products, with organic tea as a major direction. "We will add high-mountain tea and different tea varieties. When new products are launched next month, the unsweetened tea matrix will come out." In the wellness water track, to achieve differentiated breakthroughs, Hema cooperated with Li Liangji to directly raise the competition to the dimension of "competing on classical formulas." "Being a water substitute is not simply replicating traditional formulas, but making improvements more suitable for current consumption habits," said Li Mengqi, general manager of Li Liangji Health Industry Company. Li Mengqi is the fourth-generation inheritor of Li Liangji. She believes that the cooperation with Hema is about transforming good formulas, good medicinal materials, and good craftsmanship into products more acceptable to young consumers. So far, the Wuzhi Yin and Shuqing Yuanqi Water launched by the two parties have improved palatability while retaining traditional formulas, and reduced the proportion of medicinal ingredients to enhance taste. By joining forces with Li Liangji, Hema not only gains the endorsement of classical formulas and the trust of a time-honored brand but also ensures ingredient quality. "We are backed by Tianling Traditional Chinese Medicine, and many medicine and food homology raw materials have self-built bases. For example, Shuqing Yuanqi Water uses Dendrobium from our Yunnan base," said Cai Shunshun, R&D director of Li Liangji. Li Liangji factory in Suzhou Cai Shunshun also revealed that Hema and Li Liangji jointly determined a strategy of "replacing sweetness with sweetness," using ingredients with better taste from classical formulas such as pear cubes and water chestnuts to harmonize the medicinal flavor, and then using medicine and food homology materials with a sweet aftertaste like Ophiopogon japonicus and American ginseng to "create an Eastern sweetness curve." Zero sugar has become the standard answer for water substitute drinks, but how to improve taste without using sweeteners remains a new challenge in differentiated competition. In addition, innovation in any direction, such as formula, ingredients, craftsmanship, or channels, may trigger a new round of competition. As the main battlefield of water substitutes shifts from unsweetened tea to wellness water, the latter will only face more intense competition than the former. 🔺 Details of the 7th China FMCG Conference Scan the QR code for ticket consultation