Click to read the original article for details "War Horse" has not yet risen, and now "VOSS" has been supported. It is clear that the Red Bull dispute is intensifying, and Huabin Group's desire to find a substitute for Red Bull is more urgent. Recently, Huabin Group launched a domestic version of its packaged water VOSS (Fus) and will promote it on a large scale. Industry insiders point out that since the trademark dispute with Red Bull's trademark owner broke out at the end of 2016, Huabin Group launched the "War Horse" brand, hoping to replace Red Bull as a major product, even using Red Bull's channels to support it. From the current situation, War Horse cannot make up for Red Bull's losses, so Huabin needs to find other category brands to form a joint force, preparing for the company's continued development in case it loses the right to operate Red Bull. Will VOSS Rise? In June this year, Huabin Group, the domestic parent company of Red Bull, officially launched the domestic version of VOSS (Fus) water and will launch it in 24 cities nationwide, including Wuhan, Beijing, Shanghai, Guangzhou, Shenzhen, and Chengdu. A Huabin Group spokesperson said that after VOSS high-end water was introduced to China, it quickly expanded into channels such as star-rated hotels, high-end travel, and well-known e-commerce platforms. However, facing the consumption upgrade in the high-end packaged water market, relying on imports has clearly restricted VOSS from meeting the rising domestic market demand, so the domestically produced bottled water came into being. A reporter from Blue Whale Industry and Economics called the staff of Huabin Fast-Moving Consumer Goods Group, who said that the domestic version of VOSS is mineral water, while the imported version is purified water, to differentiate. Both are operating normally, with the domestic version just launched and in the distribution stage. Regarding whether there is separate channel operation for imported and domestic VOSS products, he said he was not clear. A reporter from Blue Whale Industry and Economics learned from JD.com's VOSS official self-operated flagship store that the Norwegian original imported VOSS 800ml glass bottle sparkling water is priced at 29.9 yuan, and the domestic version has not yet been listed for sale in the store. According to media reports, the domestic products are all non-carbonated versions, available in 375ml and 500ml plastic bottle specifications, priced at 5 yuan and 6 yuan respectively. In comparison, the domestic version is indeed cheaper. In addition, the biggest difference between the imported and domestic VOSS is the water source. The imported VOSS water source is in Iveland, a town on the Scandinavian Peninsula in Norway. The domestic version's water source is located in Danxia Mountain, Zhuxi, Hubei, which is described as the only recognized mineral water source for VOSS outside Norway. Xiao Zhubin, general manager of Wenhe Wang, pointed out to Blue Whale Industry and Economics that first, consumers find it difficult to have a clear consumption experience with packaged water, making it hard to highlight cost-effectiveness; second, marketing and channel costs for water are high, and the imported VOSS's brand advantage is not obvious, while the domestic new brand still requires substantial investment, with huge costs; in addition, high-end water emphasizes the water source, and the domestic VOSS water source does not have the advantage of origin, and consumption power and brand power are insufficient to support it, so he is not optimistic about this product from Huabin Group. Zhu Danpeng, a researcher at the China Brand Research Institute's food and beverage industry, told reporters that the domestic health market is currently improving overall, and there is consumer demand in the 5-6 yuan water market. Huabin Group's advantage lies in its strong channel capabilities and customer resources. From this perspective, the domestic VOSS water has a higher chance of success than other brands. However, its biggest challenge is how to create positive repeat purchases among customers, which will test Huabin Group's brand operation capabilities. Marketing expert Lu Shengzhen further pointed out that Huabin Group's operation of foreign brands is merely borrowing the intangible value of the brand. This is similar to the product mix principle in product strategy: image products build image, profit products generate profit, and competitive products defeat competitors. The imported VOSS has a higher price and a narrower consumer base, but this is very important for establishing brand image in the early stage. The domestic version may become the real profit product and competitive product in the future, adopting a strategy of "Tian Ji's horse racing" to form a cross-product competitive echelon, reserving space for future competition in the Chinese water market. The "Spare Tire" Battle Huabin Group places great importance on VOSS water this time. Its chairman, Yan Bin, has repeatedly endorsed VOSS and publicly stated that he wants to create another Red Bull in Hubei within 10 years. This shows the deep expectations Huabin Group has for this product. It is understood that Huabin Group previously focused highly on Red Bull as a single brand in the beverage industry. Until Red Bull became awkward in the prolonged litigation dispute, its status gradually became awkward, and its performance also showed a downward trend. Data shows that in 2015, Huabin Group's total sales in the domestic FMCG field were 23.401 billion yuan, with Red Bull accounting for over 98%. After the trademark dispute broke out, Huabin Group launched the "War Horse" product, tilting resources toward the new product, intending to support "War Horse" to replace Red Bull and improve the over-reliance on the single Red Bull brand. According to a Red Bull distributor, since last year, market expenses for Red Bull have been continuously reduced, and the reduced resources have been transferred to War Horse, while deeply bundling the two products to leverage Red Bull's channels and influence to radiate to War Horse products. After losing high resource focus, Red Bull's performance also dimmed. Data shows that in 2016, Red Bull's sales fell to 22.18 billion yuan, and in 2017, Red Bull's sales target was also reduced to 16 billion yuan. A reporter from Blue Whale Industry and Economics called the aforementioned Huabin Fast-Moving Consumer Goods Group staff, who said that sales performance for Red Bull and War Horse is currently not convenient to disclose. In fact, War Horse is not the first brand Huabin Group has supported. It is reported that starting in 2013, Huabin Group began looking for products, hoping to find a suitable product to replace Red Bull. In 2014, Huabin Group began introducing the beverage brand Vita Coco, and in 2015, it specifically established a fast-moving consumer goods group to handle the operation of newly introduced beverage brands. In the same year, it launched the Guoxiaoshuang product. In December 2015, VOSS (Hubei) Beverage Co., Ltd. was established. In January 2016, Huabin Group acquired slightly more than 50% of VOSS's equity for approximately $105 million. At the end of 2016, Huabin's mineral water project officially started construction in Zhongba Village, Taoyuan Township, Zhuxi County, and in 2017, the project's production plan accelerated. This year, the VOSS water project officially started production. It is reported that the first phase of the project has a total investment of 657 million yuan and is expected to produce 250,000 tons of high-end mineral water annually. From the timeline, all this is being carried out intensively, and it is hard to say that Huabin Group has not planned ahead and prepared follow-up products for Red Bull. Zhu Danpeng said that due to the trademark dispute, Huabin Group intends to abandon its previous strategy of focusing on Red Bull as a single brand and adopt a multi-core operation, which is also a relatively stable approach. "New brands need long-term market cultivation. Currently, War Horse is performing okay in some regional markets, but it is difficult to become the next Red Bull." Lu Shengzhen also pointed out that Huabin Group's FMCG strategy is very clear: to continuously seek brands with certain brand influence and good sales foundation in the international market, especially in European and American markets. By leveraging the development gap between China and developed countries, it transplants mature commodity market experience from developed countries to develop the Chinese market. Around 2015, Huabin realized the potential danger of the Red Bull model and began shifting attention to beverage brands with good development in Germany and the United States, and started shifting from Red Bull's financial share model to absolute equity and full ownership. "Red Bull accounts for too high a proportion in Huabin's FMCG sector, but there is already great uncertainty, so it is necessary to cultivate other potential products to make up for Red Bull's possible decline." Another industry insider analyzed to Blue Whale Industry and Economics that Huabin's Red Bull dispute is very similar to the JDB and Wanglaoji dispute in the herbal tea market, and its development path is also very similar to JDB. JDB, after losing the operation rights of the "Wanglaoji" brand, hoped to support its high-end water Kunlun Mountain as another "pillar" for performance, but after years of operation, it has not succeeded. Huabin launched War Horse to replace Red Bull's market, but from the current market situation, this intention is difficult to achieve. Now, whether supporting a high-end water brand can become another major product to make up for Red Bull's performance decline still needs market testing. Entering the Blue Ocean? In fact, in recent years, driven by consumption upgrades, demand for high-end water products has been stimulated. Besides Huabin, many other companies have entered this field. In June this year, Nongfu Spring's wholly-owned New Zealand enterprise Creswell NZ Ltd purchased the "Otakiri Springs" bottled water factory near Whakatane on the North Island of New Zealand, and its application for expansion of the factory was also approved by New Zealand authorities. Previously, Nongfu Spring had already launched bottled high-end water, but the above acquisition also led to industry speculation that its high-end water series may add another member in the future. Similarly, COFCO Group also stated on its official website in May that COFCO Beverage signed a processing and export transportation agreement with Russia's Baikal Sea Company. According to the agreement, the two parties will fully utilize resource advantages to introduce the world's largest lake, Lake Baikal's natural unpolluted drinking water, into the Chinese market. This also means that COFCO Beverage is also increasing its presence in the high-end water market. In addition, Nestlé has publicly announced plans to expand production capacity for its high-end drinking water brand Perrier, and Danone also disclosed last year that it will complete the modernization of its Evian factory in France, adding 10 new Evian mineral water production lines. The successive actions of these two giants also demonstrate their confidence in the high-end water market. According to the latest research on the packaged water industry released by Nielsen, in 2017, the packaged water category achieved double-digit growth of 17% in sales and 15% in volume. Among them, high-priced water above 5 yuan/liter saw a sales increase of 20%. The average profit margin for ordinary packaged water in China is only about 4%, while the profit margin for high-end mineral water can reach about 25%, which is an important reason attracting companies to enter. Zhu Danpeng pointed out that from the domestic market perspective, packaged water around 5 yuan is mid-to-high-end, above 10 yuan is high-end, and above 20 yuan is ultra-high-end. Although the profit of high-end water is higher than ordinary packaged water, the operating costs of high-end water are also high, especially promotion and personnel costs, which account for the majority. Therefore, most companies operating high-end water suffer losses in the first three years, and only a few companies can break even. Lu Shengzhen said that with the intensification of environmental pollution and consumer education on water safety, water beverages are also transforming from hard needs based on physical properties to soft needs based on social attributes and social class positioning. From the perspective of consumer market potential, the water market still has huge space. Moreover, truly high-end water brands have not yet formed, so many companies are looking for opportunities to become heroes in the water market in this prolonged water war. In addition, high-end water currently faces problems such as high-end image, low-end channels, and large-scale production. In terms of brand connotation cultivation, it is clearly inferior to foreign brands. The main reason is insufficient patience in brand cultivation, driven by a "heroes emerge in troubled times" mentality. "For high-end water to truly succeed, it should make trade-offs, not try to capture all consumers, use all channels, or engage in all price wars." Source: Blue Whale -END-