The first half of 2015 was an unforgettable pain for the entire beverage industry. Major brands saw their sales performance in the first half of the year turn red (i.e., decline), marking another trough in sales following the "small year" of beverages in 2014. Setting aside objective factors such as weather, I will analyze the future market trends and direction of bottled water in beverages from the marketing perspective of bottled water. I hope readers can correct me and offer their insights.
In the beverage industry, bottled water is one of the few categories that has seen rapid growth in market capacity in recent years. When it comes to water, one must mention the representatives of one-yuan bottled water: Master Kong and Jinmailang. These two products, which dominate the Jiangbei market, are the main components of sales in the northern market. Looking at the national market, the representatives of two-yuan water, in terms of brand awareness, naturally belong to Nongfu Spring and Wahaha. Nongfu Spring, through its brand appeal and source-of-water marketing strategies, has ultimately achieved the status of a leading player in the two-yuan water segment. Wahaha, starting with a red-labeled water at 1.5 yuan per bottle endorsed by Wang Leehom, has continuously upgraded and expanded its product range. It now offers no fewer than four types of two-yuan bottled water in the market, achieving impressive sales in the industry. Turning to the Jiangnan market, one must mention a brand born in Guangdong, the forefront of China's reform and opening-up: C'estbon. This single product, under the state-backed and financially strong China Resources Group, has created nearly 10 billion yuan in sales in just Guangdong and Hunan provinces, although its performance in most northern markets has been mediocre.
Based on my experience and observation of the Central China market over the past two years, I believe that in the future, the market-leading bottled water will gradually concentrate on the two-yuan retail price point, and the survival space for one-yuan retail bottled water will become increasingly smaller. This is mainly analyzed from the channel perspective in the following aspects:
- Channel resistance due to profit distribution in the circulation process: In a fiercely competitive environment, the distributable profit in the channel is low, which blocks the smooth flow of the channel.
Brands in the one-yuan retail segment, except for some well-known brands like Master Kong, Ice Dew, and Jinmailang that can form contiguous sales areas, other regional brands are relatively scattered and dump their products in the low-end bottled water market with low-price strategies. In channels such as relatively closed schools, stations, docks, prisons, and other special channels, competition is extremely fierce during the peak season. Due to the characteristics of these channels, small brands, driven by the profit motives of terminal store owners, almost achieve exclusive sales, and brand power has almost no influence in these channels.
- Sales resistance caused by the frozen nature of bottled water at the terminal: The sales characteristics of bottled water make terminal GT stores extremely sensitive to the price of one-yuan bottled water, which already has very low profit. The peak sales season for bottled water is from May to September, relying on refrigerator freezing for retail sales. In addition to demanding freezers from various brands, terminal stores even ask for electricity subsidies for freezing during the peak season. When the manufacturer's profit is almost zero, facing the dual competitive pressure of price and promotion, the investment and expansion of one-yuan bottled water in the market are extremely difficult.
The core issue in the above sales problems is profit. And one-yuan bottled water happens to have an unsolvable deadlock on this most important issue in marketing activities. Currently, in the one-yuan bottled water market, apart from pursuing bulk purchases by the case, relying on single-bottle sales to increase sales will be like the setting sun, gradually fading away.
Therefore, the problem with one-yuan bottled water products is not the product itself or brand power, but that the profit at every link from factory to terminal is insufficient to support marketing activities in modern society, and it will eventually die out in the beverage market.
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