At the beginning of this year, Nongfu Spring launched three new products in succession, which was interpreted by the industry as the prelude to the 2015 water war. The spin-off and listing of its mineral water business demonstrates Evergrande Group's determination to establish a firm foothold in the FMCG industry. It is foreseeable that competition in the domestic mid-to-high-end water market will become increasingly fierce.
After spinning off Evergrande Football and Evergrande Culture, Evergrande has also spun off its mineral water business for listing. Following Tibet 5100, Evergrande Mineral Water will become the second independently listed company in the drinking water industry. According to the announcement of Evergrande Real Estate, the Evergrande Mineral Water to be listed is part of Evergrande Group's FMCG layout, with natural mineral water and derivative beverages as its main business, covering the upstream, midstream, and downstream of the industry. It has taken the lead in establishing an "Internet+" quality and marketing system, aiming to build an integrated industrial group covering production, supply, and sales.
Currently, Evergrande Mineral Water has built two production bases in Jilin Province, with 9 imported production lines and an annual production capacity of 2.2 million tons. It has established 30 provincial sales companies and a sales network of 1.15 million outlets, mainly responsible for the production and sales of Evergrande Spring Water. Evergrande believes that after the listing application, Evergrande Mineral Water will further strengthen its corporate governance structure, improve equity liquidity, help attract strategic investors, enhance its corporate image, and achieve sustainable business development.
This statement is not without merit. The listing of Evergrande Mineral Water will greatly enhance its financing capability and risk resistance, further strengthen its industry competitiveness, and help it achieve the goal of building a world-class industrial cluster for natural mineral water and derivative beverages. Currently, competition in the mid-to-high-end mineral water market is fierce, and this move to promote the listing of Evergrande Mineral Water demonstrates Evergrande Group's determination to establish a firm foothold in the FMCG industry.
Data shows that in 2013 and 2014, the market share of domestic natural mineral water expanded rapidly at growth rates of 39% and 78% respectively, and by 2014 it had occupied about 15% of the domestic packaged water market, with strong industry growth and huge potential. Previously, industry insiders pointed out that bottled drinking water currently ranks first among all beverage categories in China. Although the bottled water industry in Guangdong grows at an annual rate of 20%, its profit margin is only about 3%. Meanwhile, the high-end water market is growing at an annual rate of 80%, with profit margins remaining high. It is reported that the average profit margin of high-end mineral water is about 7 times that of ordinary mineral water.
According to industry experts, since its launch in 2013, Evergrande Spring Water has achieved a relatively ideal distribution rate and industry and channel brand influence by virtue of its strong distribution capability and brand marketing ability. However, the current domestic mid-to-high-end mineral water market is highly competitive, and Evergrande Spring Water faces strong rivals such as Kunlun Mountain and Tibet 5100. Therefore, before or after the listing, how Evergrande Spring Water can achieve good inventory turnover and enhance profitability while ensuring distribution rate is a problem facing Evergrande Mineral Water.
In the current drinking water market, high-end water competes on water sources, mid-end water led by C'estbon competes on brand, and low-end water represented by Master Kong mineral water competes on price. However, in 2014, high-end water companies fought all three battles in turn, showing the intensity of competition. At the beginning of this year, Nongfu Spring launched three new products in succession, which was interpreted by the industry as the start of the 2015 water war.
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