Recently, many peers and entrepreneurs have been consulting me on how to operate the natural mineral water category in 2016 and beyond. I feel it is necessary to write an article about this category for reference, and I welcome corrections from peers.

Part 1: Several News Items About Natural Mineral Water

  1. On the snow-covered Changbai Mountain in Jilin Province, a cluster of new processing plants will soon "package" the region's precious essence: mineral water. In China's rapidly expanding bottled water market, the high-quality mineral water from this mountain has become a shining star.
  2. Statistics show that in 2015, natural mineral water accounted for more than one-third of beverage consumption, and it is clearly on a continuous upward trend.
  3. A survey asking "Which type of water do you think is most beneficial to health?" revealed that 49% of netizens believe boiled tap water is healthiest, 19% think mineral water, 12% think mineralized water, and the smallest proportion chose purified water. Only 20% of netizens believe mineral water is healthiest, indicating a misunderstanding about water health, and possibly confusion between mineral water, mineralized water, and purified water. In the online survey, the most frequently selected mineral water brands were Kangshifu (25%), Kunlunshan (8%), and Jingtian Baishuishan (8%). 38% chose "Other," and it is possible that some netizens confused mineral water with other bottled water, categorizing brands like Nongfu Spring and Wahaha under "Other."

What do these three news items indicate? I believe there are two aspects: on one hand, companies are intensively developing natural mineral water; on the other hand, only 20% of consumers know that mineral water is healthiest.

Part 2: Simple Distinctions Among Types of Water Wang Bingchen, a counselor to the State Council and hydrogeologist, explains: "To choose genuine mineral water, the key is the water source. Different water sources directly determine the quality of bottled water. Purified water comes from tap water; mineralized water comes from purified water; natural water comes from lakes and reservoirs. Natural mineral water must come from groundwater sources with unique geological conditions and years of mineralization history. For example, Nongfu Spring has four major water sources: besides Jingyu in Jilin on Changbai Mountain, Danjiangkou in Hubei, Qiandao Lake in Zhejiang, and Wanlv Lake in Guangdong are reservoirs or lakes. These sources are surface water, not groundwater that forms natural mineral water, so they can only be labeled as natural drinking water." Furthermore, GB 8537-2008 "Drinking Natural Mineral Water" clearly states: "Unless approved by national authorities, labels must not claim medical effects." So netizens should not be fooled by mineral waters advertised with therapeutic benefits. "Mineral water is also a mineral resource, a liquid mineral. After mineral water is marketed, relevant authorities collect water resource fees." (Quoted from the internet)

How many consumers know this? Consumers are often blind.

Part 3: My Views on Operating Natural Mineral Water Based on Parts 1 and 2, my viewpoint is clear: on one hand, companies are optimistic about the mineral resources of natural mineral water and are investing in projects; on the other hand, consumers have a vague understanding of natural mineral water.

According to Nielsen's latest data from December 2015, C'estbon and Nongfu Spring hold market shares of 20.4% and 20.1%, respectively. C'estbon surpassed Nongfu Spring by a slight margin, with annual revenue exceeding 10 billion yuan, taking the top spot and becoming the leader in the drinking water industry.

Mineral water brands include Baishuishan, Aershan, Kunlunshan, Tibet 5100, Coconut Tree Volcanic Rock, Evergrande Spring, Nestle Panshan, Kangshifu, and dozens or even hundreds of others. Currently, the market is fragmented, with Baishuishan having the largest sales volume.

Let's analyze the case of Baishuishan: In 2003, Jingtian entered the mineral water market, and in 2004 launched the Baishuishan series. By 2009, it ranked among the top three in the national mineral water industry, and in 2010 it took the top spot in mineral water market share. According to data from the China Industrial Beverage Industry Association, over the past 10 years, Jingtian's production has grown at an average annual rate of 32.7%. In Guangdong, Baishuishan's growth is particularly notable, with 90% of surveyed distributors saying "As long as Baishuishan has production, it will have sales."

Why? I believe there are four aspects: First: Clear positioning—the slogan "Baishuishan, the aristocrat of water" immediately differentiates it from ordinary water, enhancing consumers' sense of consumption level. Second: Emphasis on channel push—when initially entering the market, despite low sales, they insisted on distribution to ensure visibility. Distributor incentive policies were in place, so they were proactive, ensuring distributor gross margins, often doing buy-one-get-one promotions, rebates, etc., solving channel push. Third: Persistence—from 2004, it took 5 years to enter the top three, and after 2010 it became the mineral water leader. Starting in 2013, nine years after consolidating channels, Jingtian began airing TV ads on CCTV-1, CCTV-5, and some local satellite channels, sparking consumer curiosity and significantly boosting sales. Fourth: Reasonable price system—priced at 2.5-3 yuan per bottle, targeting circulation channels, compared to brands like Kunlunshan that focus on supermarkets and are priced above 5 yuan, it is more affordable and acceptable to consumers. At the same time, the price space for second-tier distributors and retail stores is reasonable, ensuring profits at all levels.

In summary, I believe that with the rise of Baishuishan and Evergrande Spring, the domestic natural mineral water market is entering a period of explosive growth, becoming the next herbal tea category. Consumers will not remain blind forever, so natural mineral water companies must strengthen their internal capabilities to seize opportunities. I summarize three sentences for companies to consider: Products must be differentiated, and push must be strengthened; Distribution must be persistent, and advertising can come later; Prices must be affordable, and promotions must be continuous.

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