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Preface: On the morning of September 7, the groundbreaking ceremony for the Antu Yili Changbai Mountain natural mineral water project was held, marking Yili's official entry into the mineral water field. From April 2018, when media reported that Yili Group frequently inspected mineral water sources, to December 2018, when Yili Group officially announced an investment of 744 million yuan to build the Yili Changbai Mountain natural mineral water beverage project, and then on August 23, 2019, when Yili laid out a mineral water production base in its home base of Inner Mongolia, this is the second move Yili has made in the bottled water sector, following the Changbai Mountain mineral water project.
From this, it is clear that Yili, as a dairy giant, has long been optimistic about the bottled water market. Although the bottled water market has grown at an average annual compound rate of 11.8% with increasing sales scale, we cannot help but ask: Can the recent wave of FMCG companies entering the mineral water market succeed? This article focuses on an in-depth analysis of natural mineral water, exploring the opportunities and challenges behind operating in this sector.
After endless disputes among water companies, bottled water has finally been defined into three categories: purified water, drinking water, and mineral water.
As one of the three essential factors for human survival (food, water, air), the bottled water market has always been favored by countless companies. Of course, bottled water has not disappointed; in recent years, its absolute value and growth rate have consistently topped the beverage charts, especially the performance of mid-to-high-end water, which has been even more impressive.
Long ago, when discussing the Chinese bottled water market with friends, I mentioned: 1-yuan water, because it cannot meet consumers' cognitive needs and cannot satisfy the profit distribution at various sales levels, will exit the mainstream market in a short time; 2-yuan water will develop towards weak branding and strong convenience; water priced at 3 yuan and above will gradually become the mainstream beverage in the mainstream market.
What is 3-yuan water? It is impossible to achieve through the upgrade of purified water and drinking water; it can only be changed. Natural mineral water is the only choice.
Because of this, many major brands have begun to venture into the natural mineral water field. However, now to succeed in natural mineral water, relying solely on brand power and channel power is far from enough. Nongfu Spring is a good example: it has strong brand and channel power, but its 3-yuan sports cap mineral water has not performed well.
Regarding the operation of natural mineral water, I have two product definition considerations for your reference.
From Homogenization to Same-Dimensional Competition: Competing on a Different Dimension
Mr. Fan Xianguo, chairman of Jinmailang, has been quite precise in defining his company's products in the industry. In earlier years, he proposed: The product following strategy is the lowest cost and lowest risk entrepreneurship, which allowed Jinmailang to survive the brutal market competition.
At the 2015 distributor meeting, Jinmailang's new strategy was mentioned: evolution and differentiation. The explanation at that time was: If you want to go to Beijing and there is a carriage, how to get there as quickly as possible? There are two ways: one is to increase the number of horses to make them run faster; the other is to replace the carriage with a car.
The former is evolution around the product itself; the latter shifts attention to customer needs and relies on technological progress to create 'category'-level differences, which is differentiation. Subsequently, Jinmailang Beverage launched two new products that successfully entered the southern market: one is Liangbai Kai (cool boiled water), and the other is Madun Town.
'Differentiation' and 'evolution' are very important concepts in the positioning theory system. What I want to mention today is: Evolution is competition among homogenization; differentiation is competition among same-dimensionality.
For water priced at 3 yuan and above, let's first look at the competitive results from homogenization to same-dimensionality. In earlier years, Nongfu Spring divided bottled water into two categories: weakly alkaline water and acidic water.
Based on the pH of human body fluids, weakly alkaline water was defined as beneficial to health, thus creating differentiated sales from purified water on the market, and it succeeded. However, as the drinking water market segmented, it was found that many waters on the market were weakly alkaline, and the differentiation no longer existed. Major water companies began to hype their different water sources.
Thus, water sources such as Changbai Mountain, Kunlun Mountain, Qingdao Laoshan, and the Alps gradually entered consumers' sight. At the same time, some water companies, in order to create differentiation again, studied the differences in mineral elements in their products, leading to concepts like selenium-rich water, calcium-rich water, lithium-rich water, etc. A series of measures were all aimed at avoiding homogenization and seeking differentiated marketing.
Just like the carriage to Beijing, you keep investing to add one horse, two horses, three horses, not realizing that horses have a speed limit; no matter how many horses you add, it's not as fast as switching to a car, train, or plane. This is evolution, competing within the same dimension, and the market obtained is extremely unstable and easily eaten up. So what would happen if you stepped out of this circle to operate a natural mineral water?
Case study of dimension change: There is a soy sauce company, a local brand with average production and scale. A few years ago, big brands didn't pay attention to this area, but now major brands have forcefully entered the region. After a few rounds of promotions, the local brand became overwhelmed and struggled, just like many companies now: if you don't change, you wait to die; if you change wrongly, you seek death.
So the problem arises: if you compete in the same dimension, avoiding homogenization leads to thinking about differentiation, such as process differentiation, raw material differentiation, price differentiation, etc. Later, it was found that these differentiations are limited to the soy sauce itself. A local manufacturer, regardless of scientific research strength, equipment strength, capital, or talent, cannot compete with nationally renowned brands because they are not competing on the same platform.
So for this soy sauce company to survive, it must think dimensionally differently, not focusing on the soy sauce itself. How did this company operate?
They visited and found that most of those responsible for buying soy sauce at home are women. Women like the taste of soy sauce but worry about its side effects, such as melanin deposition affecting beauty. What are women? Often, they are beauties who love food. If they created a soy sauce tailored specifically for women, it would solve both the purchase problem and the beauty concern. With a little promotion, sales would surely not be a worry.
Finally, the company researched and added tyrosinase to the soy sauce, an element that can inhibit copper ions to prevent melanin aggregation, and also added collagen to promote skin vitality, resolving the core conflict. A women's soy sauce was born, and sales were as expected. **
Return to the essence of things: not comparing equipment, raw materials, capital, or talent, but changing dimensions, starting from consumers, comparing beauty. One move kills the enemy!
The natural mineral water industry should also do this. Think of Evergrande Spring Water before. There are few Chinese water companies with stronger comprehensive strength than Evergrande Spring Water. There are many opinions about Evergrande Spring Water's early failure. In my view, the failure was only one point: without long-term consumer communication and accumulation, they engaged in same-dimensional competition, always entangled with the water itself—whether it was surface water or groundwater, which water source, etc. They took differentiation to the extreme within the same-dimensional circle, but ultimately it was not ideal.
The demographic dividend has long disappeared. The current market pattern has shifted from incremental competition to stock competition. If you didn't seize the previous demographic growth dividend to build your company to a certain scale, now to do natural mineral water, you must think dimensionally differently in product definition to achieve a curve overtaking.
Mass vs. Niche Choice in Natural Mineral Water
In the product definition of natural mineral water, the inertial thinking mode is: Mineral water is a healthy beverage that anyone can drink, not limited to specific groups. The more mass the product definition, the wider the channels, and the higher the sales. However, this is not the case, and often the opposite is true.
When it comes to niche, many people think of small sales volume. Some even mistakenly equate small sales with niche. The so-called niche does not refer to the number of people, but to the division of needs. Many products with small sales are not niche, but rather the edge of mass.
At the same time, it is necessary to correctly understand niche: niche is not meeting the needs of a 'small number of people', but meeting the 'small part of people's needs'. Niche products absolutely do not pursue the 'smallness' of the audience, but the 'smallness' of needs. Consumer segmentation is becoming more and more detailed. People have countless 'niche' needs in their hearts, waiting for enterprises to express and release them at a higher level.
So, should the product definition of natural mineral water be niche or mass? What is the essential difference between the two? In terms of profit, mass follows the path of small profits but high volume, while niche follows a high gross margin strategy. In terms of market operation, mass uses distribution + promotion, while niche uses precise consumer positioning. Therefore, the two are fundamentally different in both profit model and operation methods, and product definition must be rigorous.
In a previous article about natural mineral water, I explained this: due to production and operating costs, the retail price of natural mineral water is destined to be no less than 3 yuan. For bottled water, 3 yuan is destined to be a non-mainstream price band, so taking the niche route is inevitable.
How to explain this niche route for natural mineral water? 'The Most Dazzling Ethnic Style' is sung by children just learning to speak and by square-dancing grandmothers, which can be called mass. Song Dongye's 'Miss Dong' may not have been heard by many. This is the characteristic of the mobile internet era. The arrival of this era has pulled traditional point-to-surface marketing towards 'point-to-point' internet marketing.
In this era, with the emergence of new channels like B2B and B2C, consumer shopping methods have become diversified. Traditional sales markets and channels have been diverted, promoting the vertical development of market segmentation. This market pattern has caused some old brands that don't keep up with the times to lose their original market share, and also allowed some new brands to find new market opportunities.
All market brand survival of the fittest is based on changes in demand, and demand comes from conflict. Every consumer is a different individual, and individual differences create consumption conflicts, accompanied by the emergence of more new needs.
The internet era has fully released this demand. Therefore, niche demand is bound to be the focus of future marketing, and natural mineral water is no exception.
With the rapid iteration of information, after the post-90s and post-00s generations become the main consumers, their innate individuality pushes the mass towards niche. That is, in the mass market, everyone has 'niche' needs in their hearts. This is the future!
I very much agree with several points in Teacher Liu Chunxiong's article 'Originating from Niche, Igniting through Communication, Harvesting from Mass'. Let me share: Some niches are just niches and cannot be extended. Some niches can be transformed into mass. Some niches can be extended to mass.
Popularity is the transformation between niche and mass. Originating from niche is actually aiming at mass. Originating from niche, gaining preference, harvesting fans. Through niche, gathering communication energy, this is the transition. The ultimate goal is to conquer the mass through communication.
Finally, I still want to say: Natural mineral water, the waters are deep, think twice before acting.
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