The end of summer has not cooled the promotional fervor of bottled water companies. Recently, price wars continue in the bottled water market, with 12-bottle bulk packs breaking price bottom lines as companies cut prices to compete. Industry insiders believe that after summer, bottled water sales will decline sharply, and inventory will increase costs. To alleviate financial pressure, lowering prices for higher volume becomes a primary strategy. However, prolonged low prices could damage brand positioning.
01 Prices Hit Bottom Recently, the price war in the bottled water market continues. In a Carrefour supermarket in Beijing, the suggested retail price for 550ml Nongfu Spring natural water is 2 yuan per bottle, but a 12-bottle bulk pack sells for 15.9 yuan, about 1.325 yuan per bottle. In a Jingkelong supermarket, a single 550ml bottle of Nongfu Spring natural water sells for 1.3 yuan, with the promotion running until September 30. In a Yonghui supermarket, a 550ml×12 bottle bulk pack of Nongfu Spring natural water is priced at 11.9 yuan, with the per-bottle price dropping below 1 yuan. On Nongfu Spring's JD self-operated flagship store, the 550ml×12 bottle bulk pack originally priced at 17.9 yuan is now on promotion for 13.9 yuan, about 1.15 yuan per bottle, nearly half the suggested retail price of 2 yuan. Nongfu Spring's competitor, C'estbon (Huarun Yibao), is also seeing terminal prices decline. The product usually sells for 2 yuan per bottle, and even 4 yuan in vending machines, but store prices are around 1.5 yuan per bottle. In a Jingkelong supermarket, C'estbon 555ml purified water sells for 1.7 yuan. In a Yonghui supermarket, the same product is priced at 1.6 yuan. For bulk packs with higher discounts, on JD's self-operated C'estbon official flagship store, a 555ml×12 bottle bulk pack originally priced at 17.9 yuan per pack is now selling for 12.9 yuan per pack, equivalent to about 1 yuan per bottle. Additionally, in a Jingkelong supermarket, Wahaha 596ml×12 bottle purified water is priced at 14.4 yuan, about 1.2 yuan per bottle. In a Guo'an community store, Wahaha's crystal diamond packaging drinking water bulk pack sells for 9.9 yuan, about 0.825 yuan per bottle; Coca-Cola's Ice Dew 550ml×12 bottle drinking water sells for 8.9 yuan, about 0.74 yuan per bottle; Pepsi's Pure Water 550ml×12 bottle purified water sells for only 5 yuan, about 0.416 yuan per bottle, the lowest price found in the market. In another Jingkelong supermarket, Nestlé Pure Life 550ml drinking water sells for 1.8 yuan per bottle. On JD Super, a 550ml×12 bottle pack of Nestlé Pure Life sells for 13.9 yuan, about 1.15 yuan per bottle. Regarding price changes, a C'estbon spokesperson said that the current national retail guide price for C'estbon purified water 555ml is 2 yuan per bottle. In the beverage industry, there are slight differences in retail prices between chain modern stores and traditional retail terminals. Chain stores are slightly lower than traditional retail terminals, which is determined by channel characteristics. For C'estbon purified water, the prices implemented are part of a unified national retail price system. As for individual stores or channel partners selling at lower prices, these are actions taken by the channel partners themselves based on their positioning, promotional strategies, and sales strategies, with varying methods, and are not promoted by the manufacturer. Nongfu Spring stated that the 2 yuan suggested retail price for the 550ml red bottle water is for terminal stores. If terminal stores sell below 2 yuan, it should be individual retailers adjusting prices. Compared to the price competition between the two domestic bottled water giants, Coca-Cola's Ice Dew Pure Joy has not yet joined this price war. Ice Dew Pure Joy 550ml drinking water sells for 2 yuan per bottle, and a 12-bottle bulk pack sells for 24 yuan.
02 Low Costs Industry insiders point out that at the end of summer, discount promotions involve distributors, companies, and sales terminals. To ship large volumes before the peak season ends, lowering prices is the most effective means for companies or distributors. The continuous price decline of bottled water is related to its low cost. According to marketing expert Lu Shengzhen, a bottle of water priced around 2 yuan has a production cost of about 0.2-0.3 yuan, with an ex-factory price between 0.4-0.7 yuan. Although from factory to terminal, there are layers of distributor markups, a product with a terminal price of 2 yuan can still be profitable for distributors when sold at a discount of around 1.2 yuan. This shows that low costs give terminals the confidence to offer discounts. For example, a 550ml mineral water sold at 1.5 yuan in a community retail store: water cost is about 0.1 yuan; bottle + cap + code + tape is about 0.17 yuan; operating and advertising costs are about 0.22 yuan; distributors typically purchase at an ex-factory price of 0.6 yuan per bottle, wholesale to community retail stores at an average of 1 yuan per bottle, and retail stores sell at 1.5 yuan per bottle. Thus, the main cost of a bottle of mineral water lies in the sales channel costs. In summary, for an ordinary consumer drinking a bottle of mineral water, more than half of the money goes to distributors and retail stores. Distributors account for 26.7%, and retail stores account for 33.3%. Lu Shengzhen also believes that after summer, the north welcomes a relatively cool autumn, reducing consumer demand for bottled water, and sales will decline sharply. Some distributors still have inventory from preparing for the summer sales season. Facing the upcoming off-season, excess inventory increases storage costs and puts pressure on cash flow. Therefore, distributors will also choose to clear inventory at this time.
03 Low Prices Damage Brands Data from the China Beverage Industry Association shows that packaged drinking water is growing at an annual rate of 7.9%, leading among beverage categories. Data shows that from 2010 to 2015, domestic bottled water market sales increased from 47 billion yuan to 102 billion yuan, a growth of 117%, while sales volume increased from 26.008 billion liters to 45.688 billion liters, a growth of 75.7%. It is estimated that by 2020, sales and volume will grow by 76.5% and 44.4% respectively, reaching 180 billion yuan and 65.987 billion liters. Although bottled water has become one of the fastest-growing beverage categories in China, and the prevalence of the big health concept has brought sales dividends, more and more companies entering the market have intensified competition. A C'estbon spokesperson said that the packaged water industry has shown good growth in recent years, making it a segment that beverage manufacturers pay attention to, with fierce competition. Price competition in some local markets is one phenomenon in the industry's development, but not the only one. Brand, product, and channels are all important components of the beverage industry, and competition is equally fierce. For water companies like Nongfu Spring and C'estbon, the increasingly fierce competition in the drinking water market in recent years is an indisputable fact. Companies frequently launch new products to gain more market share. After "breaking up" with China Railway Express, Tibet Water Resources launched a lower-priced product, Gesangquan, and "rekindled" with China Railway Express. Danone introduced Extreme Pure to lay out a full price chain. Additionally, companies like Huiyuan, Jinmailang, and Huabin have also launched their own water products. Besides, companies are also focusing on beverage businesses to diversify risks from relying solely on drinking water. Nongfu Spring began launching NFC juices last year, trying to capture the strong NFC juice market. C'estbon is also trying to shed its water company label. In July this year, C'estbon held two high-profile press conferences, announcing the upgrade and launch of its Magic sports drink, entering the energy drink business. For Wahaha, declining performance has been a persistent issue. According to the 2017 China Top 500 Enterprises list, Wahaha's revenue was 45.5 billion yuan, down 3.9 billion yuan from the previous year's 49.4 billion yuan. An unnamed industry insider said that to capture the beverage market, water products, as the most important entry category, need huge sales volume to drive the development of other categories. Lu Shengzhen believes that the drinking water market is continuously expanding but will eventually reach saturation. Relying on volume sales can no longer support brand development. Companies need to clarify their positioning; blindly discounting only devalues the brand and damages it.
This article is sourced from Beijing Business Today.
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