Orion's innovation is insufficient, and its performance in China is struggling to match past glory; its attempt to enter China's high-end drinking water market is a self-rescue move. Recently, Orion announced a partnership with Luckin Coffee, China's second-largest coffee chain, to promote its Jeju Lava Water and other products through Luckin's online and offline channels. Currently, the drinking water market is valued at 139.782 billion yuan. This means Orion is entering a hundred-billion-yuan market. Industry insiders believe that in the past two years, Orion has lacked innovation, and its performance in China has struggled to reach previous highs. Its attempt to enter the high-end drinking water market is a self-rescue effort. While leveraging Luckin Coffee's channels could help Orion expand quickly, compared to other drinking water brands, Orion still has channel weaknesses. -01- Entering via Partnership Recently, Orion reached an agreement with Luckin Coffee to sell its Jeju Lava Water, Gao Xiaomei cookies, and other products through Luckin's online channels and offline stores. Currently, Gao Xiaomei cookies have entered markets such as Beijing, Shanghai, Guangzhou, and Xiamen through Luckin Coffee's online sales channels. Later, Gao Xiaomei cookies are also planned to expand sales to all Luckin Coffee physical stores nationwide. A Beijing Business Today reporter found that Orion is promoting its new products during launch, with the 70g Gao Xiaomei cookies priced at 13.5 yuan originally, now at 8.91 yuan. However, Jeju Lava Water has not yet appeared on the Luckin Coffee app. Additionally, Jeju Lava Water is not available on JD.com or Tmall platforms. An Orion spokesperson said, "In the first half of next year, Orion will supply 530ml bottles of Jeju Lava Water to Luckin Coffee." In fact, the Luckin Coffee app currently sells only two drinking water brands: Nestlé's 330ml Paris Water and Danone's 330ml Evian Water, both priced at 18 yuan per bottle, with a buy-two-get-one-free promotion. Besides drinking water, the Luckin Coffee app also sells its NFC juice, with 330ml priced at 24 yuan per bottle. China Food Industry Analyst Zhu Danpeng believes, "Luckin Coffee is building a platform for trendy, healthy food and beverages. With its significant traffic and online-offline channels, introducing Jeju Lava Water could allow cross-selling with coffee, complementing Paris Water and Evian." An Orion Group spokesperson said, "Taking the launch of Jeju Lava Water as an opportunity, we will fully leverage Orion's global sales network and marketing expertise to actively expand into international markets, gradually developing Jeju Lava Water into a high-quality mineral water for people worldwide." It is understood that Jeju Lava Water is a weakly alkaline mineral water, naturally filtered through 400,000-year-old basalt, rich in minerals beneficial to health such as calcium and magnesium. Orion Group plans to export it to China and Southeast Asia through its global sales network and expand its global business. In August this year, Orion also signed a global logistics contract with Pantos, a comprehensive logistics company under LG Group. -02- Restructuring the Landscape Regarding Orion's move, strategic positioning expert and founder of Shanghai Jiude Positioning Consulting, Xu Xiongjun, believes that in the Chinese market, compared to other European and American brands, Orion's products are clearly aging, with only the "Lang Li Ge Lang" product briefly boosting its sluggish performance. Currently, Orion urgently needs to expand into new areas, restructure its product portfolio in China, attract young consumers, and maintain profitability in the Chinese market. It is understood that Orion, founded in South Korea, currently focuses on products such as puffed snacks, pies, cookies, and chewing gum in the Chinese market. In 2016, Orion's performance in China peaked with revenue of 7.718 billion yuan. However, in 2017, Orion's sales in China declined every quarter, with annual sales falling to 5.155 billion yuan and operating profit dropping sharply by 90%. In 2018, Orion's revenue in China reached 5.607 billion yuan. In early 2019, both revenue and net profit declined. In the first quarter of 2019, Orion China's operating revenue was 1.509 billion yuan, down 4.5% year-on-year, and operating profit was 244 million yuan, down 15.8% year-on-year. "From a category perspective, Orion's product innovation in China is insufficient, relatively single compared to other well-known companies, products are slightly low-end, and competitiveness is gradually declining," said Zhu Danpeng. Unlike Orion's performance in China, international brands such as PepsiCo, Mondelez, and Hershey are actively expanding in the Chinese market. In 2019, PepsiCo invested $150 million in Shanghai and Sichuan to expand and build new Lay's factories. Mondelez and Hershey have accelerated the launch of localized new products based on Chinese consumer tastes. Thanks to increased investment in the Chinese market, these companies have achieved growth in China. In the second quarter of 2019, driven by strong biscuit performance, Mondelez achieved double-digit growth in China, marking its eighth consecutive quarter of growth in the country. In 2018, Hershey China's net sales grew 14%, and operating profit grew 18%. "Compared to chocolate pies and puffed snacks, the drinking water market has better prospects and aligns more with healthy consumption trends," Xu Xiongjun further pointed out. Data shows that in 2018, the overall beverage growth slowed, with a year-on-year increase of 4.7%. Among them, drinking water became the main driver of growth, with a market size of 139.782 billion yuan, expected to exceed 200 billion yuan by 2025. -03- Channel Challenges "Entering China's drinking water market through Luckin Coffee's channels is not a bad decision. However, for drinking water, relying solely on Luckin's channels is too narrow, and Orion's current channels do not align with drinking water, which becomes a decisive factor in whether Orion can succeed in the drinking water sector," Zhu Danpeng analyzed. It is understood that Luckin Coffee is currently China's second-largest coffee chain, successfully listed on Nasdaq in May this year with a market value exceeding $6 billion. As of June this year, Luckin Coffee operated 2,963 stores in 40 Chinese cities and plans to exceed 4,500 stores by year-end, becoming China's largest coffee chain. "Luckin Coffee's consumers are its fans, mostly white-collar workers. Whether these consumers will buy Orion's products is uncertain," Zhu Danpeng said. "Although China's drinking water market is large, the competitive landscape is relatively stable. On the Luckin Coffee platform, Paris Water and Evian are strong competitors for Orion." "The use of Luckin Coffee's channels is also because Orion's offline platforms are mostly supermarkets, which do not align with the high-end drinking water channels such as premium convenience stores, hotels, and clubs. Moreover, a key characteristic of drinking water is high penetration, which Orion, with its current strength and brand power, will find difficult to achieve," Zhu Danpeng further analyzed. "Orion's Lava Water faces many difficulties before launch. For long-term development, it must identify its target consumer group based on its positioning. Whether it can become as popular as its snack foods remains to be seen, and it will need to explore China's high-end water market step by step," an industry insider said. Regarding Orion's future development, Beijing Business Today contacted Orion for an interview, but as of press time, the company had not responded. Source: Beijing Business Today Tips will be paid 400-2000 yuan once adopted.