With the launch of a series of new bottled water products by Nongfu Spring in 2015, the previously vague "premium water" market has become increasingly clear with the entry of large enterprises. Taking the start of 2016 as an opportunity, let's discuss the so-called "premium water" market. Although I have some understanding of the beverage industry, "premium water" seems to be a rather unique market segment: its operating models, consumer purchase drivers, and other aspects form their own system; and the market size is often vaguely reported by the media as "expected to reach 10 billion"; its connection with ordinary beverages is probably only because it is "water". Online articles about "how premium water works" typically provide a brief analysis of the market status and a few brands, then focus on distribution and channel operations, leaning toward the sales side. The so-called "methodologies," whether local or foreign, refined or rough, are nothing more than "yellow cat or black cat"; this also indicates that domestic "premium water" has no real special features other than price. But what worries me is a phenomenon: goods are pushed into the channel, but there is no sell-through... Next, I will try to look at this market from a somewhat "academic" perspective, hoping to provide some reference points.

  1. Is Consumer Insight Useful? When discussing this topic, the first thing that comes to mind is the so-called "consumer insight," because it is really unclear what drives the purchase of "premium water"—is it merely "buying only the expensive, not the right" or so-called "showing taste"? Daily chemical products are purpose-driven consumption, so developing product concepts and concept testing are important steps in product development; for food and beverages, product concepts may be less important or effective, but taste tests are conducted, scoring on various taste and mouthfeel indicators. However, for a product like "water," taste testing is probably not feasible; and water source, small molecules, minerals, even "health and longevity" have long become the norm in the "premium water" field; as for pH value tests like Nongfu Spring's, I personally think it's somewhat of a gimmick... So what consumers can directly perceive may be just packaging and price. Although some planning companies do conduct research, those market studies may lean toward U&A (Usage and Attitude), and are mostly statistical results of certain indicators. Some planners always like to mention terms like "consumer mind," probably because they have read too much "Positioning"... So, in the so-called "premium water" field, can we use consumer insight to deeply explore why consumers (who have purchased premium water) consume such products, and then project the conclusions into brand positioning and daily product management?
  2. Price Segmentation "Water" as a product does not have clear differentiation dimensions in taste; price segmentation, if not the only one, should be a very important indicator. Using the so-called "price band" as an indicator: which brands are in different market segments, how concentrated is the market in different price bands, who might buy products in different price bands, and whether there are differences in the channels where products in different price bands are distributed... and so on.
  3. Profit and Loss On this issue, I don't have much practical experience, but I feel it is a problem that cannot be ignored, especially in the special field of "premium water." Business is about making money, but no one guarantees that a new product, especially entering a new field, will definitely make a profit... Large enterprises don't mind; they can lose millions or tens of millions without blinking—whether it's losses due to poor management or so-called "strategic losses": there are reports that JDB's "Kunlunshan" has not yet turned a profit, at best breaking even. But the premium water market seems to have limited participation from large enterprises, or at least limited deep competitive involvement: if they can do it but don't, there must be a reason. More participants are small and medium-sized enterprises (SMEs) and diversified cross-industry companies. I've seen articles saying that many herbal tea companies in Guangdong are mostly in a loss-making state, for many reasons, but due to limited understanding of the actual situation and other factors, I cannot conduct an in-depth analysis here. However, one important external factor I think is that the herbal tea market is highly concentrated. It is said that JDB (formerly Wanglaoji) holds about 80% of the market share. In such a market structure, explained by the so-called "law of duality," only a few companies can do well... But what about the premium water market? What is its market structure? How high is its concentration? Especially, in different price segments, how high is the concentration? The market structure, which may differ from the herbal tea market, might give many SMEs opportunities... For those SMEs preparing to enter this field, I personally think work like "profit trial calculation" should be done to avoid the situation of "patting the head to launch a project, patting the chest to guarantee sales, and patting the butt to leave"...
  4. Region and Channel Sales managers or sales-oriented marketing personnel are generally skilled in channel operations, but for categories like premium water, channels seem to be a particularly tangled issue. Such products seem inherently limited to "urban" areas—and only in relatively economically developed cities. As for channels, many people's first reaction might be to enter special channels: high-end department stores, bars, clubs, airports, hotels, supplemented by government agency group purchases... But how much performance can these channels provide? So, they have to get involved in mass channels: supermarkets and even traditional street stores. But are the costs invested in these channels proportional to the performance they can generate, especially actual sales volume? It might be that a large display of a certain premium water in a hypermarket is achieved at the cost of bleeding operations... But if a factory has been built, you can't let the production line sit idle, right? Once products are produced, you can't leave them in the company's finished goods warehouse, right? So, they start large-scale distribution recruitment... Often, some companies may suffer losses because of this dilemma... Prior regional and channel planning should be done, and prior capacity calculation and market size estimation should also be done, but the main issue may still be at the consumer level: because channels are merely the means of contact between products and consumers. Filling the channels to the brim and making displays and activation beautiful may not reveal why consumers spend 5 or 10 yuan on a bottle of water... Another point: when doing channel planning, it may be necessary to avoid some preconceived notions. For example, as mentioned above, everyone thinks that those so-called "special channels" are the main source of business—but that may not necessarily be correct. More precisely, those "special channels" may just be the places where it is easiest to reach "target consumers." For example, ordinary beverages are usually merchandised in hypermarkets; but according to market research data, the contribution of modern channels and traditional channels to actual beverage sales is about 3:7—that is, the actual sales volume of a certain beverage brand in a Carrefour store in one day may not be as high as the total sales of the surrounding small outlets. So, if conditions allow, conducting a survey like "distribution of actual sales volume of premium water in different channel formats" might provide a clearer understanding of channel planning and the role of different channels in the business.
  5. Target Consumers I am particularly afraid of this issue because I have never known how to determine target consumer positioning for food products—it should be based on systematic research, not the wishful thinking that many companies do, like "our target consumers are high-income people," "our target consumers are business people," "our target consumers are young women with taste for life"—these are plausible but actually meaningless. Because in most cases, food consumers are not a specific group. So who are the target consumers of "premium water" (since it is not a mass product)? How to communicate effectively with them? Which type of target consumer provides the largest share of business? ... They could be petty-bourgeois white-collar workers with a taste for life, fashionable young students, successful people showing taste, or street thugs drinking at bars... How should we determine this? ...
  6. The Significance of Methodology Methodology itself has no value; it only has value when combined with corporate reality. If the above thoughts on "premium water" have any practical significance, how would the majority of participants, which are SMEs and cross-industry companies, view these issues? Or will they return to the old path, operating this special category with the traditional basic model of "selling point planning" + "image packaging" + "regional distribution recruitment" + "PR events"? As the saying goes: white cat or black cat, as long as it catches mice, it's a good cat... -END- Content Selection Reply with the following keywords to search and read related articles: Sales Supervisor, Second-tier Management, Regional Manager, Distributor Management, New Channels, City Manager, Competition, 2015, Manufacturer-Dealer Game, Product Stagnation, Terminal Visit Management, Route Management, Deep Distribution, Internal Management, Sales Skills, Profit Improvement, Recruitment, Distribution, Daily Management, Team Motivation, Trade Promotion, Sales Misconceptions, New Product Launch, Township Market, New Product Pricing, Sales Target Achievement, Closing Deals, Market Visit Inspection, Baijiu, Beer, Sales Increase, Agency Products, Channel Crossing, KA, Terminal Merchandising, New Market, Market Operation, Learning, Book Recommendations, Inventory Management, New Salespeople, Consumer Promotion, Execution, Old Products, Expired Product Handling, Model Market, Distribution Recruitment, New Media, Distributor Development, Performance Appraisal, Assessment, Annual Planning, Shopping Guide, Morning Meeting, Display, Transformation, Pressure to Stock, Holidays, Distributor Cost Control, Channel Operation, Marketing Theory and Laws, Brand Truth, Order Meeting, Team Management, Training, Work Report, Work Report.