---
title: "The Bottled Water Arena: Nongfu Spring, C'estbon, Ganten, Master Kong, Ice Dew, Wahaha - Six Giants Battle for Supremacy!"
description: "The bottled water industry is highly concentrated, with the top six manufacturers holding about 80% of the market share. According to AC Nielsen data, in 2018, the CR3 and CR6 of China's bottled water industry reached 57.9% and 80.5%, respectively, with Nongfu Spring, C'estbon, Ganten, Master Kong, Ice Dew, and Wahaha occupying 80% of the market. From 2015 to 2018, Nongfu Spring, C'estbon, and Ganten steadily increased their market shares, reflecting that mid-to-high-end products and natural mineral water are more readily accepted by consumers during the upgrade process."
author: "叶书怀  蔡琪"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2019-07-07"
language: "en"
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# The Bottled Water Arena: Nongfu Spring, C'estbon, Ganten, Master Kong, Ice Dew, Wahaha - Six Giants Battle for Supremacy!

> The bottled water industry is highly concentrated, with the top six manufacturers holding about 80% of the market share. According to AC Nielsen data, in 2018, the CR3 and CR6 of China's bottled water industry reached 57.9% and 80.5%, respectively, with Nongfu Spring, C'estbon, Ganten, Master Kong, Ice Dew, and Wahaha occupying 80% of the market. From 2015 to 2018, Nongfu Spring, C'estbon, and Ganten steadily increased their market shares, reflecting that mid-to-high-end products and natural mineral water are more readily accepted by consumers during the upgrade process.

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In-depth report on the bottled water industry: The source of living water, a fine stream from the mountain spring.
The bottled water industry is highly concentrated, with the top six manufacturers holding about 80% of the market share.
According to AC Nielsen statistics, in 2018, the CR3 and CR6 of China's bottled water industry reached 57.9% and 80.5%, respectively, with Nongfu Spring, C'estbon, Ganten, Master Kong, Ice Dew, and Wahaha occupying 80% of the market.
Looking at the market share trends of the six major manufacturers, from 2015 to 2018, Nongfu Spring, C'estbon, and Ganten steadily increased their market shares, reflecting that during the upgrade process, mid-to-high-end products and natural mineral water are more easily recognized by consumers. Meanwhile, the market shares of Master Kong, Ice Dew, and Wahaha, which have lower-end product lines, declined to varying degrees, with the proportion of low-end bottled water gradually decreasing.
The industry barriers mainly consist of resources, brand, and channels. Leading mid-to-high-end enterprises benefit from quality and brand advantages, and their market shares are expected to further increase. We believe that the technical barriers in the bottled water industry are not high, tastes converge, and product homogenization is relatively serious. Existing manufacturers mainly build barriers through water source resources, brand recognition, and channel advantages.
Since industry barriers are generally low and product profit margins are high, we believe that in the short term, some food and beverage giants may cross over into the bottled water sector as new entrants, causing a slight decrease in concentration. In the long term, under the trend of consumption upgrading, mid-to-high-end enterprises with good water quality, high brand recognition, and strong channel marketing capabilities are expected to stand out and gain higher market shares.
**Analysis of Representative Domestic Enterprises: Nongfu Spring, China Resources C'estbon, Ganten**
**Nongfu Spring: Superior Water Sources and Quality First, with a Clear Leading Market Share Advantage**
The bottled water leader sets sail with a clear leading market share advantage. Nongfu Spring Co., Ltd. was established in 1996, originally named "Zhejiang Qiandao Lake Health Hall Drinking Water Co., Ltd.", headquartered in Hangzhou, Zhejiang. It is one of China's top 20 beverage companies, specializing in natural drinking water, fruit and vegetable juices, special-purpose beverages, tea beverages, and other soft drinks. The company adheres to the "natural, healthy" product philosophy, does not use urban tap water to produce bottled drinking water, and promises not to add any artificial minerals to drinking water. Nongfu Spring's leading position is stable, ranking first in market share in the bottled water industry for many consecutive years.
Milestones of the Nongfu Spring brand
Steady performance growth, Nongfu Spring is always on the move. According to data disclosed by China Economic Net, from 2013 to 2017, Nongfu Spring's revenue increased from 9 billion yuan to 16.25 billion yuan, with a CAGR of 15.9%. During this period, in 2015 and 2016, Nongfu Spring's revenue growth rates were as high as 38.6% and 19.0%, respectively, which we speculate is related to the launch of high-end new products and the hit single product, Tea π.
According to information disclosed in Wantai Biological's prospectus, Nongfu Spring's net profit in 2018 reached 3.616 billion yuan. We estimate the company's net sales margin is around 20%, indicating relatively outstanding profitability.
Superior water sources and quality first, with products mainly in the mid-range and continuously upgrading. The company has eight high-quality water source bases, including Qiandao Lake in Zhejiang, Changbai Mountain in Jilin, Taibai Mountain in Shaanxi, and Emei Mountain in Sichuan, ensuring water quality safety and health. Nongfu Spring insists on building factories and bottling at the water source sites, ensuring that the production process is completed at the source, and the bottled water produced is natural weak alkaline water. The company's core product, natural mineral water, firmly occupies the 2-yuan price band, positioning itself as mid-range mass consumption, with excellent quality deeply rooted in consumers' minds.
In 2015, Nongfu Spring launched three new products: high-end glass bottled mineral water, natural drinking water (suitable for infants), and student natural mineral water, marking the company's gradual transition from mid-range to mid-to-high-end. We look forward to the company further strengthening its high-end product line layout in the future to enhance overall competitiveness.
Looking at Nongfu Spring's development history, we believe the main reasons for its success are the following three points:
**1) Correct strategic positioning: Focus on producing natural water.**
From a product attribute perspective, Nongfu Spring focuses on health. In 1999, after discovering that purified water was not beneficial to human health, Nongfu Spring began to target natural and healthy attributes, transitioning to producing only natural water, with a weak alkaline pH value further reinforcing the health concept. In contrast, Wahaha has always produced purified water, and Master Kong has always produced mineralized water, which are slightly inferior in terms of health.
From a pricing strategy perspective, Nongfu Spring's mid-to-high-end positioning aligns with the trend of consumption upgrading. Nongfu Spring was positioned in the mid-to-high-end market from the beginning, while Wahaha and Master Kong took a relatively low-end route. During the upgrade process, consumers tend to choose Nongfu Spring, which is priced higher and has better quality.
From a packaging perspective, Nongfu Spring's bottles are thicker, and the red packaging is more eye-catching, making it easier to stand out compared to competitors.
**2) Channel network advantages help Nongfu Spring establish a strong sales network.**
Considering high transportation costs, the soft drink industry has significant economies of scale. A nationwide production and sales network layout not only helps reduce unit costs but also helps increase product coverage.
There is an empirical theory in the bottled water industry of "500 kilometers." If the transportation radius exceeds 500 kilometers, transportation costs may erode profits, making it difficult for packaged water priced at 1 or 2 yuan to be profitable. Nongfu Spring relies on its eight high-quality water source bases to establish a distribution network across the country, and it has done a more thorough job in channel refinement and sinking.
**3) Successful marketing: Advertising slogans such as "Nongfu Spring is a little sweet" and "Nature's porter" are deeply rooted in people's hearts, and public welfare activities enhance the brand image.**
In 1998, Nongfu Spring used large-scale, high-density television advertising to make the slogan "Nongfu Spring is a little sweet" known to every household, and the 550ml sports bottle Nongfu Spring quickly spread across the country.
In 2001, Nongfu Spring supported Beijing's bid for the Olympics and launched the "one cent" activity. In addition, during major natural disasters such as the 2008 Wenchuan earthquake, the 2010 Yunnan drought, and the 2013 Ya'an earthquake, Nongfu Spring provided a large amount of materials and cash for rescue and disaster relief, further enhancing its brand image.
**4) Keeping up with consumer demand, new products are launched continuously, and packaging design is ingenious.**
Nongfu Spring is also a highly innovative company, with new products constantly emerging in recent years. The company's new products all focus on the "healthy" and "light" route, with packaging that is either novel and fashionable or artistic and in line with Eastern aesthetics, attracting consumers' attention.
For example, the company incorporates natural elements such as flowers, leaves, snowflakes, and elk into its high-end glass bottled water, which is highly interesting and echoes the company's pure natural product characteristics. In its group painting packaging bottled water, the company depicts fairy tale worlds with images of frogs, deer, bears, and raccoons combined with the natural scenery of Changbai Mountain, showing ingenuity in brand planning and design.
**China Resources C'estbon: Multi-category layout + nationwide network to consolidate industry leadership**
The company is one of the leaders in packaged drinking water in China, with early entry into the industry and rich experience. In 1984, China Longhuan Beverage Co., Ltd. (the predecessor of China Resources C'estbon) was established, headquartered in Shenzhen High-tech Industrial Park, mainly selling carbonated beverages.
In 1990, China Resources C'estbon took the lead in launching the "C'estbon" brand purified water in China, becoming one of the earliest enterprises specializing in the production of packaged drinking water. As of the end of 2017, China Resources C'estbon headquarters had 18 functional departments, with 8 branches and 37 factories, employing more than 12,000 people, with 15 product SKUs. The company has become an important part of China Resources Group's consumer goods business segment.
Revenue shifted from high-speed to mid-to-high-speed growth, with steady improvement in profitability. In 2017, the company's revenue exceeded 12.6 billion yuan, a year-on-year increase of 9.6%, with a revenue CAGR of 21.4% from 2013 to 2017. In 2014 and 2015, the company achieved high growth rates of 36.21% and 30.28%, respectively, which then gradually slowed down.
We believe that the slowdown in revenue growth is partly a natural decline after the base increases, and partly indicates that core products are gradually entering a mature stage, with future growth rates possibly falling to the mid-to-high range. In addition, according to the company's 2017 Social Responsibility Report, from 2015 to 2017, the company's return on net assets was 14.17%, 16.86%, and 20.51%, respectively, indicating continuous improvement in profitability.
Compared with competitors, we believe the highlights of China Resources C'estbon are mainly in the following three aspects:
**1) Multi-category parallel development to explore market growth potential.**
In 2011, China Resources C'estbon proposed the strategy of "national multi-category beverage business" and began to broaden its beverage product line. Currently, in addition to its own brands "C'estbon," "Jialinshan," and "Moli," China Resources C'estbon also holds several famous brands authorized by Japanese parties, such as "Afternoon Milk Tea" and the "Fire Coffee" series. The company's products have successfully extended from purified water and mineral water to milk tea, coffee, functional beverages, and other categories, meeting the diversified needs of consumers.
**2) Strong channel construction drives steady market share improvement.**
In 2008, China Resources C'estbon formulated a development strategy "from regional to national," taking big steps to promote national expansion. In addition, similar to Nongfu Spring, the company can also gain certain competitive advantages in its national layout. China Resources C'estbon's production bases cover the whole country, effectively reducing product transportation costs. Furthermore, China Resources Vanguard, a large retail trading group under China Resources Group, also provides strong channel resource support for the expansion of China Resources C'estbon. In 2017, the number of terminal outlets covered by C'estbon exceeded 1.7 million, and the high coverage rate promoted the continuous improvement of brand market share. In 2018, C'estbon's market share in bottled water reached 20.9%.
**3) Precise marketing strategies and diverse public welfare activities help enhance brand image.**
The company actively pays attention to sports and continuously sponsors domestic marathon events. Taking 2017 as an example, the company sponsored a total of 182 marathon races, becoming the bottled water enterprise with the highest number of marathon sponsorships in China for two consecutive years. In addition, the company formed the "C'estbon Dream Team," which achieved excellent results in multiple marathon races, also providing some assistance for brand promotion. In terms of public welfare activities, since 2007, the company has launched the "100 Library Plan" to build libraries and donate books in areas with scarce educational resources, while inviting experts and social volunteers to hold reading sessions to help share educational resources between urban and rural areas. As of 2017, the company had donated 192 libraries and collected tens of thousands of books, receiving widespread social recognition.
**Ganten: Following the consumption upgrade trend, brand marketing increases product added value**
Advanced equipment focused on bottled water, exported overseas with a good reputation. In 1992, Ganten Food and Beverage Co., Ltd. was established in Shenzhen, focusing on the production and operation of packaged drinking water. The company owns more than ten independent subsidiaries and multiple large production bases, distributed in Shenzhen, Guangzhou, Huizhou, Yichun, Putian, Xiamen, Nantong, Tangshan Qianxi, and other places.
The factories are equipped with multiple German-imported Krones integrated bottling lines, producing products including mineral water, purified water, soda water, and other series. The company has hundreds of distributors worldwide, with products exported overseas and a good reputation worldwide.
Ganten launched Ganten Mineral Water in 2004. From 2009 to the present, Ganten Mineral Water has ranked first in the domestic natural mineral water market for nine consecutive years, and its export volume ranks first in the drinking water industry. In 2018, Ganten Mineral Water's market share in the bottled water market reached 9.6%, ranking third in the industry.
The main reasons for Ganten's success are the following two aspects:
**1) Precise product positioning and outstanding cost performance, with the natural concept enjoying the dividend of consumption upgrading.**
With the trend of consumption upgrading and the awakening of residents' health awareness, the public's preference for bottled water is gradually shifting from purified water to healthier natural mineral water. Ganten positions itself as mid-range in the drinking water market but prices lower within the natural mineral water category. Compared with higher-end mineral water brands, Ganten has outstanding cost performance advantages and is more easily accepted by consumers, exchanging price for volume to fully enjoy the upgrade dividend.
**2) Successful brand marketing creates a sales dark horse.**
Since 2013, Ganten has launched the "noble" advertising trilogy. The impressive advertising videos and slogans, combined with high-frequency TV and online placements, successfully introduced the impression of "noble in water" to consumers, achieving success in media communication. Combined with the "flat shoulder design" of the bottle and the simple and elegant outer packaging, it brings consumers a good consumption experience.
In addition to ingenious advertising design, Ganten continues to increase sports marketing. The company not only partners with top sports events, sponsoring large sports activities such as CBA and the Chinese Super League, but also cooperates with Juventus Football Club and has signed as a global partner of the FIVB. A series of high-end sports activities have greatly consolidated the positioning of "noble in water" and enhanced the brand image.
**Dairy Giant Crosses Over, Yili Plans to Enter the Bottled Water Industry**
**The dairy giant has a unique vision, and its cross-border entry into bottled water demonstrates its ambition for expansion.**
On December 15, 2018, Yili Co., Ltd. issued an announcement, planning to invest 744 million yuan to build a new Yili Changbai Mountain natural mineral water beverage project in the Changbai Mountain Natural Mineral Water Industrial Park in Antu County, Jilin Province. Based on a construction period of 31 months, the project is expected to be completed and put into production in 2021. The company expects a payback period of 5.7 years, an investment return rate of 16.34%, and an internal rate of return of 16.01%. We believe that Yili's move reflects, on the one hand, the company's optimism about the development prospects of bottled water and its intention to gain a share of the 100-billion-yuan bottled water market; on the other hand, it is also an extension of the main product line, helping the company create new big single products and accelerate the construction of a health food group.
**From the product perspective, we believe that Yili's entry point of natural mineral water, positioned as mid-to-high-end, has a higher probability of success.**
Unlike purified water and mineralized water, as can be seen from the announcement, Yili is targeting the natural mineral water market, with competitors being Ganten and Kunlun Mountain. In terms of product attributes, natural mineral water contains certain mineral salts and trace elements, requires higher water quality, is more beneficial to health than purified water and mineralized water, and is positioned as mid-to-high-end. In recent years, the sudden rise of Ganten indicates that natural mineral water is the future direction of consumption upgrading in the bottled water industry, and Yili's entry through this route is more likely to succeed. Benchmarking against Ganten and Kunlun Mountain, we speculate that the single-bottle price range for Yili's mineral water products after launch may be around 3-5 yuan.
**Limited by the distribution of water sources, the cost pressure on the product side may lie in transportation.** Since natural mineral water has high requirements for water sources, the water sources are basically distributed in remote areas with well-preserved original ecology, rarely visited by humans, and unpolluted. Therefore, the water sources are far from the market, resulting in high logistics costs. In the early stage of product launch, when economies of scale have not been fully realized, Yili may find it difficult to avoid high transportation costs. As production scale expands, the project's profitability is expected to gradually improve.
**Yili's advantages and challenges: Brand + channels build core competitiveness, and seizing consumer mindshare may be the biggest challenge.**
As a leading dairy enterprise in China and even Asia, Yili has strong brand power and complete channel construction. We believe that with Yili's brand endorsement, product quality can be guaranteed, and the channels for bottled water overlap highly with the company's existing liquid milk channels, covering circulation, supermarkets, KA, convenience stores, and e-commerce, making channel synergy not difficult. However, how to handle brand positioning and seize consumer mindshare poses certain challenges. Since Yili's dairy products are deeply rooted in consumers' minds, consumers may not quickly accept non-dairy products when operating across categories. We suggest that the company establish a new independent sub-brand for operation, supplemented by appropriate online and offline marketing. In addition, based on the announcement, we speculate that Yili will likely have only one water source base in Changbai Mountain in the early stage, and due to transportation costs, it cannot achieve a nationwide layout like liquid milk. Therefore, how to balance the relationship between pricing, region, and marketing is also worth further consideration.
**In summary, we believe that Yili's strategic layout to enter the natural mineral water industry at this point reflects the unique vision of the company and its management, and in the long run, the benefits outweigh the drawbacks.** This project is not only expected to contribute incremental revenue and profit to the company but also help Yili advance its goal of becoming one of the top five and achieving 100 billion in revenue, and build a health food group. However, we suggest that the company think more deeply about the challenges that new businesses may face in brand positioning and channel layout.
**Bottled Water Market Size Exceeds 180 Billion Yuan, with Room for Expansion in Both Volume and Price**
According to Euromonitor International statistics, in 2018, China's bottled water industry scale was 183.09 billion yuan, a year-on-year increase of 9.5%, with a five-year CAGR of 11.5%. Euromonitor predicts that industry sales will maintain growth of 7%-9% in the next five years, with sales volume growth remaining at around 6%-7%. Currently, per capita consumption of bottled water in China is still far below that of other countries in the world, and there is significant room for improvement in both sales volume and unit price in the future.
**From the sales volume perspective:** With the enhancement of residents' health concepts, low-sugar consumption habits are expected to drive bottled water to replace other soft drinks; the increase in consumption scenarios such as tourism is expected to bring incremental consumption to bottled water; the expansion of new channels such as vending machines and convenience stores helps bottled water sales; occasional water pollution incidents drive bottled water sales growth.
**From the price perspective:** Enterprises directly raise prices, driving up the unit price of packaged water; with the improvement of residents' consumption capacity, the demand for health, quality, and personalization continues to heat up, and the proportion of mid-to-high-end packaged water is expected to increase. We believe that using Japan and Taiwan as benchmarks for upgrading, there is about 60% room for improvement in the unit price of bottled water in China.
Source: Oriental Securities (excerpt from Oriental Securities industry research)


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