---
title: "The 'Risks' and 'Opportunities' Behind Nongfu Spring's Coffee Venture"
description: "From OYO Hotels launching 'Fenran' coffee, Sinopec partnering with Lian Coffee to release Yijia Coffee, to Suning Xiaodian entering the coffee business, more and more companies are interested in the coffee business, seemingly everyone believes the coffee market is worth occupying. Nongfu Spring, which started with bottled water, has shown great interest in coffee, launching Tanbing in May to enter the ready-to-drink coffee business; after partnering with Wumart to place fresh-ground coffee machines in Wumart convenience stores and supermarkets, it recently continued its 'persistent' pursuit in the coffee field by launching three new coffee products: low-sugar latte, sugar-free black coffee, and no-sucrose latte."
author: "丹丹"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2019-10-18"
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citation: "丹丹. “The 'Risks' and 'Opportunities' Behind Nongfu Spring's Coffee Venture.” New Distribution, 2019-10-18. https://xinjignxiao.com/en/articles/the-risks-and-opportunities-behind-nongfu-spring-s-coffee-venture-42d96ca2/"
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# The 'Risks' and 'Opportunities' Behind Nongfu Spring's Coffee Venture

> From OYO Hotels launching 'Fenran' coffee, Sinopec partnering with Lian Coffee to release Yijia Coffee, to Suning Xiaodian entering the coffee business, more and more companies are interested in the coffee business, seemingly everyone believes the coffee market is worth occupying. Nongfu Spring, which started with bottled water, has shown great interest in coffee, launching Tanbing in May to enter the ready-to-drink coffee business; after partnering with Wumart to place fresh-ground coffee machines in Wumart convenience stores and supermarkets, it recently continued its 'persistent' pursuit in the coffee field by launching three new coffee products: low-sugar latte, sugar-free black coffee, and no-sucrose latte.

From OYO Hotels launching 'Fenran' coffee, Sinopec and Lian Coffee releasing Yijia Coffee, to Suning Xiaodian entering the coffee business, more and more companies are interested in the coffee business, and it seems that 'everyone' believes the coffee market is worth occupying.
Nongfu Spring, which started with bottled water, has shown great interest in coffee. In May, it launched Tanbing to enter the ready-to-drink coffee business; after cooperating with Wumart to place fresh-ground coffee machines in Wumart convenience stores, Wumart supermarkets, and other Wumart retail outlets, extending its business to fresh-ground coffee, it recently continued to 'persist' in the coffee field by launching three new coffee products: low-sugar latte, sugar-free black coffee, and no-sucrose latte.
**Behind the entry of many companies is the strong rise of the coffee industry since 2017.** According to the '2019 China Coffee Industry Market Prospects Research Report' by China Commercial Industry Research Institute, the coffee market scale is further expanding. With the improvement of people's living standards and the growing awareness of coffee culture, China's coffee industry is generally on the rise, and it is expected that the market size will exceed 300 billion yuan by 2020.
# **An 'Opportunity' Not to Be Missed**
**Coffee, along with tea and cocoa, is known as one of the world's three major beverages.** China has traditionally consumed tea, and coffee culture has been in a long period of germination.
But since Nestlé introduced '1+2' instant coffee in China in 1989, Starbucks entered China in 1998, and C-store began selling fresh-ground coffee in 2010, the categories and grades of coffee have continuously enriched and differentiated, and China's coffee market has begun to reach a certain scale.
Data shows that in 2012, China's coffee consumption was about 130,000 tons, continuing to grow at an annual rate of 15%-20%, making it the world's most potential coffee-consuming country.
Lian Coffee, founded in 2014, initially started as a coffee delivery platform via WeChat official accounts, mainly providing delivery services for Starbucks, Costa, and other third-party brands. In August 2015, Lian Coffee stripped off the delivery services for third-party brands like Starbucks and began focusing on its own brand, Coffee Box, for coffee delivery, and it has been doing quite well.
In 2017, Luckin Coffee's entry brought about earth-shaking changes to the original coffee market. With its wild internet approach, it changed the development pattern of the traditional coffee industry, using 'mid-range quality + low price' products, adapting to the fast-paced lifestyle with delivery services and internet marketing models. It transformed coffee from a cultural symbol not yet widely popular into a popular high-quality beverage for mass consumption, playing a role in consumer education and popularization, and sparked a 'new coffee wave' in China, making coffee a hot commodity.
Furthermore, Luckin Coffee, which sold 89.68 million cups in 2018, stated: Starbucks completed the popularization of coffee culture, and the next step is to achieve the popularization of coffee consumption.
From a market perspective, **China's coffee market is entering a stage of rapid development.** Luckin Coffee's prospectus shows that in 2018, per capita coffee consumption in China was 6.2 cups, and compared with developed countries, China's per capita coffee consumption is only 1.6% of that of the United States.
'With a large market and high profits, giants have no reason to ignore the coffee field, which is a treasure trove,' said industry experts. China's coffee market is far from saturation, and its prospects are vast. In the future, more industries and companies may enter this field.
Whether it's Coca-Cola, Sinopec, or OYO Hotels, they all prove that coffee is a big business.
# More Possibilities
Engaging in cross-border business and enriching product structures is a growth trajectory followed by many global food and beverage giants. By continuously entering new fields and categories, they have gained more development opportunities.
Zhong Shanshan, founder of Nongfu Spring, is considered the boss who can 'give birth to the most children' in the industry, and his diversification began as early as 2015.
It is understood that at that time, the growth of Nongfu Spring's core product slowed down, and it began to lay out market segments. That year, Zhong Shanshan launched glass-bottled high-end mineral water, special water for infants and young children, and student mineral water in one go, focusing on the bottled water segment. Zhong Shanshan was most optimistic about infant water, even inviting tennis star Li Na, who had just announced her second pregnancy, to endorse it, and it still has a group of mid-to-high-end users.
In addition to increasing its focus on bottled water, Nongfu Spring also began to enter high-profit categories such as fruit juice and tea drinks. In 2016, it launched three strategic new products: 17.5° NFC juice, fruit-flavored water, and 'Tea π'. As a light tea beverage designed for the post-90s and post-00s generations, with a low-sugar and healthy concept, the product contains fruit juice ingredients, giving it a fresh and crisp taste that suits young people's preferences. Within 10 months of launch, sales exceeded 1 billion yuan.
Under its diversification strategy, Nongfu Spring has created multiple beverage brands such as Nongfu Orchard, Scream, C100, and Oriental Leaf, forming a category structure including bottled water, fruit and vegetable juice, tea drinks, and functional beverages.
According to Wantai Biological's prospectus, in 2018, Nongfu Spring achieved a net profit of 3.616 billion yuan, a year-on-year increase of 7.33%. Horizontally comparing, listed companies in the same industry, Master Kong's net profit in 2018 was 2.463 billion yuan, and Uni-President's net profit was 1.029 billion yuan. Nongfu Spring's net profit performance is relatively impressive.
'In areas we deem necessary to enter, we will accelerate our pace. When an empty chair appears and no one has sat in it yet, we will immediately sit down,' Zhong Shanshan once explained his logic for this layout.
In April 2019, Nongfu Spring crossed over to launch plant-based yogurt made from high-quality soybeans; subsequently, Nongfu Spring set its sights on the booming coffee industry. In May, it entered the fiercely competitive billion-yuan coffee market with differentiated innovation, introducing the novel combination concept of 'rich coffee + light bubbles' and launching a carbonated coffee new product—Tanbing—bringing a refreshing experience to consumers and matching the consumption habits of young people.
However, on Nongfu Spring's official flagship store, sales of this product were mediocre, with fewer than 200 people paying. Consumers who received the product also said: the coffee taste is weak, too sweet, not worth it...
But this did not affect Nongfu Spring's enthusiasm for coffee. Later, it cooperated with Wumart to deploy coffee machines and start fresh-ground coffee business; at the same time, it did not give up ready-to-drink coffee. Recently, it launched three new ready-to-drink coffees, focusing on low-sugar and sugar-free formulas to meet consumers' sugar reduction and health needs, showing its emphasis on coffee.
# **Opportunities and Challenges Coexist**
The emergence of Luckin Coffee not only accelerated the consumption of fresh-ground coffee but also drove the development of ready-to-drink coffee. Unconsciously, in convenience store freezers, more and more ready-to-drink coffee brands are occupying more shelf space.
According to the '2018-2023 China Coffee Market Prospects and Investment Opportunities Research Report' by China Commercial Industry Research Institute, in China's segmented coffee market, instant coffee accounts for the highest proportion at 72%; followed by fresh-ground coffee at 18%; and then ready-to-drink coffee at 10%.
Although ready-to-drink coffee currently has the lowest market share, the industry generally believes that compared with instant coffee and fresh-ground coffee, ready-to-drink coffee has the characteristics of convenience and stable taste. In the future, with the upgrade of product differentiation and quality, it will continue to seize more market share.
Mintel also pointed out in its report: **'Ready-to-drink coffee has more advantages than other hot coffee drinks, giving manufacturers more room to play.'**
Because of its convenience and moderate price, it has also attracted companies to enter in droves. Take Nongfu Spring, for example, in response to consumers' low-sugar demand in recent years, it launched low-sugar latte and no-sucrose latte that are more suitable for Chinese people. Senior coffee users have a special preference for black coffee, so Nongfu Spring also launched sugar-free black coffee, with only water and coffee as ingredients. This product is highly anticipated.
The '2019 China Coffee Consumption Advancement Trends' also shows that consumers' demand for coffee flavors is increasing, and black coffee and other types are becoming increasingly popular.
In the view of Zhu Danpeng, a researcher at the China Brand Research Institute, the current rise in ready-to-drink coffee also meets the needs of the new generation of consumers. Overall, domestic coffee consumption is still in its infancy, and the market still has significant room for growth.
From Nongfu Spring's own perspective, there are still opportunities to break through. After all, it has been deeply involved in the beverage industry for many years and has advantages in its channels and brand.
But it is worth noting that in the bottled water market, Nongfu Spring mainly relies on low-end spring water to gain market share, and it still lacks in the mid-to-high-end market, with insufficient momentum. The main coffee consumers are currently office workers and the middle class, which to some extent discounts Nongfu Spring's brand and channels.
Trends replacing advantages is an inescapable fate for any enterprise. Multi-category layout is crucial for long-term development. Currently, coffee does conform to the beverage development trend, but whether Nongfu Spring can make this brand the next Tea π still needs to be answered by market performance.
Source: Zhiliao Finance (ID: zhiliaocj)
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## Citation metadata

- Publisher: New Distribution
- Author: 丹丹
- Published: 2019-10-18
- Canonical: https://xinjignxiao.com/en/articles/the-risks-and-opportunities-behind-nongfu-spring-s-coffee-venture-42d96ca2/
- Original source: https://mp.weixin.qq.com/s/eSGTjYnDmzdqA4Ekm0_5gg

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