In July last year, Nongfu Spring launched a natural snow mountain mineral water priced at 3 yuan. In January this year, Kunlun Mountain, which had been in the mineral water market for 12 years, reduced its price from 5 yuan to 4 yuan. In June this year, Genki Forest's Youkuang mineral water also dropped from 5 yuan to 3 yuan, and its statement at the launch event, 'Let all water factories compete fiercely,' stirred the industry, prompting many bottled water brands to start a new round of price competition. On e-commerce platforms, the price cuts for high-end bottled water have been even more aggressive. For example, Aikua, originally priced at 4.6 yuan per bottle, is now promoted at 2 yuan. Evian, Perrier, and Panna, originally priced above 10 yuan, have seen their prices halved, with Evian's 500ml bottle promotional price close to 4 yuan. Based on the above phenomena, this article focuses on answering the following four questions:

  • Why are high-end bottled water brands starting to cut prices?
  • Why is 3-yuan bottled water so popular?
  • Besides price, what other consumption trends are there in bottled water?
  • What issues should domestic bottled water brands pay attention to in their premiumization? 01 The Rise of 3-Yuan Water Is Like The Impact of 2-Yuan Water on 1-Yuan Water a Decade Ago In the domestic bottled water industry, there is a saying: every 10 years marks a cycle of price band shift. In fact, national drinking water has undergone a continuous upgrade from purified water to natural water to mineral water:
  • In 1989, C'estbon launched the first bottle of purified water in China, marking the era of purified water, with Wahaha and Robust as mainstream brands;
  • In 2000, Nongfu Spring was the first to propose the concept of natural water, successfully differentiating it from purified water by emphasizing mineral content, which also led Master Kong to follow with mineralized water;
  • In 2011, Nongfu Spring dethroned Master Kong from the top spot in bottled water, officially shifting the price focus to 2-yuan water;
  • From 2005 to 2015, mineral water brands such as Ganten, Kunlun Mountain, and Evergrande Spring emerged in large numbers, highlighting the trend of upgrading to better water quality and rarer water sources;
  • From 2015 to the present, mineral water brands have embarked on a path of premiumization, with water sources, quality, packaging, and prices all reaching new heights. According to Nielsen statistics, the growth rate of China's high-end water market is currently as high as 46%-50%, and it is conservatively estimated that the market capacity will exceed 10 billion yuan in the next few years. Meanwhile, a report titled "2022 JD Supermarket Mineral Water Consumption Trend Report" released on July 20 shows that in the past 12 months, mineral water sales growth was 8 percentage points higher than natural water, and user growth was 9 percentage points higher than natural water. Source: "2022 JD Supermarket Mineral Water Consumption Trend Report" Why is the upgrade from 2-yuan water to 3-yuan water seeing a simultaneous increase in price and volume? There are four reasons: 1. The competitive landscape for mid-to-low-end bottled water is fixed, and brands seek greater incremental space When serving Jinmailang, I noticed that in 2019, the CR5 of China's bottled water industry was as high as 56.2%—Nongfu Spring, C'estbon, Wahaha, Master Kong, and Ganten are all water giants. Only new trends and new price bands can bring new opportunities for competition and development. 2. High-end bottled water brings higher profit margins Under the same production costs, labor costs, and transportation costs, the gross margin of high-end bottled water can reach over 40%, which is 6-7 times that of ordinary bottled water. Driven by the pursuit of high gross margins, many companies have entered the mid-to-high-end bottled water market priced at 3 yuan and above. 3. The trend of high-end drinking water abroad According to public data from the Japan Mineral Water Association, from 2004 to 2015, natural mineral water consistently accounted for about 80% of Japan's bottled water production, with the lowest in 2008 at 79.3%. The European mineral water market is even more mature, with bottled water divided into natural mineral water, spring water, and other bottled water. According to a Canadean survey, in 2015, 83% of European consumers chose natural water as their drinking water, with Germany, Italy, and Spain having natural mineral water production rates above 90%! In contrast, China's per capita mineral water consumption is only 13 liters per year, leaving double the growth space compared to Japan and even more compared to European and American countries. 4. Upgraded drinking water concepts According to the 2018 "China Public Health Drinking Water Blue Book," 75% of daily bottled water consumers choose natural mineral water as their daily drinking water, and 45% believe that the subjective price for natural mineral water should be 3 yuan per bottle. With the diversification of household drinking water scenarios, high-end water usage scenarios such as cooking, tea brewing, maternal and infant water, and social drinking have also driven the premiumization trend of bottled water. Additionally, due to concerns about surface water pollution, consumers' demand for safe and healthy drinking water has shifted from surface water to deep groundwater and snow mountain water, and the cognitive distinction between natural water and mineral water is becoming clearer. 02 Mainstream Price Band Creates Mainstream Market Below 3 yuan, price matters; above 3 yuan, category matters. The rise and development of 3-yuan water is mainly the upgrade and replacement of natural water by mineral water. However, even among mineral waters, due to differences in mineral element composition and content, the taste varies, and there are many grades. But when ordinary consumers cannot distinguish the grade differences, and when domestic mineral water brands rise in large numbers, consumers begin to reject the original high-priced foreign mineral waters, and the prices of foreign mineral waters are driven down to affordable levels. Especially under the decline in purchasing power caused by the pandemic, the most effective way for foreign brands to deal with sluggish sales is to cut prices, making prices cater to a broader consumer base. 03 New Trends Bring New Opportunities 1. The trend of multiple flavors replacing single flavor VOLVIC is a long-established European mineral water brand, sourced from the volcanic region of Auvergne in central France, rich in natural minerals and with a soft, refreshing taste. To attract more young people, it has launched apple, lemon, and other fruit-flavored mineral waters in addition to the original flavor. In Japan, with its abundant high-quality water sources, I LOHAS quickly became the best-selling bottled water in Japan through its eco-friendly, twistable cap and public relations, and has since launched a variety of new flavors each year to attract repeat purchases. Existing bottled water brands focus on price, packaging, and water sources, but overlook the substitution of multiple flavors for single flavor. The trend of multi-flavored mineral water is similar to how fruit-flavored milk once segmented the pure milk market. 2. The trend of 5L large-format water for household consumption With the emergence of various consumption scenarios such as cooking, tea brewing, soup making, and direct drinking, large-format water, which has just started to develop in recent years, is experiencing a surge in growth, with a potential market size of up to 100 billion yuan. Existing household water consumption is still mainly boiled water, but due to issues such as pipe damage, pipe corrosion, storage tank contamination, and excessive chlorine or insufficient disinfection during tap water transportation, boiling tap water directly is not entirely safe, and the water quality is not high. Most water purifiers filter out purified water, which is not as good as natural water and has high costs for regular filter replacement. Choosing 18L barreled water also poses hygiene risks due to the reuse of barrels. Additionally, with urbanization leading to smaller family sizes and an increase in single young people, large-format water that is convenient, lightweight, and of higher quality has greater potential for household consumption. Although water giants such as Nongfu Spring, C'estbon, and Ganten have launched large-format water products, there are still opportunities for brand building in the high-growth large-format water track. First, the original water giants represent bottled water in consumer perception, leaving a window for creating expert brands in large-format water. Second, the original water giants still face strategic weaknesses in water quality, and expert brands with better water quality can replace them. Third, the direct competitors of large-format water are barreled water, not bottled water. The barreled water market is large but fragmented, with local brands dominating and CR4 below 10%. Fourth, in the large-format water track, channel drive is stronger than brand drive. After the original water giants occupy KA and convenience store channels, new brands can cooperate with local water distribution stations to build new brands in new channels. 04 Grasping Common Perceptions is a Strategic Issue That Emerging Bottled Water Brands Cannot Ignore Product strength, channel strength, and brand strength have always been the three major factors affecting marketing. In the early stages of competition, when channel distribution and brand awareness are not strong, relying on product strength from high-quality water sources can gradually compensate for shortcomings in channel distribution and brand recognition. However, when competition intensifies, relying solely on product strength is insufficient to shake the dominant positions of Nongfu Spring and Ganten, as leading brands can respond to emerging brands by seeking high-quality water sources. This has led brands like Quanyangquan to remain confined to regional markets, unable to become national bottled water brands. Emerging bottled water brands need to consider leveraging e-commerce channels, water distribution stations, and other new channel trends, as well as high-end endorsements, to expand channel distribution and brand awareness. On the other hand, mid-to-low-end mineral water bottles have ordinary designs with a rectangular label around the bottle, while high-end mineral water bottles not only feature elegant drop-shaped designs but also have full-coverage landscape graphics in packaging. A lack of common perception of high-end water packaging may become another development obstacle for emerging bottled water brands. 05 Conclusion Mainstream price bands create mainstream market capacity, new channels create new perceptions, and new trends build new brands. When all bottled water brands see the consumption trend of 3-yuan water, effectively utilizing new channels, new perceptions, and new product opportunities will become the winning chance for emerging bottled water brands to break through regional barriers and go national. At this point, new flavors, new packaging designs, new large-format capacities, and new household consumption scenarios may be worth considering.