As health concerns mount in China amid worsening pollution and contamination of lakes and reservoirs, selling high-end bottled water has emerged as a fast-growing business opportunity in the country.
According to research institute CIConsulting, the average profit margin of bottled mineral water is about 3.85 percent, while in the high-end market the margin could be more than six times that level.
Total sales of high-end bottled water in the nation reached 500,000 tons last year after expanding 42.6 percent from the previous year, industry research website askci.com said in a report. That compares with a growth rate of 16.3 percent in the cheaper bottled water segment.
Quality water source is the most important thing that market players seek. The National Business Daily quoted industry insiders as saying that for water companies in China clean supply sources have become as important as milk sources are to baby formula makers. That is why market participants are competing for water sources from glaciers and snow mountains, as Tibet 5100 Water Resources (01115.HK) and Kunlun Mountains Natural Mineral Water are doing.
Hoping to grab a share of the growing pie, property developer Evergrande (03333.HK) announced a foray into the bottled water market last month. The group has claimed that its water comes from an ice fountain in Changbaishan.
But access to quality water source is not enough. Strong marketing support to convince consumers is equally important.
Beijing Baihuan, another real estate developer, officially launched its bottled water brand Beijiquan this June. Although the company has invested more than 200 million yuan (US$33 million) to secure what is claims is water source from the North Pole, sales have been disappointing since its debut due to inadequate promotion.
Successful branding is what makes a product stand out from the others. After all, there are hundreds of bottled water brands out there, with marginal taste difference.
In this sense, foreign giant Evian has a lesson to offer. The French firm’s water is expensive — a bottle of Evian usually costs more than a pint of beer — but it still managed to grab around 10 percent of the market worldwide last year, according to US market research firm IRI.
Brand-building takes a lot of time as well as requires huge investment. An industry insider told the National Business Daily that a high-water brand has invested over 200 million yuan in advertising in year to date, but sales have been rather weak.
The industry is still in its infancy in China and it will take time to convince consumers to pay more for quality. “The prices of high-end water in Japan and Korea are 1-2 times higher than other bottled or canned beverages. China will be there in 5-8 years,” industry veteran Liu Wei told mainland media.
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