China-Singapore Jingwei, February 2 (Yan Shuxin intern Zhao Wei) Recently, a price increase notice made Nongfu Spring the focus of the outside world.

  According to the notice, Nongfu Spring raised the price of bottled water of certain specifications in Hangzhou, an increase of 10%.

Previously, Nongfu Spring also raised the price of bottled water in Shanghai.

  Will the price increase of Nongfu Spring spread to other cities?

Will bottled water be in the mix too?

10% increase, will other cities join?

  Sino-Singapore Jingwei noticed that the first thing that was circulated in the industry was a piece of Nongfu Spring's "Notice on Price Adjustment of 19 Liters of Water in Hangzhou Area". The price of 19-liter bottled water in Hangzhou was adjusted to 22 yuan per barrel.

It is reported that before that, the price of 19 liters of bottled water from Nongfu Spring in Hangzhou was 20 yuan per barrel.

  On the 2nd, the customer service of Nongfu Spring confirmed the content of the above notice to Sino-Singapore Jingwei.

The customer service said, "There is no notice for other specifications. At present, only the Hangzhou area (price increase), and other areas are temporarily unclear."

  It is worth mentioning that in 2022, Nongfu Spring also raised the price of 19-liter bottled water in Shanghai from 26 yuan/barrel to 28 yuan/barrel. Impact".

  Will more cities raise the price of bottled water in the future?

Will bottled water also join the ranks of price hikes?

On the 2nd, Zhongxin Jingwei asked Nongfu Spring for confirmation on these issues. The relevant staff said that the company had not responded to the relevant issues for the time being.

  According to media reports, at an analyst performance meeting in March 2022, Zhou Zhenhua, executive director of Nongfu Spring, once said bluntly that the

cost pressure has "exceeded the level that the company can unilaterally digest"

, and Nongfu Spring's first choice is to improve operating efficiency. Digesting costs, and due to large changes in the market and costs, competing products also have price adjustments, and Nongfu Spring is also continuing to wait and see.

The cost is high, will raising the price be the best solution?

  Nongfu Spring is indeed facing greater cost pressure.

  According to the data, in the first half of 2022, the gross profit margin of Nongfu Spring dropped from 60.9% in the same period of the previous year to 59.3%.

  It is reported that

PET is the most important raw material for Nongfu Spring's product packaging.

According to the prospectus data, in 2019, Nongfu Spring’s PET cost was 3.382 billion yuan, accounting for 31.6% of the total sales cost, while the cost of packaging materials such as cartons, labels, and shrink films accounted for 31.5% in the same period.

Calculated, these two costs accounted for 63.1% of the sales cost of Nongfu Spring.

  Nongfu Spring once introduced in the 2022 semi-annual report that international oil prices will rise rapidly and fluctuate at a high level in the first half of 2022. PET is a downstream product of crude oil. The rise and uncertainty of crude oil prices have brought challenges to the company's production cost control. pressure.

  Under cost pressure, Nongfu Spring’s performance growth in the first half of 2022 has slowed down sharply.

Data show that in the first half of 2022, Nongfu Spring achieved a total revenue of approximately 16.599 billion yuan, a year-on-year increase of 9.4%; the profit attributable to owners of the parent company was 4.608 billion yuan, a year-on-year increase of 14.8%.

In the first half of 2021, Nongfu Spring's total revenue and profit attributable to owners of the parent company increased by 31.4% and 40.1% year-on-year respectively.

  Among them, Nongfu Spring’s main source of income, the packaged drinking water business, has been hit hard, and the growth rate of income has dropped to single digits.

The semi-annual report shows that in the first half of 2022, Nongfu Spring’s packaged drinking water products achieved revenue of 9.349 billion yuan, a year-on-year increase of 4.8%, accounting for 56.3% of total revenue.

In the same period last year, the revenue of packaged drinking water products increased by 25.6% year-on-year.

  Nongfu Spring once explained that the sales of packaged drinking water in the first quarter of 2022 will be good overall, but will be hit by the epidemic in the second quarter.

  Zhu Danpeng, vice president of the Guangdong Food Safety Promotion Association and food industry analyst, told Sino-Singapore Jingwei that the price increase is a "double-edged sword" for Nongfu Spring.

"On the surface, it may increase the profit of Nongfu Spring. The profit of Nongfu Spring does not mean that it does not make money, but that it wants to get more investors in the capital market. But after the price increase, if other brands do not If it follows up, its market share may be affected. But if the cost of the entire industry is really very high and everyone collectively raises prices, it may be different.”

  According to Mintel data, in 2022, the top three market shares in the domestic bottled water market based on sales estimates are Nongfu Spring (25.7%), China Resources (subsidiary brand C’estbon, 17%) and Jingtian (subsidiary brand Baisuishan , 9.7%).

  As for whether other brands have followed suit, Zhu Danpeng said that the competition for drinking water in China has entered a very introverted cycle. In terms of water species, Nongfu Spring does not have an advantage; from brand effect to scale effect, Nongfu Spring has advantages but not crushing With the advantage of pressure, other brands should not follow up the price increase.

(The opinions in this article are for reference only and do not constitute investment advice. Investment is risky, and you need to be cautious when entering the market.)