Chinanews.com, February 4 (Xie Yiguan, China News Finance reporter) Recently, a Nongfu Spring "Notice of 19 liters of water price adjustment in Hangzhou area" has been circulated in the industry.

The price adjustment notice shows that starting from February 1, the retail price of 19 liters of water from Nongfu Spring in Hangzhou will be adjusted from 20 yuan/barrel to 22 yuan/barrel.

　　On the 3rd, a reporter from China New Finance and Economics called the official website of Nongfu Spring, and the other party confirmed the news of the price increase.

Screenshots of products of different specifications in the online official flagship store of Nongfu Spring.

Why does Nongfu Spring need to adjust the price?

　　Regarding the reason for this price increase, Nongfu Spring stated in the notice, "In view of the rising pressure of prices, raw materials, labor and operating costs in recent years."

　　In the 2022 semi-annual report, Nongfu Spring also mentioned, "PET, the main raw material for our product packaging, is a downstream product of crude oil. The rise and uncertainty of crude oil prices have put pressure on our production cost control."

　　According to the prospectus disclosed before the listing of Nongfu Spring, from 2017 to 2019, PET materials accounted for 29%, 31.9%, and 31.6% of the total sales cost of Nongfu Spring, respectively, and are an important part of the sales cost.

　　According to media reports, at an analyst performance meeting in March 2022, Zhou Zhenhua, executive director of Nongfu Spring, said bluntly that the cost pressure has "exceeded the level that the company can unilaterally digest."

He said PET costs are expected to be 30%-40% higher in 2022 than last year.

Will the price adjustment spread to other cities?

　　In December 2021, Nongfu Spring issued a price adjustment announcement, raising the retail price of 19 liters of water in Shanghai from 26 yuan/barrel to 28 yuan/barrel from January 1, 2022.

　　Shanghai and Hangzhou have raised the price of 19 liters of water successively. Will the price adjustment spread to other cities?

Nongfu Spring customer service told reporters that it is not clear at present.

　　As for whether the price of drinking water of other specifications will be raised accordingly, the customer service of Nongfu Spring did not give a reply.

　　However, at the aforementioned analyst performance meeting, Zhou Zhenhua once said, "Currently speaking, we have no plan to raise prices on a large scale, whether it is water or beverages, but we have been continuing to wait and see, and we have also seen some price adjustments for competing products. action, so we will not say 'no price adjustment' so deadly."

　　Zhou Zhenhua said that due to the subsequent large changes in the market and costs, the price increase of Nongfu Spring "will open up all possibilities", but the first choice is to digest costs by improving operating efficiency.

Due to rising costs, Nongfu Spring's gross profit in 2022 is "very likely to decline to the level of 2019."

　　The reporter noticed that due to the increase in PET procurement costs, the gross profit margin of Nongfu Spring in the first half of 2022 has dropped by 1.6% from 60.9% in the same period of the previous year to 59.3%.

　　According to Zhu Danpeng, an analyst in the food industry, the price increase of Nongfu Spring is a "double-edged sword". Although it may increase the profit of Nongfu Spring, if other brands do not follow up, it may affect the market share of Nongfu Spring.

Data map: Citizens buy mineral water in supermarkets.

Photo by Dou Yuewen

Cost pressure plagues enterprises

　　Affected by the rising prices of upstream bulk commodities such as crude oil, the costs of midstream and downstream enterprises are under pressure.

　　According to a report by Japanese NHK TV station on February 1, more than 5,000 kinds of food and beverages will increase in price in Japan in February. After the price increase in Japan reached the largest scale in 30 years in October 2022, Japan is ushering in a new round of price increases. .

　　As a well-known beverage brand in Japan, it is reported that Yakult Headquarters has increased the prices of the lactic acid bacteria drinks "Yakult" and "Yakult Low Sugar" sold throughout China since January, and will pass on the price increase of raw materials to the sales price superior.

　　Looking back on 2022, under cost pressure, companies such as PepsiCo, Genki Forest, Liziyuan, and Suntory have also reported that they have raised the prices of some of their products.

　　"The Suntory sugar-free oolong tea in the nearby supermarket has increased from 3 yuan a bottle in the past to 3.5 yuan a bottle now." Xiao Lin, who works in Xicheng District, Beijing, said.

　　However, the pressure on raw material costs may be eased in the future.

Zhao Ying, an analyst at Zhuo Chuang Information, said that based on scenario calculations, it is expected that from 2023 to 2024, oil prices will continue to decline from the average price of 95 US dollars in 2022, and fluctuate in the range of 65 US dollars / barrel to 80 US dollars / barrel down.

　　This may be good news for beverage companies suffering from rising packaging costs.

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