The Paper reporter Fan Xinru
Recently, Nongfu Spring has been pushed to the forefront.
As of the close of Hong Kong stocks on March 12, Nongfu Spring (09633.HK) rose 1.43%. Since February 28, Nongfu Spring’s stock price has fallen by 4.8% in 10 trading days, and its market value has evaporated by more than HK$20 billion.
At the same time, Wahaha, another packaged drinking water brand, is experiencing booming sales.
A consumer in Shanghai told The Paper that a week ago, she tried to buy Wahaha purified water online, but was told by customer service that the product would not be available until two weeks later.
In some terminal shops and restaurants, some owners have replaced Nongfu Spring water with Wahaha.
After the death of Wahaha founder Zong Qinghou, the old grievances between the two companies were once again stirred up.
On the evening of March 3, Zhong Suisui, the founder of Nongfu Spring, published an article titled "Two or Three Things Between Zong Lao and Me" on the Nongfu Spring WeChat official account, saying, "Zong Lao has always been an entrepreneur I respect. He and I have also Teachers are also friends, and of course, they are also competitors." Zhong Suisui mentioned that since then, Nongfu Spring and Wahaha had lawsuits against each other, but in the end Zhong Suisui shook hands with Zong Qinghou in the presence of the main leaders of Hangzhou City at the time. and.
Although Zhong Suisui still insists on his own views, he emphasized, "My respect for Mr. Zong's entrepreneurial spirit has never wavered. I have always stated on various occasions that Mr. Zong is the representative entrepreneur I respect."
Zhong Suisui's statement did not influence the choices of some consumers. The outside world is also observing whether the pattern of Nongfu Spring and Wahaha in the packaged drinking water market will change.
How is offline sales going?
A Nongfu Spring dealer told The Paper that a series of recent events have indeed had a great impact on Nongfu Spring’s sales.
Recently, more people have requested the return of freezers (Editor's note: used to display Nongfu Spring products) than usual. "But the customers who are resisting have not seen it yet, and there are still more supporters."
A salesperson from Nongfu Spring said that the recent incidents had no impact on his county and everything was normal.
Under the influence of Internet emotions, proactive brand changes do occur.
The owner of Henan Yiyan Hotel told The Paper that every summer, the best-selling product in the store is water, especially water from Nongfu Spring.
But now, he has contacted the Wahaha salesman and is preparing to replace the aquatic products in the store.
In his store, not only drinking water is affected, but the sales of oriental leaves, which used to be a best-seller, have also dropped significantly.
The Paper reporter visited some offline convenience stores and found that Wahaha purified water is not widely available in many convenience stores.
In many convenience stores and supermarkets, Nongfu Spring purified water is still the most common and most widely distributed.
Other drinking water brands such as Baisuishan, Yibao, Master Kong and other brands are also available.
Wahaha's products are mainly AD calcium milk, Nutrition Express, and eight-treasure porridge.
The same is true for some online platforms of supermarkets.
Many offline convenience store clerks said that sales volume has been affected, but not significantly.
"Water is a fast-moving consumer product. For some consumers, the brand is not that important, as long as the product is good. The only difference is what kind of water you like to drink." In the view of a Nongfu Spring dealer, it is the same as before. Like Hongxing Erke, the explosive consumption caused by public opinion will not last long. "Dealers should get better after this period of time."
From the "water war of the century" to the first breakthrough
Speaking of the rise of Nongfu Spring, people can easily think of the "water war of the century" that took place in 2000.
In April 2000, at the inauguration ceremony of Chun'an Water Plant, Zhong Suisui criticized purified water, saying it did not contain minerals and was therefore not good for human health, and announced that it would no longer produce purified water and would instead produce natural water.
At the same time, Nongfu Spring also used daffodils, animals and other controlled experiments to launch an offensive against pure water at that time through TV advertisements.
Starting from the end of April 2000, major domestic pure water companies and Nongfu Spring have been engaged in a fierce war of words.
During this period, Nongfu Spring took Wahaha to court. Wahaha led 69 purified water companies across the country to jointly accuse Nongfu Spring of unfair competition.
The matter finally ended with Nongfu Spring and Wahaha shaking hands and making peace.
But in fact, from 2004 to 2008, the focus of the battle in the domestic packaged drinking water market was mainly between Wahaha and Master Kong.
A former Wahaha employee who joined Wahaha in 2004 and served as a regional manager for many years recalled that between 2003 and 2005, the retail price of almost all packaged drinking water on the market was 1 yuan/bottle, and the wholesale price of a box was 18 yuan. Yuan or so.
In the second half of 2003, Master Kong launched mineral water and set the ex-factory price at 13 yuan/box, which was far lower than the market average price, triggering a price war in the drinking water market.
At that time, the ex-factory price of Wahaha pure water was 21.2 yuan per box, and 17 boxes were given away for every 100 boxes.
In response to Master Kong's low-price strategy, Wahaha also offers periodic promotions, with a profit of 1-2 yuan per box, and the final wholesale to terminal price is about 18-19 yuan.
In 2004, Wahaha also launched a product "The Age of Innocence" that matched the price range of Master Kong's mineral water.
After laying out new products, Wahaha canceled the promotion of 1-2 yuan per box of classic pure water.
The low-price strategy adopted by Master Kong did have an impact on the packaged purified water market at that time, and quickly helped Master Kong occupy the market share of packaged drinking water.
According to Master Kong's financial report, in 2005, in order to meet consumers' demands for drinking water quality, Master Kong added mineral water plants in major cities during the year.
Since then, Master Kong’s market share of packaged drinking water has gradually increased.
In terms of sales, its market share increased rapidly from 11.0% in 2006 to 15.4% in 2007, and officially surpassed Waha to become the first.
At that time, the gap in market share between Wahaha and Master Kong was not large.
According to data disclosed in Tingyi's 2008 financial report, Tingyi's drinking water market share in 2007 was 18.1%, ranking first.
Wahaha ranked second with 17.2%, and Nongfu Spring ranked third with 11.7%.
However, the time for Master Kong to reach the top of the domestic packaged water market passed by in a flash.
In 2008, due to the "Shuiyuan Gate" incident, Master Kong fell into a whirlpool of public opinion, and its market share dropped to second place.
Data from Master Kong's financial report show that in terms of sales volume, Master Kong's market share in 2008 was 17.7%, Wahaha's was 18.0%, and Nongfu Spring ranked third with a market share of 12.2%.
In the view of the above-mentioned former Wahaha employees, although Nongfu Spring gained a certain social popularity through the "Water War of the Century" in 2000, its real emergence in the field of packaged drinking water was around 2010.
According to his recollection, around 2010, Nongfu Spring took the lead in raising its mineral water prices from 1 yuan to 1.5 yuan.
In 2012, Nongfu Spring raised its price again, to 2 yuan a bottle. “By the time Wahaha realized it and started to follow the increase, it was already too late.”
Different from Master Kong's strategy of exchanging market prices at low prices when it first entered the packaged drinking water market, the logic behind Nongfu Spring's price increase is actually to give profits to terminals and cultivate terminals.
At that time, although Nongfu Spring raised the market price, it kept the wholesale price unchanged and gave all the increase to wholesalers and terminals.
This is a huge gain in the low-margin packaged drinking water market.
The strategy of investing in developing terminals finally paid off. A large number of terminals were acquired by Nongfu Spring, and the domestic drinking water market also changed accordingly.
In 2012, Nongfu Spring replaced Wahaha and became the largest packaged drinking water brand in terms of market share.
There is also a relationship with decision-making.
According to the memories of the above-mentioned former employees, in 2004, Nutrition Express was born, and the company's focus shifted to Nutrition Express. In 2006, Shuang Wai Wai was launched.
Compared with mineral water priced at 1 yuan a bottle, Nutrition Express, which is priced higher, has higher gross profit, and dealers and terminals can earn more profits.
This led to dealers and terminals at that time being more willing to sell drinks such as Nutrition Express instead of pure water.
"It is true that Wahaha itself felt that there was no money to be made (selling water) at that time, and the dealers also felt that there was no money to be made," he said.
Data shows that from its launch in 2004 to May 2014, Nutrition Express has sold a total of 39.4 billion bottles.
Among them, the total sales volume exceeded 15 billion yuan in 2011, and exceeded 20 billion yuan in 2013, becoming a truly super single product of Wahaha.
Regarding the success of Nongfu Spring in the domestic market in recent years, a Nongfu Spring dealer analyzed that the main reason why Nongfu Spring has gained market recognition is that Nongfu Spring is more important than display.
"Nongfu Spring spends money on display every year and puts all its efforts into putting freezers in terminals." In the dealer's view, product display in terminal stores is extremely important to sales. Only by placing products neatly and uniformly can consumers be attracted to buy.
The second is to visit customers and do a good job in customer service.
Can sales pick up during the peak season?
Since 2012, when the retail price of domestic packaged drinking water was brought into the 2-yuan era through price increases, Nongfu Spring has gradually established itself as the king of the domestic packaged drinking water market.
The Nongfu Spring prospectus quoted the Frost & Sullivan Report. From 2012 to 2019, Nongfu Spring ranked first in China's packaged drinking water market share for eight consecutive years.
Although many companies have entered the packaged drinking water industry in recent years, Nongfu Spring is still at the top of the industry.
Haitong International's research report shows that packaged water and ready-to-drink tea will account for 35.6% and 18.7% of the total soft drink market in 2023, respectively.
In terms of packaged water, Nongfu Spring, Yibao and Jingtian ranked among the top three, and Wahaha ranked fourth.
"The packaged drinking water market has entered a point where it is somewhat monopolized." In the view of Zhu Danpeng, a Chinese food analyst, the possibility of new entrants entering the market is already very low.
In 2023, Mixue Bingcheng, which has more than 30,000 terminal stores, tried to sell water through store channels, but failed in the end.
Haitong International Research Report stated that soft drinks are an industry with low barriers and high competition. At the same time, the profit per bottle is thin and requires high turnover, which competes with the comprehensive capabilities of enterprises.
After many changes, packaged faucets have entered a medium-to-low growth stage, and the industry's future growth rate will remain between 3% and 4%.
In this context, Nongfu Spring itself is also facing changes.
In recent years, Nongfu Spring has continuously launched high-end products, developing in the direction of high unit price and high capacity.
Starting from 2020, although it still accounts for most of Nongfu Spring's revenue, the proportion of drinking water business continues to decline, and the beverage, especially tea beverage business, has begun to enter a period of rapid growth.
Data shows that from 2020 to 2022, Nongfu Spring’s packaged drinking water revenue was 13.966 billion yuan, 17.058 billion yuan and 18.263 billion yuan respectively, accounting for 61.0%, 57.4% and 54.9% respectively.
During the same period, Nongfu Spring tea beverage revenue was 3.088 billion yuan, 4.579 billion yuan, and 6.906 billion yuan, accounting for 13.5%, 15.4%, and 20.8% respectively.
The 2023 interim report shows that the revenue of packaged drinking water products was 10.442 billion yuan, accounting for a further drop to 51.0%.
The proportion of tea beverages further increased to 25.8% of total revenue.
Wahaha on the other end seems to have seen an opportunity.
Recently, an internal letter from Wahaha's sales system leaked online, showing that Wahaha has introduced a strong deposit incentive policy and promotional activities.
However, reporters were unable to contact Wahaha for comment.
"This wave has a great impact on Nongfu Spring," Zhu Danpeng believes that this is also a node where other companies are focusing their efforts.
It remains to be seen when the Nongfu Spring market will recover. Sales may slowly pick up during the peak season from July to August this year.
The above-mentioned Nongfu Spring dealer believes that even if Wahaha now begins to focus on terminal channels to compete for the market, it will take several years for terminal channels to make up for it. "At least there are not many Wahaha drinking water products on the market so far."