The explosion of interest in Western goods and brands extends far beyond beer and spirits in China today and has affected almost every beverage. However in recent years the bottled water market has been one of the sectors delivering the most growth. Out of the total of 15m tons of beverages sold in 2000, 60% were water and sodas.


History

Before the 1980s, China had only one mineral water plant, the Qingdao Laoshan Mineral Water. This brand was famous all over China and together with the regional beer, Tsingtao and the Qingdao cuisine, firmly established Qingdao as the foremost culinary region in China. The distinctive tastes of the mineral water from Laoshan and its healthy properties are well known in the most affluent parts of the country and its was no surprise that when the country started opening up in the mid-1980s that many other producers started entering the market.

Initially it was other mineral water producers located in Guangdong that made an initial impact, but soon these were joined by purified water brands (ie Wahaha and Robust from the Huangzhou Group and Guangdong Foodstuff & Beverage Company respectively) and other provincial mineral waters (ie Farmers-Spring from the Zhejiang Sock Company). In the 1990s these brands revolutionised the industry by growing using above-the-line advertising, positioning their brands towards the younger, wealthy Chinese city dweller.

The success of this sector attracted many more domestic companies and by 2000, water output and sales were amongst the largest in the beverage sector. However, this market now has many different companies vying for market share, with imported brands such as Evian, Perrier, Volvic and Vittel commanding the tiny super-premium end, joint ventures such as Nestle in Shanghai and Tianjin occupying 5% of the market and the rest divided between the major domestic brands.

Types Of Water

The Chinese producers refer to three different sectors in this market, purified water, natural mineral water and sparkling mineral water. Currently the biggest brands in the purified sector are both Wahaha and Robust. Although this sector is experiencing growth, one industry commenter suggested that "mineral water brands will see the most growth in the near future, as foreign investment increases after the WTO agreement and because consumers are starting to acknowledge their quality. Genuine mineral water production has always been hampered by the speed of the production line, well output and transportation radius and we expect the benefits of the WTO and increased investment to go along way towards easing those problems. In the long term we expect purified waters to decrease in market share substantially and the consumer acceptance of sparkling and slightly salty mineral waters to steadily increase."

The key brands in the mineral market sector - most producing both sparkling and still waters - are Laoshan, Coconut Palm and Danone Health. These primary domestic brands sell from between US$0.09 and $0.15 for 550ml size, where as the imported brands retail from US$0.77 to $1.24 in the major supermarkets.

The Consumers

As with many beverages in China, a substantial segment of the market, especially the older generations and those in the rural areas are not purchasers of bottled water. Yet in the cities, the younger more westernised middle classes are consumers mainly of the domestic brands and these individuals are becoming more affluent.

The consumers purchasing the foreign brands are foreigners, ex-pats and some domestic high-class white-collar consumers and these can be both in the off and on-trade. Fashionable nightclubs in the major cities can be a good channel for targeting these domestic consumers.

Competing Beverages

As with all beverages, the water companies are also facing increasing competition from other sectors and the fastest growing sector here is the bottled tea sector. Initially this interest was sparked by imported brands such as Kangshifu, President, Suntory, Kirin and Asahi. However, now green, herbal and black bottled teas are gaining in popularity and Coco-Cola and the fast expanding domestic producer Xurisheng, will soon join those Japanese and Taiwanese brands. Many commentators believe that this sector could, in the long term, provide the water companies with more competition than the more famous soft drinks brands.

The Future

All in all, the domestic industry has a very positive outlook for the future. Not only are the domestic producers looking at opportunities on the home market, but they also have eyes on markets further a field. The Chinese source said: "The Olympics will bring many prospects to this water sector, especially to Laoshan (as Shandong is involved in the events) as we are the original Chinese mineral water.

"We expect increased competition leading up to 2008 from the imported brands and this could force several changes in the structure of our domestic industry. However, as our domestic mineral water quality is of an international standard, we are confident in the potential of this market sector and feel that the advances in packaging and investment resulting from the WTO offer great opportunities for the export market in the long term as well."