Beverage plays turning big business in China

More Chinese consumers are taking to new premium water products－carbonated, functional and imported mineral water with health benefits－this summer, fueling heated competition among international and local players.

Global beverage and food giant Nestle launched its Italian high-end water brand Acqua Panna last month in China. In the same month it rolled out Nestle-branded sparkling water with multiple flavors for younger consumers.

Since its introduction to the Chinese market in 2012, another highend Nestle brand Perrier has continuously achieved double-digit growth, boosted mostly by sales generated from online platforms and catering channels including bars and cafes, Nestle said.

The green-bottled carbonated mineral water brand has been a growing presence in the majority of first and second-tier cities in China, online and offline, said Phillip Chilton, international brands business director of Nestle Water.

The company has continued to expand its presence in new markets including Chengdu, Sichuan province, and Wuhan, Hubei province, he added.

"The strong growth of Perrier in China has mirrored consumers' emerging positive pursuit of healthier and high-end water, as well as a more pleasant drinking experience in recent years," Chilton said.

Natural sparkling mineral water has met demand from younger consumers in taste preferences and their rising awareness of health and wellness, he added.

Nestle's accelerated moves to bring more high-end water brands to China are in line with the company's shifting focus on its iconic international water brands, especially its leading premium mineral water brands and functional water products.

According to Nestle, the aim is to allow strategic acquisitions to grow in this category, while pledging to make its entire global water portfolio carbon neutral and replenish associated watersheds by 2025.

Mark Schneider, Nestle CEO, said in June, "This strategy offers the best opportunity for long-term profitable growth in the category, while appealing to environmentally and health-conscious consumers."

Schneider said the company remains fully committed to growing its iconic international brands, including Perrier, S.Pellegrino and Acqua Panna.

To emphasize this sector, the company will further build its leading premium mineral water brands around the world and invest in differentiated products under the Nestle Pure Life brand, such as functional water with health-enhancing ingredients, Nestle said.

Jason Yu, managing director of Kantar Worldpanel Greater China, said generally high-end bottled water is priced about five yuan (71 cents) per 500 milliliters and it is also defined by its water resources, quality and ingredients.

"In the COVID-19 era, consumers are more aware of health benefits and quality of life," Yu said.

"High-end water products also follow the market trend of low sugar and no sugar drinks in recent years."

He added that high-end water products－including functional water and carbonated water－meet evolving consumer demand.

However, the top water market, with the majority of business generated from outdoor catering, has been in recovery since the outbreak of the pandemic, Yu said.

This market segment requires long-term cultivation and even longer marketing and investment periods.

Another international water producer, Paris-based Danone, considers China a key strategic market.

"We reiterate our commitment to sustainable development in China and to operate under Danone's mission to bring health through food to as many people as possible. We are confident in the future of our imported water business in China, such as Evian and Volvic," the company said.

Ferrarelle, Italy's fourth-largest mineral water producer, said recently it struck a distribution deal with Danone to boost exports and increase awareness of its top brand overseas.

Under the agreement, Danone will distribute Ferrarelle's sparkling water in several countries. It is believed that Danone will eventually introduce Ferrarelle to the Chinese market.

According to the 2019 Tmall High-end Water Trend Report jointly released by Tmall and Nielsen Market Research, the growth in transactions of high-end water started to grow from July 2018.

According to Nielsen, the high-end water sector's market value in China stood at 4.6 billion yuan in 2012. Five years later, revenue stood at more than 10 billion yuan.

"The popularity of high-end water since 2018 has been a result of higher per capital incomes and enhanced awareness of healthier water among consumers," said Zhu Danpeng, a food and drink freelance analyst who also predicted strong performance in both sales and production boosted by high frequency of repeat customers and strong emerging customer numbers.

But, Zhu said, the market has been dominated by international brands despite the strong presence of local players in the water market in general.

Euromonitor International said bottled water in China will have a market value of 219.5 billion yuan by 2022. The figure for 2019 was 169.4 billion yuan.

The top bottled water brand in China's domestic market is local player Nongfu Spring, taking up 9.8 percent of the domestic market.

Next is C'est Bon of China Resources Holdings Co Ltd at 8.6 percent and Ganten of Shenzhen Ganten Industry Co Ltd at 8.3 percent.

Danone's Mizone is fourth at 4.6 percent and Master Kong of Ting Hsin International Group at 3.4 percent.

Amanda Zhang, in her early thirties, regularly buys bottled carbonated water from online retailers, or 24 bottles a week on average, both imported and local brands.

"My husband and I like the taste and health benefits," said Zhang. "The price of carbonated water is affordable and we want to invest in what we drink."