Opportunity looms for premium Chinese water brands

5100 Tibet Glacier Spring Water, the bestseller among domestic premium water brands, managed to grab a niche of high-end channels such as the high-speed railway. In 2007, it signed a strategic contract with China Railway Express, the purchasing agent for China Railways. The contract gave 5100 Tibet access to the high-speed train market and was decisive in the company’s commercial success.

In 2010, the water sold to China Railway Express accounted for 81 percent of Tibet 5100’s revenue, the company said. In its statement before the IPO, the company vowed to diversify its client base and reduce its reliance on CRE to 59 percent.

Tibet 5100 has since signed contracts with local governments, Air China, China Mobile and BP Plc. In its latest marketing campaign, it’s selling a "water card" through online retailers. Customers who buy the prepaid card get a home-delivery service.

In its 2011 financial report, Tibet 5100 said its reliance on China Railway was reduced to 62 percent.

Kunlun Mountains water is clearly lagging behind.

"You can’t expect to recover costs within three to five years," Pang said, indicating the business is still operating at a loss.

The water’s place of origin, a long distance from major markets in eastern China, means expensive transportation costs. Heavy marketing was another major cost for the brand.

For JDB — which also produces the popular herbal tea Wanglaoji, with more than 18 billion yuan in sales last year — the huge investment in Kunlun Mountains water is bearable, at least for now. JDB said it has hopes of making a profit due to economies of scale, by expanding production capacity.

But finding a way to develop the brand in a competitive niche market — like its rival Tibet 5100 — is perhaps a more important question.

zhengyangpeng@chinadaily.com.cn