Chinese consumers are snapping up premium bottled water with this market expected to reach Rmb 86.5 billion (US$13.05 billion) in 2021.
Drinking upmarket bottled water has become chic for China's sophisticated shoppers, as they go for healthy beverage options to substitute sugary soft drinks. Latest research from Mintel confirms this trend as between 2011 and 2016, China's bottled water segment grew more than 12% annually. In 2016, the industry was worth Rmb 60.7 billion yuan (US$9.1 billion) and is expected to hit Rmb 86.5 billion (US$13.05 billion) by 2021. In 2016, 25,906 million litres of bottled water were consumed and this will grow to 30,699 million litres by 2021.
“Premiumisation, or the increase in high-end brands which are considered healthier, is the major driver of increased consumption of bottled water in China,” said Li Lei, a Research Analyst at Mintel. The shoppers are not only buying more, but they are also going upmarket.
In the 400ml to 800ml bottled water segment, which is the leading category, mid- to high-end brands are taking an increasingly bigger share, according to Kantar Worldpanel. It also reported that upmarket bottled water sales grew 27% from mid-2015 to mid-2016. This was far higher than the 5% posted in the low-end market during the same period. Naturally, companies are scrambling to get a larger share of the high-end segment.
Some examples of prominent launches include the release of Blairquhan upmarket label of mineral and sparkling water series sold at a price of Rmb 15 (US$2.26), and launched earlier in March by Shenzhen Ganten Food & Beverages. This series was sold in hotels, cinemas, cafes and bars. Blairquhan series was launched after the success of Nongfu Spring. Since then, international businesses have also dipped into this lucrative segment. In July, Reignwood Group introduced Norwegian high-end Voss bottled water and in August, Danone brought in Aoraki upmarket brand on e-commerce platforms.
Li Lei said, “High-quality water sources are 'premium' among consumers.” And this fact was evident in a survey conducted by Mintel covering the retail habits of 2,965 shoppers aged between 20 and 41. Mintel found that up to 71% of those surveyed last year were more concerned about where the water was sourced, compared to 68% in 2015. Another 45% felt high-end bottled water helped provide additional health benefits, up from 42% in 2015. “Consumers nowadays have become increasingly sophisticated and therefore look for value before paying a premium price,” said Li Lei. “While high-quality water sources are strongly associated with 'premium bottled water', different age groups have different interpretations of 'premium'. Companies and brands should target them accordingly,” Li added.
Li also pointed out that Sparkling Water attracts mainly high-income consumers, while ‘black water’, which contains additional minerals, is popular with younger shoppers.
Nestle’s premium carbonated water brands enjoy unprecedented success in 2017
Perrier has made quite a splash since Nestle SA launched the brand in China 20 years ago. Famous for its elegantly-shaped green bottle, the sparkling mineral water label has enjoyed unprecedented high growth this summer in China.
Sister brand, San Pellegrino has also cut a dash in the more upmarket restaurants across the country. “This year has been a very good one for both brands,” said Phillip Chilton, Business Director of Nestle Sources China's International Brands division.
Perrier, which costs Rmb 9 (US$1.30) for a 330ml bottle and San Pellegrino, which retails at Rmb 8 (US$1.21) for a 250 ml bottle, are the leading labels in China's carbonated mineral water market.
Annual growth for the brands has been 30% annually for the 2010-2015 period.
In June, it announced an ambitious plan to increase Perrier's production by 40% to 2 billion bottles by 2020.
“I think we have reached a (key) point, where you have the slow consumption of a product before all of sudden you have this boom,” said Chilton explaining the surge in sales in China.
According to Chilton, San Pellegrino is well known internationally, but still not yet well-known by Chinese consumers. As such, the company will allocate huge investment in advertising and promotion to promote the brand, and will be using a popular Chinese actor, Huang Xuan to be its brand ambassador.
“It's never just the water, but also the packaging, the brand image and emotional connections,” added Chilton.
Sophisticated shoppers representing a younger section of China's ballooning middle class are helping to drive consumption in the country. “With the exposure through overseas travel, education and the Internet, this market, more than anywhere else in the world, is continuing to grow,” he added.