market in ChinaBologna, 2013

China Bottled Mineral Water Market MARKETING REPORT

  

January, 2014

Overview of Bottled Mineral Water Market in China

• The bottled water market in China consists of various types of bottled water, including mineral water, sparkling water and purified water. Economic growth, urbanization, increase in disposable income and changes in lifestyle and consumption behavior have led to substantial growth in the bottled water market in China.1

• Over the five years through 2012, revenue for the Water Supply industry in China has been increasing at an annualized rate of 8.0% to total $16.0 billion in 2012.

• In recent years, the Chinese government has been promoting the commercialization of the Water Supply industry, which has contributed to revenue growth. Most companies in the industry now have private and foreign capital.2

1. Source: China Bottled Water - Market Report, New Zealand Trade and Enterprise, 2012.2. Source: Water Supply Market Research Report, IBISWorld, 2013

Trends

• With Improving health consciousness and growing urbanisation and their enhanced health awareness, more consumers, especially those living in urban areas, prefer to purchase bottled water instead of drinking tap water.

• Wealth accumulation of consumers in the low-tier areas has resulted in a marked increase in their general consumerism.

• The water contamination problem in China and concern about how to improve the standard of daily drinking water have also been the focus of attention for consumers in the low-tier areas. This has resulted in them switching from tap water to bottled water.

• Manufacturers contributed to increased penetration of the benefits of bottled water to consumers through a series of marketing campaigns.2

2. Source: Water Supply Market Research Report, IBISWorld, 2013

Characteristics of Premium and Mass-Market Bottled Mineral Water

• Retail price of premium bottled mineral water (500ml) is not less than 8CNY (1,3USD; 0,96EUR). Retail price of Mass-market bottled mineral water (500ml) is less than 5CNY (0,81USD; 0,6EUR).

• Distribution channels are diverse for bottled mineral water, the retailing price is not the only criteria applied to identify a brand’s positioning in either the premium or mass-market segment, consumer perception is also a key consideration.

• Premium bottled mineral water in China is primarily consumed by middle to high income consumers and institutional purchasers such as major corporations and government organizations with a large middle to high income customer base and significant bulk purchase demand.3

3. Source: Bottled Water in China,Euromonitor International, 2011

Sales Volume of Premium Market and Mass-Market Bottled Mineral Water 2007-2014E (in thousands of tonnes)

2007 2008 2009 2010 2011 2012E 2013E 2014E0

1000

2000

3000

4000

5000

6000

157 198 242 286 416 482 541 603

2254 25552925

33593740

42134718

5250

Mass-Market CAGR 2010-2014: 11,8%

Premium Market CAGR 2010-2014: 20,5%

4. Source: Tibet 5100 Water Resources Holdings Ltd., Global offer, 2011

Retail Sales Value of Premium and Mass-Market Bottled Mineral Water 2007-2014E (CNY in Millions)4

2007 2008 2009 2010 2011 2012E 2013E 2014E0

2000

4000

6000

8000

10000

12000

40684616

53986285

68187690

86209611

28293579

43925208

7573

8802

9906

11064

Mass-Market 2010-2014 CAGR: 11,8%

Premium Market 2010-2014 CAGR: 20,5%

4. Source: Tibet 5100 Water Resources Holdings Ltd., Global offer, 2011

Main Leaders of Mass-Market Bottled Mineral Water

Hangzhou Wahaha Group was the clear leader of bottled water by capturing 13% volume share in 2012.5

• Mainly benefited from advantages in distribution networks especially in low-tier cities and rural areas

• Is affordable to consumers with low disposable income• High quality of the products

5. Source: Bottled Water in China,Euromonitor International, Apr 2013

Wahaha, Master Kong, and Nongfu Spring

Brand Shares of Bottled Water by Off-trade Value 2006-2010

1. Source:China Bottled Water - Market Report, New Zealand Trade and Enterprise, 2012

Brand Shares of Mass-Market Bottled Water by Off-trade Value 20103

13.710.2

8.6

7.16.8

3.33.12.62.30.8

0.6

41Wahaha Master Kong

Nongfu Spring C'estbon

Robust Sensation

Ice Dew Water Mizone

Health Watson's

Nestle Pure Life Others

4. Source: Tibet 5100 Water Resources Holdings Ltd., Global offer, 2011

Main Leaders of Premium-Market bottled Mineral Water

Tibet 5100 (Market share by sales is 28,5%)

• Positioned as a premium brand by emphasizing the uniqueness and purity of a glacial spring mineral water, which is sourced from a unique glacial spring at 5,100 meters above sea level.

• Highest quality standards

• Is consumed primarily by middle to high income consumers and institutional purchasers such as corporations and government organizations in China3

3. Source: Tibet 5100 Water Resources Holdings Ltd., Global offer, 2011

Tibet 5100, Evian, Perrier, Vittel, San Pelegrino.

Top Six Manufactures of Premium Mineral Water Ranked by Sales Volume (%), 20103

3. Source: Tibet 5100 Water Resources Holdings Ltd., Global offer, 2011

Top Ten Brands of Premium Mineral Water Ranked by Sales volume, 2010

3. Source: Tibet 5100 Water Resources Holdings Ltd., Global offer, 2011

Top Six Manufactures of Premium Mineral Water Ranked by Sales Volume, 20103

28.5

26.9

4.9

2.91.61

24.3Tibet 5100 Water Resources Holding Ltd. (5100 Tibet, Glacier Spring Water)

Groupe Danone (Evian, Volvic, Badoit)

Nestlé S.A. (Perrier, San Pellegrino, Vittel, Acqua Panna, Contrex)

Heilongjiang Emperial Spring Drinks Co., Ltd. (Emperial Spring)

Pamir Tianquan Co., Ltd. (Pamir)

Qingdao Laoshan Spring Co., Ltd. (Classic 1905, Laoshan Mineral Water)

Others

3. Source: Tibet 5100 Water Resources Holdings Ltd., Global offer, 2011

Key Growth Drivers of China’s Premium Bottled Mineral Water Market

• Increase in urban population and urban disposable income in China.

• Growing health consciousness. • Change in consumer behavior. • Growth in the number and scale of large corporations. • Procurement behavior of large institutional purchasers • Drive to improve customer service

Pricing of Premium and Mass-Market Bottled Water

Mass-Market bottled water Premium market bottled water

Overage price (500 ml)

1-2CNY7

0,16-0,33USD(0,12-0,24EUR)

Overage price (500 ml)

10-30CNY6 1,65-4,95USD(1,2-3,6EUR)

Wahaha(596 ml)

1-2CNY7

0,16-0,33USD(0,12-0,24EUR)

Evian(500 ml)

8,80-9 CNY6,8 1,40-1,48USD(1,05-1,08)

Nongfu(500 ml)

1CNY8

0,16USD(0,12EUR)

Tibet 5100 (330 ml)

8,5-10,5CNY7,9

1,40-1,73USD(1,02-1,2EUR)

Sources:6. Want China Times,11/2013 7. Olans, 20138. China Daily, 20129. Global Times (China), 2012

Distribution area of Acqua Norda products

Chengdu Fuzhou Nanchang10 KunmingPopulation (2012)

Urban

Rural

7,677,100

14,047,625

4,468,076

2,707,294

5,042,565 (Prefecture level city)

3,583,4296,432,212

GDP(2012) Per capita (Billions)

(Total GDP - CNY 373.478 bln USD 59.22 bln)

43,417CNY

6,442 USD

(5,225EUR)

52,144 CNY

8,268 USD

(5,225EUR)

53,250CNY

8,719USD

(6,408EUR)

28,894CNY

4,731USD

(3,477EUR)

Area Urban Prefecture-level

2,129 km2

12,132 km2

12,177 km2

12,177 km2

617 km2

7,372 km2

2,622 km2

21,473 km2

10. Source: Nanchang Economic Information Center, 11.Wikipedia – free encyclopedia, 2014 12. Source: Forbes, 11/2013

Key Factors of Acqua Norda Promotion in China Premium Market

• Target audience: middle to high income consumers and institutional purchasers

• Distribution area: industrial cities • Distribution channels: institutional sales, food service

and retail• Beautiful design of the bottle

Key Factors of Acqua Norda Promotion in China Mass-Market

• Target audience: low income consumers• Distribution area: rural zones • Distribution channels: food service and retail• Competitive price of the product

Acqua Norda SWOT Analysis

Strengths Weaknesses

•High quality of the product•We have a net of the distributors•Good image of Italy as a country with high quality standards of food and beverages

•The brand Acqua Norda is not known in China

Opportunities Threats

•CAGR of Mass-Market and Premium Bottled Mineral water is very high•Increase in urban population and urban disposable income in China•Change in consumer behavior

•High level of competition•We may be unable to manage future rapid growth. •The bottled water industry could face slower growth.

Conclusion

• Population growth and accelerating urbanisation are expected to be key driving factors for the growth of bottled water over the forecast period.

• Chinese-style healthy drinks booming• Increasing importance of branding in the fierce

competitive environment• Packaging change affects consumer choice• Food safety problem continues to challenge the

confidence of local consumers

References1. China Bottled Water - Market Report, New Zealand Trade and Enterprise, 2012,

http://www.prclive.com/pdf/uploads/Bottled%20water%20in%20China%20-%20September%202011.pdf2. Water Supply Market Research Report, IBISWorld, 2013, http://www.ibisworld.com/industry/china/water-

supply.html3. Bottled Water in China, Euromonitor International, 2011, 4. Tibet 5100 Water Resources Holdings Ltd., Global offer, 2011,

http://hk.5100.net/files/pdf/Tibet%205100%20Water%20%20(1115.HK)_Prospectus%20ENG.pdf5. Bottled Water in China,Euromonitor International, Apr 2013 ,

http://www.euromonitor.com/bottled-water-in-china/report6. Want China Times ,11/2013, http://www.globaltimes.cn/content/749313.shtml7. Olans, 2013, http

://webcache.googleusercontent.com/search?q=cache:9u3uKd6ZNkcJ:www.gzolans.com/en/shownews.asp%3Fid%3D167+&cd=10&hl=ru&ct=clnk&gl=ru

8. China Daily, 2012, http://chinabevnews.wordpress.com/category/china-mineral-water/9. Global Times (China), 2012, http://www.globaltimes.cn/content/749313.shtml10. Wikipedia – free encyclopedia, 2014, http://www.wikipedia.org11. Nanchang Economic Information Center, http://english.nc.gov.cn/aboutnanchang/economy/12. Forbes, 11/2013, http://www.chinainternetwatch.com/category/economy-trade/

Thank you for your attention!