In the price war, Nongfu Spring has met its rival

Water is the source of life. Everyone needs to drink at least 1L of water every day. Nongfu Spring occupies a large part of the water sales market in China. But now Nongfu Spring has encountered a rival. Who is this rival and what is so special about him? Let's read this article to find out.

"Cheaper than Nongfu Spring, Hebei tycoon blocks Zhong Shanshan."

The hotter the weather, the more intense the water war. Among them, Nongfu Spring, as the "water king", is the craziest.

It has been "rooted" in the 2 yuan price range for a long time, but this time, in order to promote the "little green bottle" of drinking pure water and compete for more market share, Nongfu Spring has returned to the 1 yuan price range and continued to lower the price through different channels.

In a chain supermarket in Beijing, the media found that the promotional price of 12 bottles of Nongfu Spring's "little green bottle" (packaged in 1 piece) was as low as 8.9 yuan, and each bottle was only 74 cents; other media noticed that in Yonghui Supermarket's online mini program, the price of Nongfu Spring's "little green bottle" was as low as 7.92 yuan per piece after the coupons were added, which is equivalent to only 66 cents per bottle.

Netizens lamented that "Nongfu Spring is going crazy", but they did not expect that there are those who are even more ruthless than Nongfu Spring.

At Meituan's Xiaoxiang Supermarket, "New Consumption 101" observed that the promotional price of 12 bottles of 550ml Jinmailang Blue Label packaged drinking water (hereinafter referred to as "Blue Label Water") was 6.9 yuan, or about 57 cents per bottle.

Jinmailang sells drinking water at a cheaper price than Nongfu Spring. In other words, in the price war, Nongfu Spring has met its match.

1. Quietly engage in price war

Before analyzing the drinking water price war, it is necessary to first understand Jinmailang and the man behind it, Hebei billionaire Fan Xianguo.

Many people's impression of Jinmailang comes from instant noodles. This is indeed the case. In the 1990s, Fan Xianguo focused on the instant noodles business and established Hualong Group. Relying on the geographical advantage of being close to raw materials, deep processing of seasonings and labor cost advantages, the first product "Hualong Xiaozai" was priced at 5.5 cents, and gradually swept the rural market with low prices.

It is reported that by 2001, Hualong's total assets reached 3 billion yuan, with more than 20 production lines and products covering more than 30 provinces.

However, when the two instant noodle giants, Master Kong and Uni-President, accelerated their efforts to explore the rural market, Fan Xianguo had to lead the company to break out into the city. For this purpose, he founded Jinmailang, hoping to create a "golden wheat wave."

From 1999 to 2008, Jinmailang launched three generations of 0-fried products. In the long run, this not only met the relatively healthier consumption trend of instant noodles, but also seized the dividend of the era of the rising instant noodle market size, thereby effectively seizing the market and becoming famous.

But it is undeniable that Jinmailang is also good at price wars.

According to previous observations by Hydrogen Consumption, the popular classic 5-pack instant noodles are often sold at Jinmailang for 3 or 4 yuan cheaper than those sold at Uni-President and Master Kong. For example, the official price of a 5-pack of Laotan Pickled Cabbage is 12.5 yuan, while Jinmailang sells it for only 8.5 yuan. If promotions are included, the price is even lower.

From the above analysis, it is not difficult to see that from Hualong to Jinmailang, price war can be regarded as Fan Xianguo’s "usual weapon". When he entered the drinking water market, this "weapon" would naturally not fall behind.

First, Jinmailang directly targeted the 1 yuan price range and launched blue label water. Second, like Nongfu Spring, it lowered prices through different channels, but unlike Nongfu Spring, which was aggressive, Jinmailang chose to do it quietly.

In March this year, the media discovered that Jinmailang Blue Label Water was quietly put on the shelves of Wumart Supermarket, Meituan Xiaoxiang Supermarket and other terminals, and there was a lot of promotion - 550ml blue label water was priced at 0.60 yuan a bottle, and 5L bottled water was 5 yuan, "the prices were all lower than Nongfu Spring, Yilibao, Wahaha and other brands."

As mentioned at the beginning of this article, the price of blue label water in Xiaoxiang Supermarket is now less than 0.6 yuan. This move quickly attracted the attention of consumers. On the afternoon of July 12, "New Consumption 101" found that blue label water was "out of stock" in Xiaoxiang Supermarket, but at 23:00 in the evening, it was shown as available again.

"New Consumption 101" also noticed that on the shopping page of Blue Label Water in Xiaoxiang Supermarket, information such as "A hot-selling product repurchased by 20,000 people" and "Recent sales soared by 32%" were scrolled from time to time, indicating that the pricing strategy of Blue Label Water has been effective.

Image source: Little Elephant Supermarket

In fact, blue label water has been selling well not only recently, but also in the past two years.

At the beginning of last year, Jinmailang's official data showed that the annual sales of Blue Label water exceeded 9 billion bottles, and the cumulative sales exceeded 50 billion bottles. In a public speech, Fan Xianguo revealed the goal of Blue Label Water that year, "to achieve 500 million packs and 12 billion bottles."

Do these data change your impression of Jinmailang? In fact, in the drinking water market, Jinmailang is not satisfied with the above performance of Blue Label Water. Fan Xianguo's goal is to compete with Nongfu Spring.

2. 1, 2, 3, attack in groups

Jack Welch, known as the "world's number one CEO", once said: "In a price war, only those companies that can offer the lowest cost can survive."

Specifically in the drinking water field, the reason why Nongfu Spring can lower the price of its new "little green bottle" to less than 1 yuan is because it can "provide the lowest cost" through the supply chain.

The same is true for Jinmailang Blue Label Water. In a public speech last June, Fan Xianguo said that Blue Label Water adheres to the "cost leadership strategy" and uses a high-speed canning line from Germany, with a speed of 91,000 bottles per hour, "which can achieve great value for money."

If the production speed is fast and the price is 1 yuan or less, it can be "great value for money"? From the perspective of the industry, this is indeed not an empty statement.

According to a report by Frost & Sullivan, the size of China's ready-to-drink soft drink market in terms of retail sales will reach 909.2 billion yuan in 2023. Among them, packaged drinking water is the largest category in terms of retail sales, with a market size of 215 billion yuan in 2023. The compound annual growth rate from 2023 to 2028 is expected to be 7.9%, making it the fastest growing category among all ready-to-drink soft drinks.

Judging from the brand actions, not to mention traditional drinking water brands such as Nongfu Spring, Yilibao, Wahaha, and Jinmailang, even Aldi, Pangdonglai, and Oriental Selection have launched related products, all wanting to get a piece of the pie, which indirectly shows that they value its market value and prospects.

This is easy to understand. After all, water is a basic need in human life. However, for all brands, consumer demand needs to be vigorously undertaken, otherwise, it is very likely that the basic demand market will be "left" to other brands.

Obviously, this is also the industry reality that Jinmailang needs to face. For this reason, Fan Xianguo’s strategy is not limited to the 1 yuan price range, but to attack in a group, including 1 yuan water, 2 yuan water, and 3 yuan water.

Breaking it down, in the Jinmailang drinking water product matrix, 1 yuan water refers to the aforementioned blue label water, 2 yuan water refers to boiled water, and 3 yuan water refers to the high-end mineral water "Jinkuang".

Regarding the improvement of the product matrix, some media said that this has become "one of the strongest moats" of Jinmailang in the bottled water market, and "these three products are the basis for Jinmailang to compete with Nongfu Spring."

"Jinmailang is the only beverage company in China that has penetrated the 1-yuan, 2-yuan and 3-yuan price range for water," said Fan Xianguo. "Jinmailang has the best chance of becoming a competitor to Nongfu Spring in the Chinese market."

There is nothing wrong with this "vision", but when we examine the above product matrix, we soon discover that the 2 yuan boiled water is the "most attractive one" among them. In the words of the media, it is "Jinmailang's ever-increasing 'long board'."

Objectively speaking, Jinmailang launched boiled water and created the cooked water category, similar to Nongfu Spring's creation of the natural water track more than 20 years ago. As a pioneer, boiled water was launched in 2016, and its sales exceeded 3 billion yuan in 2022, showing rapid growth.

However, market competition in recent years is very different from that of more than 20 years ago. As the public has seen, after boiled water activated the market, cooked water products emerged in large numbers, including Nongfu Spring, and the development of the cooked water category has slowed down.

The "White Paper on Development Trends in China's Packaged Drinking Water Industry in 2023" shows that the current growth rate of the "cooked water" market has passed its peak and is gradually slowing down. In addition, there is basically no difference between the "cooked water" of different manufacturers, and "the living space is extremely crowded."

From this perspective, as the "most handsome guy", boiled water has to face more severe competition; for Jinmailang's drinking water product matrix, it is inevitable to be under pressure.

Perhaps, it is precisely because of the clear understanding of the "reality" that Jinmailang has stepped up the promotion of boiled water, met the demand for cooked water consumption, and expanded the sales of blue label water.

3. More important than price war

The 1 yuan blue label water is a hot-seller, and Jinmailang has also established a product matrix that includes groundbreaking "big single products" such as boiled water. Jinmailang has accumulated a certain amount of strength in the drinking water market, and has more confidence in engaging in price wars with rivals such as Nongfu Spring.

However, there is something more important than the price war, namely, the channel. As mentioned above, both Jinmailang and Nongfu Spring have lowered their prices through different channels. In fact, this is their main way to compete for and occupy the market.

As the "water king", one of Nongfu Spring's core advantages is that it has a large number of distribution channels. The prospectus shows that as of the end of May 2020, Nongfu Spring had 4,454 distributors across the country, covering more than 2.43 million terminal sales outlets.

In January 2022, Jinmailang’s investor "Canada China Capital" revealed that at that time, "Jinmailang had completed the layout of food and beverage production capacity across the country and had a deep distribution network of more than 2.3 million terminal outlets."

Having these terminal outlets does not mean that everything will be fine. Long-term and effective operation is also required.

In this regard, Jinmailang's strategy is to deepen the "Four-in-One Project" and strengthen control over terminal outlets through the integration of people, vehicles, mobile phones and terminal management systems, thereby increasing market penetration.

However, as competition intensifies, some dealers may face challenges in profitability because they need to invest a lot of resources to maintain sales performance and market competitiveness.

In other words, it is relatively easy to engage in a price war, but it is quite challenging for dealers to still be "profitable" and work together to give full play to the scale effect of terminal outlets when brands are engaged in a price war.

In an interview, Song Xiangqian, founding partner and chairman of China Renaissance Capital, said: "An average consumer can only remember a few brands, and an industry can only remember two or three brands. Therefore, the larger the display area of ​​the human heart shelf and the larger the display area of ​​the physical shelf, the more successful the company can be in both directions."

In the cooked water category, Jinmailang boiled water is one of the two or three brands that can be remembered. But in the broader drinking water industry, can Jinmailang be remembered by ordinary consumers?

What is certain is that, apart from Nongfu Spring, Yilibao and Wahaha, if Jinmailang is to be remembered, it has to do more, go deeper and go further than just engaging in price wars.

Author: Bandits

Source: WeChat official account "New Consumption 101"