Healthy and cool? Packaged water sales in China driven by new consumer preferences
China has overtaken Japan as the largest market in Asia for Perrier, as brand-conscious consumers embrace healthier options
Premium mineral waters have enjoyed continuing sales growth in mainland China, benefiting from rising awareness of health and a growing appetite for branded drinks among newly affluent urban consumers.
In the first half of this year, sales of packaged water grew 14 per cent by value, well ahead of a 2 per cent rise of all types of fast-moving consumer goods, according to data from market research firm Kantar Worldpanel.
Chinese consumers have been embracing health and wellness, shying away from products considered less healthy such as chewing gum and confectionery. The growth also goes against trend, as sales of consumer goods have been relatively sluggish amid a rising appetite for travel, dining and entertainment.
“Water is a vibrant category as Chinese shoppers pursue a ‘go healthy path’,” said Jason Yu, general manager at Kantar Worldpanel in Greater China. “Overall, local brands take dominance in the mass market, with the top five local brands accounting for 70 per cent of market share. But in the upscale segment, imported brands have an upper hand.”
The trend bodes well for Swiss food and beverage giant Nestle.
The company has already seen “higher than expected” double-digit growth for sales of its premium sparkling mineral water brands Perrier and San Pellegrino.
This year, China has for the first time overtaken Japan as the largest market in Asia for Perrier.
“It happened faster than I was expecting,” said Phillip Chilton, director of international brands at Nestle Water China, in Shanghai.
When he started overseeing the brands on the mainland in 2009, his initial target was to match the size of the market in Hong Kong, which currently ranks No 4 in Asia for sales of Perrier.
Rapid wealth accumulation among China’s middle class, especially younger consumers who look favourably upon western lifestyle and brands, add up to a strong catalyst for sales of imported mineral water.
“We still think that the room for growth is considerable given the size of the market and our business today,” he said, adding that the trend toward “premiumisation” remains intact in China.
“As long as we are doing a good job in building brands and merchandise [channels], we will continue to do well.”
Nestle’s mineral water brands also benefited from rapid growth in online shopping, providing an important new channel for distribution.
“E-commerce is a boon for us, giving consumers ready access to our brands and convenient means to purchase,” he said.
However, local brands are also vying for a share of the lucrative upscale segment. To help gain a foothold, many have looked to decorative glass bottling inspired by Perrier’s trademark packaging.
In March, Shenzhen Ganten Food and Beverage launched its premium brand of Blairequhan in glass bottles.
Hangzhou-based Nongfu Spring unveiled its high-end glass bottled series targeted at the upscale market in 2015.
The 350-ml sparkling mineral water Nongfu Spring retails for 30 yuan (US$4.53), or roughly triple the price of a 330-ml glass bottle of Perrier. Meanwhile a Blairequhan 348-ml glass bottle is available at 10 yuan.
But other local brands are still playing catch-up, Yu said, noting that it takes time to build a premium brand with solid sales.
Other consumer experts pointed out that diverse product packing can help capture a wider range of consumers.
In addition to glass, Perrier is also distributed in green plastic bottling to tap “on the go” consumers who want lighter, unbreakable packaging.
“You move [up] your range, create more SKUs [stock keeping unit], so that you can address all the types of consumer moments and all the types of consumers,” said Bruno Lannes, partner in Bain & Company’s Greater China consumer products practice.
The Chinese bottled water market grew at a compound annual growth rate of 12.8 per cent in the five-year period through 2016, according to market research firm Mintel.
The bottled water market, worth 60.7 billion yuan in 2016, is set to grow to 86.5 billion yuan by 2021, according to Mintel.