Wen Yu
Research Analyst, Food and Drink, China

Chinese bottled water and beverage company Nongfu Spring started trading on the Hong Kong Exchange. Founded in 1996, Nongfu Spring, with registered capital of 1.08 billion yuan, is a leading enterprise in packaged drinking water and beverages in China.

As released in its prospectus, Nongfu recorded a profit of nearly 5 billion yuan in 2019, a 20% increase from the previous year. Much of its success has been generated because of the company’s ability to understand local markets’ needs and respond to them rapidly.

In addition, the company has extensive coverage of water production bases nationwide. The advantage of sufficient supply and quality production makes it possible for the firm to produce natural water, natural mineral water and pure water.

On top of the bottled water, the company boasts different types of products in its portfolio, including functional drinks, juice, tea and plant protein such as coconut yogurt. And one of the latest new launches was its carbonated coffee drink, a coffee and CSD hybrid drink, which appeals to those who rely on coffee for an energy boost while still longing for a refreshing mouth-feel. 

Meanwhile, we’ve seen a rising demand for healthy drinks among local consumers. According to Mintel research on the soft drink China market that three in five consumers would be encouraged to buy a soft drink that uses high-quality ingredients such as high-quality water source. At the same time, nearly seven in ten consumers hope for sugar-free or low sugar content in CSDs and tea infusions. 

What we think

The reason for Nongfu’s success is that the brand is always at the forefront in launching new products and its diverse offerings in the sub-categories help it secure a leading place.

When we overall look at the market, there’s the heated demand for sugar-free, calorie-free and fat-free RTD beverages, especially fizzy drinks, is followed by the participation of popular companies such as Genki Forest. Other than the newcomers, established brands like Nongfu and Coca-Cola have extended their reach in this regard as well. And Coca-Cola’s sugar-free cokes are actually among one of the first products alike in the market.

And, in terms of the ingredients of these drinks, you’ll find that they all use sugar alternatives such as stevia and erythritol to replace cane sugar and fructose. Other than the application of the natural sweeteners, some also put on other nutrient-fortified claims such as dietary fibre containment. 

Drinking in a healthy way is really a trend for the moment.