Is haute the future for China’s premium bottled water market?

September 1, 2016
5 min read

Despite slowing economic expansion, the premium bottled water market remains strong in China. There is even an annual ‘China High-end Bottled Water Exhibition (CBW)’ dedicated entirely to the premium bottled water sector, with 2016 being the 9th Expo.

As pollution worsens and incomes rise, consumers have a growing demand for bottled water and are likely to keep trading up. Naturally, companies and brands in the bottled water industry, especially in the high-end sector, want to know how to attract consumers for premium consumption. Market players yet to enter the high-end water world, but would like to join the club and develop towards premiumisation in order to harvest higher marginal growth, are keen on the definition and understanding of premium bottled water so that they can compete strategically in the battle with already existing competitors.

International vs domestic

In China, premium bottled waters are mainly divided into internationally imported and domestically produced. Notable domestic brand such as Evergrande Spring and Tibet 5100, and international brands such as Perrier and Evian, are all well-known among Chinese consumers.

The battle between the two premium bottled water camps is intense. Due to high import taxes and tariffs, the price of international bottled waters are about 20 times higher (on average) than that of domestic bottled waters. However, while international water dominates the premium market and seems to be on the winning side of the price war, domestic water has the competitive advantage to obtain more and wider top-tier consumers. Apart from the relatively low price, domestic brands also use other claims to appeal to premium consumers, such as Tibet 5100’s environmental positioning claims.

International premium water brands have declined since China’s anti-extravagance campaign initiated in 2012, and the superior image of non-Chinese brands and imported bottled water is weakening, opening up opportunities for Chinese bottled water brands.

What’s premium?

Premium water companies and brands used to get help from concepts such as ‘oxygen-rich’, ‘distilled’ or ‘ionized’; these claims had to change due to new bottled water regulations. Effective 1 January, 2016, in China, bottled water products must abandon dazzling names, must use strict labelling by indicating the use of any additives, and must reference drinking waters with true and scientific names. Implementation has shaken the premium bottled water market and, subsequently, is responsible for impacting competitiveness and even pushing a few brands out of the premium market.

7 in 10 consumers believe high-quality water source is the most prominent association with premium bottled water

While probably bad news for bottled water marketers, this is  good news for consumers, as stricter requirements are positive in helping consumers to ensure the safety and quality of the bottled water they buy. Besides, water brands’ points of view about premium are not necessarily the same as consumers’. According to Mintel’s Bottled Water China 2016 report, seven in 10 consumers believe high-quality water source is the most prominent association with premium bottled water. Clearly, a fancy product name is less likely to attract these consumers.

How haute is water?

So what could be the next step for premium bottled water? Whether Chinese or non-Chinese brands, innovation varies in the premium sector from rare ingredients and pure water sources to distinctive packaging and exclusive purchase channels for consumers to splash out.

Bling H2O, a favourite amongst celebrities, not only contains the cleanest water from a Tennessee spring, but also uses Swarovski crystals to highlight the luxuriousness of its frosted bottle; Fillico is sold in a Swarovski-crystal–studded bottle and costs more than Dom Pérignon champagne; Acqua Di Cristallo Tributo a Modigliani, sold in a handmade 24 karat solid gold bottle, is currently the world’s most expensive water with a cool price tag of £41,335 (RMB 354,606).

There are other premium brands focused on offering specialty waters with purity and added benefits, such as Fiji which offers natural artesian water from the Fiji Islands; Iluliaq bottled water is from melting icebergs in Greenland and claims to be “the purest water in the world”; blk. is Alkaline water and is said to have “an abundance of anti-oxidants and electrolytes, the added benefits which helps balance the human body’s pH levels”. Furthermore, Beverly Hills 9OH20 ‘Master Crafted Water’, created by a water sommelier, brings customisation to the table. Somehow bottled water – the most basic of beverages on earth – can become a status symbol.

What we think

Premium bottled water is money! Ultra-premium bottled water is even more money! While the ultra-premium offerings are not made for mass consumption (not yet, anyway), Chinese consumers love the idea of anything luxury. In this brand-friendlier nation, the majority of consumers may not be willing to pay for a bottle of water at absurd prices, but the ordinary consumers is more likely to trade up for premium bottled water, under budget and under the fear of pollution. Since the air pollution fears are driving consumers towards buying up bottles of fresh air from Canada, it’s reasonable to assume that water pollution will drive consumers towards expensive bottled waters for quality consumption.

Premiumisation is indeed a trend for the bottle water industry in China; however, market players need to pay attention to consumers’ perceptions about what is premium. From lifestyle statements and demands for customisation to fears of pollution and ethical claims, consumers’ justifications to buy and drink premium bottled water are varied. Premium products should avoid promoting themselves as merely “standard” water in fancy bottles, but should opt for more diverse premium attributes, from ingredient innovations and functional benefits to novelty value and exclusivity.

The future of China’s premium bottled water market depends on how far companies and brands will go and how well consumers will buy-in, premium and haute, above and beyond.

Lei is a Drinks Analyst for Mintel China. Prior to joining Mintel, she worked mainly in fashion retailing and marketing with brands including Chanel, Fendi,and Christian Dior. She has first-hand experience in consumer behaviour and psychology both in the UK and China.

Lei Li
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