Category Archives: China Mineral Water

Nestle Taps China Water Thirst as West Spurns Plastic

Source: Bloomberg News By Dermot Doherty

Nestle SA’s (NESN) water business has suffered as western consumers turn to the tap due to environmental concerns about plastic bottles. Fortunately for the Swiss company, in China environmental concerns are instead driving growth. Continue reading

Chinese Luxury Water? Tibet 5100 Aims High

Source: Wall Street Journal

Clean water and China are not a likely pairing in most consumers’ minds, but Fu Lin is determined to change that.

The Chief Executive of upscale Chinese bottled water company Tibet 5100 Water Resources Holdings says he has big plans for his company as he hopes to expand sales of the Chinese water overseas next year, hitting Singapore and the Middle East first before going on to Europe and the U.S. Continue reading

French mineral water fails China quality tests

Source: china.org.cn

China’s top quality watchdog announced Tuesday that two brands of mineral water from France were among more than 420 imported food or cosmetic items found substandard during entry tests.

Excessive nitrite, which may increase cancer risks, was detected in Evian and Volvic water, the General Administration of Quality Supervision, Inspection and Quarantine(AQSIQ) said in a report put on its official website.

Evian and Volvic have established a presence in Shanghai through high-end restaurants, hotels and supermarkets since the Danone Group introduced the brands to China.

“The recent scandal hasn’t pulled their products off our shelves as we are waiting for the further notice from headquarters,” said a spokesman for Tesco in Shanghai.

This isn’t the first time Evian has fallen foul of China’s food safety rules. In January, more than 80 tons of its mineral water failed entry inspection, also for excessive nitrite, and was destroyed by the local authority,Shanghai Daily reported.

In 2007, the regulator seized 118 tons of Evian water with excessive amounts of bacteria.

In its defense, Danone cited the difference between the local standard and the one set by the World Health Organization, and said that microbial flora was commonly to be found in natural spring water.

(Shanghai Daily contributed to this story)

China’s Premium Bottled Water Market

Source: By Meng Jing (China Daily)

The days of French brands Evian and Perrier having a hold on half the premium bottled water market in China may be over.

Consumers can now find plenty of domestic high-end bottled water at any medium-sized supermarket, ranging from glacier mineral water from Tibet to spring water from Qingdao Laoshan.

The bottled water comes in different sizes, different shapes and different brands, but they have one thing in common: High-end water – whether from China or overseas – is eight times to 10 times more expensive than the cheapest domestic versions.

Increasing concerns over water safety and the deeper pockets of Chinese consumers have led to a booming market, says Liao Lei, secretary-general of the natural mineral water committee for the China Mining Association.

“Around 70 percent of rivers have been polluted. And the pollution isn’t getting any better. Water sources that haven’t been contaminated are very scarce, which are usually located in remote areas,” he says, adding the high transport costs is one reason for the high prices of high-end bottled water.

With the improvement of living standards, more and more people want better quality drinking water, as well as safer options. Unlike in Western countries, tap water in China is undrinkable and has to be boiled before ingested.

The increasing demand for quality drinking water has made more companies jump into the high-end bottled water market, transporting the finest water over a long distance.

According to Liao, the size of the bottled water market has grown at an average of 20 percent a year over the past decade.

“With more people starting to care about the quality of their drinking water, the growth for high-end bottled market will be even faster.”

A report published this year by Sinomonitor International, a Beijing market research company, estimates that the premium bottled water market will expand at an annual rate of 80 percent over the next five years, reaching annual sales of 10 billion yuan ($1.56 billion, 1.17 billion euros) by 2015.

Tibet 5100 Water Resources Holdings Ltd, one of the earliest Chinese premium bottled water providers, reported a net profit of 148 million yuan in the first half of this year, surging 232 percent compared with the same period last year.

The company, founded in 2005, says it provides glacier water from Tibet, which is 5,100 meters above sea level.

Fu Lin, chief executive officer of Tibet 5100, says that Chinese demand for premium mineral water has been growing rapidly, significantly outpacing the mass-market segment.

“We’ve sold 28,000 tons of water in the first half of this year, which is a very nice performance. And we’ll continue to expand our sales network, strengthening our market share in premium bottled water market in the second half of this year.”

The success of the company, which listed on the Hong Kong stock exchange in June, has made more Chinese companies believe that the earlier they step in, the more market share they will get.

A dozen new brands have mushroomed in China over the past couple of years.

Following the steps of Tibet 5100, Hong Kong-based JDB Group, which produces and sells specialty beverages, launched Kunlun Mountains Natural Mineral Water in some 30 provinces and cities last year.

Aershan Mineral Water, produced in Arshaan city in the Inner Mongolia autonomous region, announced plans to expand into the southern China market last month.

However, getting a piece of the pie in the market that has long been dominated by Western premium bottled water giants is not an easy task, analysts say.

Statistics from CIC industry research center, a Shenzhen consulting company, shows that about 50 percent of the premium bottled water market in China is held by Western players such as Evian and Perrier.

“Evian entered the Chinese market in 1986 and only started to turn a profit in 2007. The market is not quite developed yet. The majority of the domestic brands in this field are losing money and it will take a long time and a huge amount of money for them to establish their brands,” says Zhou Siran, an analyst of food and beverage industry with CIC.

Tibet 5100 is one of the few exceptions in China. It started making money two years after the company was founded by selling its water to organizations such as China Railway Express and Air China, making up a large chunk of its sales figures.

Despite the success, Tibet 5100’s Fu says one of the challenges his company faces in China is from international competitors.

“Some international brands have been here for a very long time, in some cases more than 20 years, so they’ve already established a group of loyal and stable customers.”

Wang Cuiyun, a saleswoman at a BHG Food Market in Beijing, says the market’s top three sellers in bottled water are Nongfu, Nestle and Evian.

One bottle of Evian costs about 9 yuan, while Nongfu and Nestle are around 1 yuan, which probably makes Evian the most profitable option out of a dozen domestic and international premium bottled water brands in Wang’s market.

With an eye on the strong foreign competitors that are already established in China, an increasing number of international brands are entering the county, looking at the market potential in the high-end bottled water industry.

Pinlive Shanghai Foods Co Ltd, one of the biggest food importers and distributors in China, introduced Rosbacher, a German mineral water, to the Chinese market last year.

Yang Liuqing, who is in charge of Rosbacher’s marketing in China, says the sales of the mineral water at about 8 yuan for 500ml increased steadily in China, but she refused to give figures.

“High-end bottled water is an emerging market in China. We are seeing more and more domestic brands entering the market, but we don’t think they will make much difference because the low-end image of domestic brands is already well-established.”

Wu Yun, a 30-year-old businessman, recently bought a bottle of LaCroix sparkling water, imported from the United States for 12 yuan for 375 ml.

Apart from boiling water at home, he only drinks high-end bottled water. He says he has bought various brands of bottled water over the past couple of years, but only sticks to international brands because he thinks they are better than domestic ones.

Tingyi 2011 Interim Report- Beverage Highlights

Source: Tingyi (Cayman Islands) Holding Corp.

Beverage Business

In the first half of 2011, the sharp increase in raw material costs in the food and beverage industry together with the plasticizer incident, caused the beverage market to go through a confidence crisis before entering the peak selling season this summer. The cooler weather in various regions across the nation compared to previous years resulted in more rainy days, affecting the total beverage sales in China’s domestic market, presenting a declining trend.

In the first half in 2011, benefited from new products’ active promotion and the “One More Bottle” lucky draw campaign launched since March, turnover for the beverage business grew by 31.58% year-on-year to US$2,392.423 million, representing 58% of the Group’s total turnover. However, rising costs of raw materials, transportation and labour, along with the unfavourable weather factor impeded the profitability potential of Group’s beverage business. During the period, the gross profit margin of the Group decreased by 6.42ppt. year-on-year to 26.71% compared with the same time last year. Profit attributable to equity holders of the Company decreased slightly by 1.99%, to US$79.765 million.

RTD tea series: Master Kong’s tea drinks continued to maintain its position as market leader. Following a new packaging tea drinks were widely welcomed by consumers, with product lines ranging from green tea, iced red tea, iced green tea, jasmine tea series to Tie Guan Yin and oolong tea; and the diverse range of product varieties and categories, the best quality products, were provided to consumers, while the message on leisure and healthy lifestyle was also passed on to them.

Fruit juice series: In order to satisfy the consumers’ needs of a healthy, diversified and quality lifestyle, Master Kong continued to develop and introduce new products and new flavours, while at the same time promoting new flavors of fresh orange lemon juice, grapefruit and mango juice launched in the previous quarter, allowing more consumers to enjoy the natural and healthy drinks of Master Kong. Master Kong’s “new taste for traditional drink”, Sour Plum Juice and Wild Jujube Juice, were well received by consumers since their launch into the market and occupied a share of the highly competitive juice market. In the second half of the year, Master Kong will continue to develop and further introduce more tradional Chinese beverages.

Bottled water: Master Kong has taken an interest and has been an active participant in the social community. Its mineral water, which was hugely popular amongst consumers, had launched an innovative light green bottle to raise the awareness of energy saving and carbon reduction and foster a healthy lifestyle attitude on “Contributing efforts for Environmental Protection” together.

During the reporting period, brand new product concept was introduced. “U-Joymore” lactic acid drink, was launched into the market to satisfy the changing tastes of the city consumers. In line with the quality, healthy and trendy characteristics of Master Kong’s drinks and not least the focus on texture, various flavours were available for selection by consumers. Products focusing on health qualities had received overwhelming responses from consumers.

According to ACNielsen’s latest survey in June 2011, in terms of sales volume, Master Kong’s RTD tea and bottled water’s market share in the overall PRC market increased to 54.2% and 24.6% respectively, ranking it No.1 in the market. By using duo brands Fresh Daily C and Master Kong, the Group’s fruit juice drinks have gained 21.1% market share, ranking it No.2 in the diluted juice market.

Under the more competitive environment and the harsh conditions of raw material prices, Master Kong will adjust the product mix in the second half of the year, continue to expand the production base for increasing production capacities, upgrade production equipment, improve production techniques and enhance the sales network, in order to increase sales volume and size for more profits.

PROSPECTS

The global economy continues to recover in 2011 and the overall conditions are in line with expectations. However, the recovery progress is not smooth, uncertainties in economic growth and instability in the financial markets have increased significantly. It is expected that the full-year economic growth of 2011 will continue to be in the pattern of beginning at the higher end and reaching the lower towards the end of the year. The economy of China is affected by the withdrawal of the consumption stimulation policy and the macroeconomic controls of the real estate market. The GDP growth rate has slowed down for two consecutive quarters.

But the slower economic growth is mainly attributable to the active policy controls, performance of investments and imports remain strong according to statistical data, this shows the domestic driving force for domestic economic growth remain strong. And the risk for a “hard landing” for the economy in the second half of the year is small. Under the backdrop of “structural adjustment, promoting consumption”, and with the new consumer demand and maturity in consumption brought by urbanization, the instant food product and beverage industry in China still have enormous room for growth and development opportunities. The Group will continue its active development strategies, deepen market penetration, increase product innovation , research and development, and develop new profit growth spots, in order to promote sales growth and increase market shares.

Currently, there are various factors leading to the rising prices of raw materials, and a general increasing trend is anticipated in future. With the additional effects from higher labour costs and excessing money supply, it may take a longer period of time for prices to return to a lower level, the pressure of rising cost will continue in the second half of the year. Facing such circumstances, the Group will continue to strengthen cost controls, optimize production plans, enhance production technologies and impose stricter management measures in order to alleviate the cost pressure. Meanwhile, product specifications will be enhanced through the optimization of product mix, improving the product items and accelerating the frequency of product swaps, as well as increasing the unit profit margin of products. Moreover, by full utilization of our own advantages in production, channels and branding to further strengthen our market leading position in the vast consumer product market in China, Tingyi will continue to maintain stable growth for creating better returns for shareholders.

Full 2011 Interim Report

Danone sells water JV stake to Bright Food

Source: Reuters

(Reuters) – French foodmaker Danone has signed an agreement with Bright Food Group to sell its 50 percent stake in a water company to a Bright Food Group unit, Bright Food said on Thursday (July 14).

Danone had a joint venture with Shanghai Maling Aquarius , a unit of Bright Food Group, to operate the Shanghai Aquarius brand in China. Danone will sell its stake in the joint venture to another Bright Food unit, said Pan Jianjun, a Bright Food spokesman. Pan declined to disclose the financial details of the deal.

Danone sold its 23 percent stake in China’s Huiyuan Juice last July for around 200 million euros to focus its water division on natural mineral and spring water-based beverages.

Danone could not be immediately reached for comment.

In 2007, Danone was involved in a high-profile legal tussle with Chinese beverage maker Wahaha Group over what it said was a violation of the two firms’ joint venture agreement. The matter was settled in 2009.

Bottled water IPO to soak up funds

Source: By Yang Ning (China Daily)

Tibet 5100 looks to list on Hong Kong market and challenge Europeans

BEIJING – Tibet 5100 Water Resources Holdings Ltd, the Chinese provider of premium bottled mineral water, began looking to raise up to HK$1.6 billion ($205.3 million) in an initial public offering on Monday.

A total of 459.29 million new shares will be sold in a price range of HK$2.62 to HK$3.50 between Monday and Thursday, and the company plans to list on the Hong Kong Stock Exchange on June 30, the Lhasa-based enterprise said in a statement.

JP Morgan Chase & Co, CCB International (Holdings) Ltd, ICBC International Holdings Ltd and CITIC Securities Co are managing the offering, according to the company.

Fu Lin, the chief executive officer of Tibet 5100, said on Sunday that Chinese demand for premium bottled mineral water has been growing rapidly, significantly outpacing the mass-market segment.

“The company will continue to take full advantage of government initiatives that encourage investment across western China, and capitalize on the rapidly growing premium bottled water sector,” said Fu.

Analysts said the IPO will help the company to better challenge the foreign domination of the market segment, which has great potential.

“The country’s premium drinking water market will expand at an annual rate of 80 percent during the next five years,” said Xiao Ming- chao, vice-general manager of Sinomonitor International Co Ltd, a Beijing-based market research company.

“Annual sales of premium bottled water are expected to reach 10 billion yuan ($1.54 billion) by 2015,” he said.

However, foreign brands, such as Evian and Perrier, which have been in the Chinese market for more than 20 years, still dominate the premium market at present, said Xiao.

“Tibet 5100’s IPO is part of its plan to achieve better long-term growth and it will help the company to grab more market share from foreign competitors,” said Huang Wei, the chief food and beverage analyst at CITIC Securities.

With three production lines in the Tibet autonomous region, its annual production capacity is approximately 155,000 tons, according to the company.

Founded in 2005, the company mainly targets institutional purchasers, including rail operators, commercial banks, airlines and government organizations.

Since 2007, it has had a strategic partnership with the Ministry of Railways to provide free 5100 Tibet Spring Water on high-speed trains around the country.

In 2010, Tibet 5100 generated 360.5 million yuan in sales, an increase of 32.9 percent from the previous year, while net profit hit 115.2 million yuan from 47.4 million yuan in 2009.
 
About Tibet 5100 Water Resources Holdings Ltd.
 
Main Business:
 
Tibet 5100 produces bottled mineral water in China. The company has positioned its “5100” brand as a premium brand by emphasizing the uniqueness and purity of its glacial spring mineral water, which is sourced from a unique glacial spring at 5100 meters above sea level. Tibet 5100’s products contains only glacial spring mineral water collected and bottled in lcose proximity to the water source at the Nianqing Donggula Mountains in Tibet, one of the world’s most remote and pristine locations, which is deep inside the mountain range without easily accessible transportation. In addition, Tibet 5100’s water source is a natural spring, where water comes to the surface from deep underground.

Marketing strategy:

Tibet 5100 establishes its market position by executing a growth strategy that focuses on penetrating institutional sales channels. Its targeted institutional purchasers consist of rail transport operators, commercial banks, airlines, government organizations and other major corporations in China which frequently have a large base of middle to high income customers and significant bulk purchase demand for its product.

Tibet 5100 has established a long-term strategic relationship with CRE. It has also entered into sales agreements with Air China, BP-PetroChina JV and China Post, and strategic cooperative agreements with CCBI and ICBCI Holdings.

Sales to CRE accounted for ~90.9%, 89.7% and 89.5% of Tibet 5100’s sales volume in 2008, 2009 and 2010, respectively. In addition to institutional sales channels, Tibet 5100 is also actively developing traditional retail distribution channels which are owned by third parties. It has developed retail distribution networks to include a wide range of retail outlets, including hotels, bars and restaurants, supermarkets and convenience stores. As of end-Dec10, it had a total of 2875 points of sale for its product.

Market share:

According to the prospectus, retail sales volume and revenue of premium bottled mineral water represented 7.9% and 45.3%, respectively, of the overall bottled mineral water market in China, and Tibet 5100 ranked first in terms of sales volume in the premium market segment in 2010, with a market share of 28.5% in China. Tibet 5100’s sales volume in 2010 represented a market share of 2.2% in the overall bottled mineral water market in China.

Delivery:

The company has established logistics network to facilitate nationwide delivery of its product and the transportation of raw materials to its production sites in a timely manner. Tibet 5100 has entered into arrangements with CRE to provide it with integrated logistics solutions, including dedicated rail transportation capacity and storage centers that cover its four major sales regions. Tibet 5100 has also established logistics arrangements with FedEx and China Post to achieve integrated and comprehensive delivery coverage across China.

Government Support:

The PRC government has in recent years implemented a series of policies to encourage investment in western China and Tibet. In addition, as a major enterprise based in Tibet and employer of ethnic Tibetans, Tibet 5100 has gained strong support from the local government in various aspects, including preferential tax treatments and government grants. The company expects to continue to benefit from such preferential policies and government support in the future. In 2008, 2009 and 2010, Tibet 5100 received grants from the government in the Tibet Autonomous Region as other income in the amount of Rmb0.002m, Rmb2.5m and Rmb2.5m, respectively, which amounted to 0.02%, 4.9% and 1.9% of its profit before income tax in the respective periods. In order to encourage the expansion of the bottled water industry in Tibet, the government in the Tibet Autonomous Region granted Tibet 5100 a subsidy income amounting to Rmb11.6m in 2010 to compensate its efforts to increase its production capacity.

Source: VC Group