Billion Dollar Yibao Goes Public: The Water Wars Begin
The bottled water market in China has long been dominated by a few key players, but now, one of its significant contenders is finally going public. On October 23, 2024, China Resources Beverages Holdings Limited, the parent company of Yibao, made its debut on the Hong Kong Stock Exchange, with shares opening at an impressive 13.52% increase, reaching HK$16.46 and giving the company a total market capitalization of HK$38.645 billion. This move marks a pivotal moment in the company’s history, especially considering its longstanding rivalry with other bottled water brands.
Back in April 2023, China Resources Beverages submitted its prospectus for public offering, a step forward that culminated in a successful completion by September 25, following a hearing with the Hong Kong Stock Exchange. With this launch, the firm becomes the 18th publicly listed company under the China Resources Group umbrella. According to the prospectus, China Resources Beverages commands an 18.4% share of the packaged drinking water market, placing it second behind the ever-popular Nongfu Spring. This positioning is interesting, especially given that Yibao, the brand that launched in 1990, is often considered the progenitor of packaged drinking water in China.
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In 1990, Yibao's pure water was introduced to a market where domestic brand Nongfu Spring had not yet made its mark; in fact, its founder, Zhong Shanshan, only began his dealings as a distributor for Yibao in the following year. The fascinating competition between the two has resulted in each founder experiencing their own ascension to the title of China’s richest person. In contrast, the Yibao brand, along with its leadership, has maintained a more subdued profile throughout these years.
The marketplace has undergone dramatic changes over the past three decades. Nongfu Spring has thrived and effectively eliminated competitors like LeBaishi, Wahaha, and Kang Shifu from the limelight, leaving Yibao to persist as its final counterpart. However, as 2024 unfolds, we are witnessing a resurgence of competition in the bottled water industry: Nongfu Spring has shifted focus onto the purification water market while Wahaha has reemerged from various challenges to stake its own claim. Emerging players like Yuanqi Forest have also stepped into the purifying water segment, as brands like Pang Donglai and Dongfang Zhenxuan are launching their own lines of bottled mineral water, indicating that the battlefield is heating up yet again.
Transitioning to a broader context, Yu Jingleang, Yibao’s manager, remains less recognizable to the public compared to his counterparts, yet within the beverage community, he bears the title of "Father of Packaged Water." In 1984, at age 34, he became the manager of the China Longhuan (Shekou) Company, which subsequently transformed into what we recognize today as China Resources Beverages. Initially, the company focused its efforts on selling Guizhou’s specialty product—prickly pear juice—yet failed to gain national traction due to its strong regional ties, ultimately leading to its decline.
This initiated a critical pivot where the company turned its attention to pure water. To establish a brand identity, Yibao invested significantly, enlisting famous designers to create a visually appealing bottle. The result was the eye-catching white and green “Yibao” branded bottled water, which the company cleverly named after the French phrase “C'est bon,” meaning "it's good." The launch in 1990 initiated a shift towards high-class aspirations within the company, a sentiment that continued to shape Yibao’s journey in the years to come.
A significant moment arrived in 1991 when Vanke acquired a majority stake in China Longhuan, leading to a management overhaul that prompted Yu to depart and establish Shenzhen Jingtian Industrial Company. Under his leadership, Jingtian pursued a high-end water market strategy that culminated in the emergence of the “Baishui” brand, a symbol of prestige in bottled water.
However, Yibao's journey has not been linear. In 1999, Vanke divested from Yibao, selling it to China Resources, who initially focused more on its beer operations, leaving Yibao somewhat sidelined. During that time, competitors like Wahaha and Nongfu had expanded nationally, with the latter, in 2000, propelling itself into the spotlight by igniting a “water quality debate” that further broadened its reach.
In response to the competitive pressures at the time, Yibao began re-strategizing. In 2004, then-General Manager Liu Hongji convened a crucial internal meeting in Xiamen, termed the “Zunyi Meeting” within the company. At this strategic assembly, the philosophy of “small markets, big share” was advocated, resulting in Yibao first dominating the Guangdong market before setting its sights on nationwide expansion.
The ensuing “all-out street battle” strategy put robust sales personnel into urban and rural areas to promote its products aggressively. Consequently, by 2007, Yibao claimed roughly 50% market share in Guangdong—a figure that helped solidify its status as a major player in the water business. Through strategic campaigns and grassroots marketing, Yibao introduced its national expansion strategy that saw leapfrogging growth over the following decades.
By 2013, Yibao transitioned from a middle-tier manufacturer to an industry leader, prompting repeated clashes with Nongfu Spring. That March, in response to Nongfu's allegations regarding the quality of Yibao's water, the company issued a lawsuit, resulting in Nongfu being fined for its claims. Nevertheless, the feud continued, punctuated by campaigns that saw Yibao successfully labeling the competitive claims as misleading. The result of these battles was a sizable market share for Yibao, enabling it to generate revenues exceeding 10 billion yuan by 2015, momentarily taking the lead from Nongfu Spring.
In subsequent years, both Nongfu Spring and Yibao entrenched themselves firmly as the top two industry players, together dominating over 40% of the bottled water market in 2023, distancing themselves from other competitors like Baishui, Wahaha, and Kang Shifu. Particularly in the purified water sector, Yibao commands a remarkable 32.7% market share, surpassing the collective shares of the ensuing four companies.
Despite its advantageous position in the pure water market, Yibao now faces unprecedented competition. In April 2023, as part of its initial public offering efforts, the company emphasized its association with bottled water heavily. Financial reports revealed that in 2021, 2022, and 2023, revenue climbed from 11.34 billion yuan to 12.623 billion yuan, and then to 13.515 billion yuan, with a staggering 92.1% of its revenue in 2023 generated from its water products.
Yet challenges loom large. The bottled water segment's appeal and financial viability have triggered notable growth, attracting more competitors. While the initial reluctance of competitors toward the purified water sector remains in history, companies like Nongfu Spring have established new offerings, creating further market destabilization. Capitalizing on the opportunity, even Yuanqi Forest has now launched its own water brand amidst the ongoing competition. Despite these challenges, the bottled water market remains lucrative, indicative of its foundational necessity and sustainability as a crucial sector. While new entrants may revel in the prospects of wealth, they will undoubtedly traverse a landscape riddled with trials and tribulations akin to those faced by established titans.