Evergrande launches bottled water brand

Chinese real estate developer Evergrande Group unveiled its new bottled water on Sunday, a move which experts said on Monday Evergrande had chosen a good occasion for though it would still face challenges in cross-industry investment.

Several sports celebrities helped launch "Evergrande Spring" bottled water Sunday at a press conference including Italian soccer coach Marcello Lippi, who is also coach of Evergrande's soccer team, and European soccer star Luis Figo, according to the Weibo account of Evergrande Spring.

The total investment in Evergrande Spring is around 10 billion yuan ($1.64 billion), news portal 163.com reported Monday. The company could not be reached for comment by press time.

The water used for Evergrande Spring comes from the Changbai Mountain area in Northeast China, Evergrande Spring's Weibo account said Sunday, noting it is a "high-end product" but with an "affordable price" of 3.8 yuan for each bottle of 350 milliliters (ml).

Chinese consumed more than 500,000 tons of high-end bottled water (5 yuan or higher for a 500ml bottle) in 2012, with a total revenue of 10.8 billion yuan, Shenzhen-based market research firm China Competition Information reported on July 23, noting that the revenue of high-end bottled water in China had increased 42.6 percent year-on-year in 2012, three times the growth of mid- and low-end bottled water.

But, according to 163.com's report, Evergrande Spring's price is in the middle range of bottled water market, given that the price of a 350 ml bottle of C'est bon is around 1.4 yuan and 330 ml bottle of 5100 Tibet Glacier Spring Water costs about 8 yuan.

It was wise for Evergrande to launch its drinking water right after its soccer club won the 2013 Asian Football Confederation Champions League title on Saturday, Zhao Yong, an analyst with Haitong International Securities Group Ltd, told the Global Times Monday, noting that because of this, many Chinese will recognize the Evergrande name immediately upon seeing it.

The triumph has put Guangzhou Evergrande Football Club and Evergrande Group, the club's investor, under the national spotlight because it is the only Asian championship that a Chinese team has won in the past 23 years.

"Evergrande Spring will be the only bottled water I will buy in the future," Li Yu, a Beijing-based soccer fan, told the Global Times Monday.

The bottled water market in China witnessed a rapid growth and China will consume more bottled water than the US in 2013, Forbes reported on August 14, citing a research report released by Canadean Ltd, a British beverage market research company.

Evergrande is not the only company which sees the opportunity in this market. Fangda Special Steel Technology Co Ltd announced Saturday on the Shanghai Stock Exchange that it will invest 100 million yuan to establish a wholly owned subsidiary to produce bottled drinking water.

Compared with more established competitors in the bottled water sector such as Hangzhou Wahaha Group, Evergrande does not have obvious advantages, media reports said.

Evergrande is still faced with risks in its cross-industry development because fast-moving consumer goods (FMCG) is quite different from real estate, Liu Hui, an analyst with Capital Securities Corp, told the Global Times Monday.

For FMCG, a sales network is the most important factor for success, Liu said, noting the field is quite new to a real estate developer.

Evergrande Spring will build sales outlets for wholesale in Evergrande real estate projects nationwide, while it has started to recruit sales agencies, according to its Weibo account.

Supermarkets are still the major sales channel for bottled water, so Evergrande has to build its sales network in supermarkets if it wants to do well and it will need a team experienced in the FMCG sector, said Liu. "The new product has to go through a longer test set by the market."