Not a good deal
Tibet's immature transportation network is likely to be the actual reason for Zong's dampened enthusiasm in selling water from the region, said Yan Qiang, a beverage industry analyst with Beijing Hejun Consulting.
"High transportation costs make developing water resources in Tibet a poor proposition for Wahaha, which also has to pour a lot of money into marketing and setting up new high-end sales channels for the premium Tibetan water," Yan said on Tuesday.
Wahaha could take a lesson from Qumolangma Glacier, which was founded in 2006 to produce bottled water from a national reserve in Tibet. Yan said Qumolangma did not perform well due to high transportation costs.
In the first nine months of 2015, Qumolangma lost 36.5 million yuan ($5.6 million), almost double its net losses for all of 2014, according to a post on the website of Guangzhou Enterprises Mergers and Acquisitions Services.
The purpose of the post was to help two of its shareholders in Guangdong Province sell their 6 percent stake in the company. It had 385 million yuan in debt as of September 2015.
The official from Tibet's water resources department acknowledged that the region's underdeveloped transportation system is a major obstacle in attracting mineral water companies.
"We are in talks with companies and try to improve the current situation as soon as we can," he said.
Liu Hongqiao, a consultant with Hong Kong-based nonprofit organization China Water Risk, thinks the investment in Tibet's bottled water industry should be prudent.
"Investors should consider whether consumers have sustainable interests in bottled water from Tibet, but they also need to pay attention to the environmental, political and cultural risks," Liu told the Global Times on Monday.
Tibet plateau is known as Asia's water tower, the headwater of many important transboundary rivers that feed billions of people through Asia, said Liu.
Aggressive exploitation in the upstream may add further geopolitical threats to transboundary water disputes, she added.
Spurred by the government
Despite of the barriers and risks, many companies have started producing mineral water in Tibet.
"Last year, I saw the sudden emergence of more than 200 mineral water brands in Tibet, even though the number was in the single digits the previous year," said Shen Bin, secretary-general of the Tibet Cooking Meal Restaurant Trade Association of the Tibet Autonomous Region.
This has been spurred by encouragement from the government, Shen told the Global Times on Monday, following an event sponsored by the local government and the Ministry of Industry and Information Technology (MIIT) in 2014 to promote Tibet's water among inland companies.
During the event, the MIIT pledged to map out specific plans and measures to support Tibet's mineral water industry, which is expected to be a new economic growth engine for the region's economy.
Tibet's regional government also decided to push ahead the expansion with a 10-year plan proposed in 2015 to help grow China's bottled water industry, which experts said is the world's largest in terms of consumption and production, but faces slow growth rate.
The plan set a goal to produce 10 million tons of bottled water by 2025, up from 153,000 tons in 2014.
Nongfu Spring, the Zhejiang-based mineral water producer, mainly exploits water resources at Changbai Mountain in Northeast China's Jilin Province, which has been promoted as another source of pristine drinking water.
Wahaha and Evergrande Spring have opened plants at Changbai Mountain to compete for the high-end mineral water resources there.
Analysts said there is red-hot demand for the mountain's water, which also provides producers with higher profit margins.
In 2015, people in China consumed 1.3 billion yuan worth of premium mineral water. The market has been growing at an average annual rate of more than 20 percent, according to the Bosi Data Research Center.
There are no signs of excessive exploitation of the rivers and lakes in Tibet, said Liu from China Water Risk.
She explained that only an estimated 2 to 5 percent of approved volumes have been exploited, citing public information of listed mineral water companies such as Tibet 5100.
