China’s Booming Water Purification Market

Analyst Insight onChina's Water Purification Market and Unilever's Qinyuan Acquisition

China's level of water pollution has grown in tandem with its rapid industrial revolution and urbanisation. Consumer awareness of water quality and safety, rising living standard and improved levels of income have contributed to the increasing demand for bottled water. Euromonitor International's data show thatChina's bottled water market is worth approximately US$18 billion in 2014, and the country is set to continue to be the growth engine of global bottled water sales in next few years. Simply satisfying 1.4 billion people's basic needs - safe water and sufficient food - offers abundant business opportunity and challenges.

Nevertheless, the consumer market is changing and the competitive environment is evolving constantly. Euromonitor International's field analyst commented that sales of bulk water are likely to be affected by the growing adoption of household purification and filtration devices, as evidence shows that a growing number of households are opting for various purification solutions as a replacement for bulk water. Unilever took a swift move in this dynamic market and acquired a local company, Qinyuan, to complement its international brand Pureit in 2014.

Water purification is part of home improvement

Despite the slow sales of some domestic appliances, there are a growing number of manufacturers entering water purification. In 2000, it was reported that there were only several hundred companies engaging in this specialist field. According to China's water purification solutions official report, there were over 3,000 brands available by 2014 and the number is growing daily. Sales of water purification solutions grew by 20% year-on-year for the past three years. There are millions of new-build apartments, and old apartments in need of decoration or refurbishment; safe and economical drinking water has become the priority for all households and finding the solution is becoming a key part of the home improvement process.

Typically, a construction company will collaborate with a water purification solution player to install intertap filter water taps. The price of the products ranges from high-end (typically Japanese or South Korean brands) to economy brands (typically domestic brands). Normally, for high-income households, the solution provider will recommend high-quality foreign brands. Middle and lower-income households will normally choose affordable domestic brands. Consumers see the benefits of water filter devices for home use as there is no more need to purchase bulk water, saving time and avoiding hassle. Moreover, the recent reported incidents of contaminated bulk water packaging have also made some consumers uncomfortable consuming this water. Moreover, the price of bulk water in first-tier cities is not cheap. InShanghai, for example, a typical nuclear household (three persons) consumes three bottles of bulk water in two weeks, and the cost for a whole year could be RMB1,584. For water purification devices, the average price, such as Ecowater Systems is around RMB4,000 for at least 15-20 years of lifetime.

This is not good news for bottled water players such as Wahaha and Ting Hsin International Group, which have enjoyed strong sales for the past decade. Although there are no clear figures to show how badly their sales have been affected by the adoption of water filter devices at home, this trend certainly represents a serious threat to growth.

Source: Euromonitor International

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Taxonomy

• Purification
• Filtration
• Finance and Markets