Structural Opportunities in Bottled Water Industry Highlighted by Open Source Securities

Open Source Securities has released a research report indicating that, supported by health-conscious consumption demand, the bottled water industry is expected to continue its steady expansion through 2026. Industry concentration is projected to increase further, with structural opportunities likely to emerge amid a competitive landscape favoring leading players. The focus remains on identifying high-quality targets with distinct competitive advantages, solid growth foundations, or improving fundamentals. Beneficiaries include NONGFU SPRING (09633), CR BEVERAGE (02460), and Quanyang Spring (600189.SH). Key viewpoints from Open Source Securities are outlined below.

Rising health awareness serves as the primary driver for the steady expansion of the bottled water industry. In recent years, as public health consciousness has deepened, consumer preferences have rapidly shifted from sugary beverages toward healthier hydration options. Due to its natural, healthy composition and diverse consumption scenarios, bottled water has become a simple and favored hydration method among consumers. According to data from Chanson Consulting, the bottled water market grew from RMB 152.6 billion in 2018 to RMB 215 billion in 2023, achieving a compound annual growth rate of 7.1%. Over the medium to long term, the industry is expected to maintain mid-to-high single-digit growth, with the market size projected to exceed RMB 300 billion by 2028.

The industry is currently characterized by multi-dimensional competition involving pricing, distribution channels, branding, and water sources. Market concentration remains high, with leading companies maintaining relatively stable advantages. In 2023, the combined market share of the top five players approached 60%. It is anticipated that industry competition will gradually shift from price wars to value-based competition. Leading enterprises are expected to leverage their resources, distribution networks, brand strength, and production capacity to further increase market share. Meanwhile, smaller brands may face growing pressure to exit the market, leading to further industry consolidation and benefiting established bottled water companies.

Product innovation and scenario-based segmentation are accelerating, driving continuous value enhancement within the industry. As consumer demands become more diverse and refined, innovation in products and usage scenarios has become a key growth driver. Two main trends are evident on the product front: First, quality upgrades, with leading companies accelerating their entry into the mineral water and natural mineral water segments by leveraging high-quality water sources to develop premium products. These products emphasize natural and health-oriented selling points to capture consumer interest. Second, innovations in form and packaging, such as small, portable bottles suited for outdoor and office use, and large family-sized packages that offer cost-effectiveness for home consumption.

Scenario-based segmentation continues to develop, with products tailored for specific needs—such as water for infants, sports hydration, and water for tea preparation—gaining traction rapidly. These targeted products help unlock potential in niche consumer segments, further elevating the industry’s overall value.

Risks to consider include economic downturns, food safety incidents, fluctuations in raw material prices, and slower-than-expected recovery in consumer demand.