It was just another ordinary Sunday afternoon in Hangzhou, an ancient and beautiful city in eastern China． As usual, Mr Liu was riding his bicycle to deliver 5 gallon bottles of water to a residential area． In recent years, this has become a commonplace scene in many streets of Chinese cities． For Mr． Liu, he has been doing it for almost two years and experienced some changes．

'How many bottles do you deliver everyday?'

'I deliver 30 or 40 bottles daily, ' Liu answered．

'Do you think of the delivery volume has been increased in recent years? '

' For myself, I deliver the same amount as before． But the boss has hired another two guys．'

Take Hangzhou as an example, currently, there are 2000 people in the business of delivering water． One 5-gallon bottle of water costs RMB 15 or 2 US dollars． Mrs Tao is just one of the ordinary residents who drink bottled water．

Today, in supermarkets, the good old thermos— the traditional drinking equipment in China is losing popularity． But over at the water dispense section, the salesman is patiently introducing the functions to customers．

Li Ming, staff of Wu Mei Supermarket, said: 'Nowadays, customers have more choices． For example, waster dispenser and other equipment are very convenient． That has brought a decrease in thermos sales．'

Wei Youxiang, customer, said: ' At present, the working pace is fast． People get home quite late． The water dispenser is very convenient． Water from water dispensers tastes sweeter．'

Since the first foreign beverage brand—coca-cola entered the Chinese market in 1980, carbonated drinks have assumed an irreplaceable position in the drinking habit of Chinese people． Compared with carbonated drinks, water beverages show a more seasonal skew．

However, since the late 90's, it has grown rapidly especially bottled water, which has shown 40% annual growth since 1999． So, what are the underlying reasons for the increase?

Sales Volume of Bottled Water in China

Unit: 100m tons

1999: 29 2000: 34

2001: 45 2002: 59

Source: China National Business Center

Li Fuxing, director of Beijing IDM Institute of Bio-Technology, said: 'With improvements in living standards of the Chinese people, health and drinking water have become top concerns． In the recent five or six years, bottled water in China has kept the fastest growth in Asia or even the world．'

'Water beverage is more natural． Chinese people are seeking environmentally-friendly and green products． Those factors are very important to people's health． Therefore, I choose water or tea beverage,' said Wang Mei．

Eyeing the change in the drinking habits of Chinese people, foreign beverage companies have quietly stepped into China's drinking water market．

Major Moves of Foreign Beverage Companies

1, Nestlé established two water manufacturing bases in Tianjin and Shanghai．

2, Danone bought two domestic water manufacturers

3, Coca-Cola launched a water brand in China

Source: China National Business Center

Jiang Jianjun, dept director of Ministry of land and Resources , P．R．C．, said: ' The introduction of foreign water brands in particular mineral water to some extent will foster China's drinking water industry in the area of manufacturing and hygiene processes．' At the same time, the Chinese government encourages foreign water brands to come into the Chinese market．'

' It is a trend for foreign water companies to step into China's drinking water industry． This trend consists of two aspects． China is a populous nation． Whoever comes first, will wins the upper hand． In addition, Chinese water companies should also enter foreign markets． Competition can bring fast development,' health expert Li Fuxing said．

In order to face competition posed by foreign brands, price cuts are becoming one of the key tactics for domestic brands to attract more customers． However, it brings some problems．

Zheng Bo, assistant president of Yang Shentang, Co．,Ltd, said: ''Price war' is against social trends． People always favour high-quality products． Therefore, providing high quality water should be the top priority, not lowering the price． '

Currently, foreign investment is playing an important role in China's drinking water market．

Market Share of Bottled Water Brands in 2002

Nongfu Spring 21．26%

Wa Haha 16．14%

Robust 11．96%

Nestlé 8．75%

Kang Shifu 3．75%

Source: China National Business Center

Among those top five water brands in China, only the market leader, Nongfu Spring has no involvement of foreign investment． Moreover, Nongfu Spring ranked number one for four years straight from 1998． What is its winning strategy?

'We think that foreign brands have their own core business when entering China's market． For instance, Coke is Coca-cola's main business． They don't have an exclusive manufacturing base for drinking water． However, we have the best water resource and built the production base nearby to produce good quality drinking water． That's one of our strengths,' Zhe Bo said．

As a domestic brand, Nongfu Spring is not only able to survive but also thrive amidst fierce competition． However, for the majority of China's drinking water companies, they still meet some difficulties, such as not achieving economy of scale and lacking in technology． Those problems can be overcome by bolstered capital backing and international co-operation to bring in world's best technologies．

According to statistics released by the Beverage Association of China, every Chinese consumes 2 liters of drinking water per year． A westerner drinks 130 liters of water． The huge difference may stem from different drinking habits． But with increasing attention and expenditure given to Chinese health, it spells an opportunity for domestic and oversea drinking water companies．

(cctv.com April 28, 2003)