Thirst for profit sends retailers into bottled water manufacturing

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Thirst for profit sends retailers into bottled water manufacturing


There’s no business like the water business.

Bottled mineral water has become a lucrative product in Korea. There are over 70 companies with 100 brands competing, but the market still posts 10 percent growth every year and continues to be an attractive one for beverage makers and food producers.

Dr. Chung’s Food, famous for its 50-year-old soy milk brand Vegemil, released a line of bottled mineral water called Shimchunsoo on Monday. Soy milk is still their biggest seller and make up about 85 percent of sales, but mineral water could by promising for Dr. Chung’s Food. “In the long run, we plan to step into offline distribution and manufacturing as well,” a company spokesman said.

Commercial sales of bottled mineral water were legalized in 1995. Before, the government was against bottled water sales, saying it would create an atmosphere of “disharmony” between different social classes. Back then, a majority of Koreans boiled tap water and drank it as tea with corn silk or barley.

In the last 10 years, the Korean mineral water market has posted fourfold growth, from 224 billion won ($191.5 million) in 2005 to 800 billion won last year, according to the Korea National Mineral Water Association. The market is estimated to reach 1 trillion won by 2020.

“A rise in health-conscious consumers pushed up demand for bottled water with high mineral content,” said Kim Tae-ho, a researcher at IBK Securities. “As more people live in single-person households apart from their families, they no longer boil tap water but prefer to simply buy them in smaller bottles.”

Last year, single-person households made up 27.1 percent of all households. It’s forecast to reach 31.1 percent by 2025 and 34.3 percent by 2035. This suggests room for further growth in the mineral water market, and it is luring many major companies.

OurHome, a provider of school meals and food ingredients, launched a mineral water brand called OurHome Jirisan Water last year. Shinsegae Food acquired the mineral water manufacturer Jone for 7 billion won last year and is preparing for a product release. Snack company Orion is looking into the market as well.

Convenience stores jumped in early with private-brand mineral water. Since their main customer base is single households, bottled water is a steady seller, with sales going up an average of 20 percent every year. CU’s private-brand mineral water even surpassed Samdasoo, the market leader, in sales at their convenience stores last year. GS25’s private-brand mineral water has been the store’s second most popular mineral water product for two consecutive years.

Another factor that attracts competitors is low manufacturing costs. “Set aside personnel expenses and other additional expenses, the manufacturing cost of one 2-liter (0.5-gallon) water bottle includes the bottle, lid and allotment paid to the government for public drinking water management. This all adds up to around 100 won,” said a source working in the industry. “There aren’t many items left in the beverage industry, which is posting two-digit growth, that don’t require high costs. It’s only natural that companies are jumping into the market.”

The competition for mineral water is expected to heat up even more because distribution rights for Jeju Samdasoo, the market leader, will be up for sale this year.

Launched in 1998, Samdasoo takes up 35 percent of the entire mineral water market. It is manufactured by the state-run Jeju Province Development Company and sold on consignment by an external enterprise. Kwang Dong Pharmaceutical has been in charge of selling Samdasoo since 2012, and its contract with the Jeju Province Development Company ends this year. A public bidding will be held to select a new partner, which will have the right to sell Samdasoo for the next four years.

Seven companies competed in 2012. Among that year’s list were big names in Korea’s food and beverage industry: Lotte, Chilsung, Coca Cola, OurHome, Woongjin Food, Sempio Food and Namyang Dairy Products. The same is expected to happen this year. The other six that failed last time are also said to be considering bids again.

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