Page 31 - Sphere No.19 (Jun 2007)

SPHERE 29
AFFLUENT CONSUMERS in the world’s fastest grow-
ing economy are beginning to demand a brand-name
product when they order juice for the home, a mixer with
their nightclub drink or a bottle of water from the local con-
venience store.
It is a trend that is benefiting A S Watson enormously: Chi-
na’s upper middle classes recognise the name as one that is syn-
onymous with quality, yet with a price that is more affordable
than imported drinks. Watsons Water, for example, is consid-
ered to be the prime local product that discerning consumers
specifically ask for by name.
Lifestyle products in general have enjoyed an unprec-
edented surge during the past decade of astounding
growth in China. When A S Wat-
son ventured into the newly
opened-up country more than
two decades ago there was only
a niche market for products per-
ceived as high-end; state controls
meant that all imported goods had
to be sold in designated stores.
And, in any event, locals
had neither the income, nor
the brand-awareness, to con-
template spending their hard-
earned yuan on luxury items.
But come the late 1990s and
demand went through the roof,
particularly in the southeastern part
of the vast nation, leading A SWatson to
invest in three separate production facilities.
In Guangdong province, a factory produces var-
ious A S Watson beverages, while in the capital Beijing and the
city of Shanghai plants are dedicated to water production. The
plants altogether employ around 1,600 staff in China and have
a production capacity of 650 million litres of beverages.
As the company celebrates 12 years of resuming production
in modern China after a hiatus of half a century, the market
looks very healthy indeed. Annual growth in the country as
a whole is more than 10 per cent - significantly more in the
coastal regions where much of the wealth is concentrated.
“From our current expansion mode and with fast economic
development in China, we believe A S Watson will be one of
the key players in the categories of water, professional mixer
drinks and chilled juice,” says Ricky Cheung, managing direc-
tor, A S Watson Industries, Beverages.
With water, the company is targeting the segment known as
mass premium, essentially white-collar and upper middle class
professionals who want a quality brand that has ca-
chet.That is the area where there is most profit margin;
while the lower-end brands sell huge volumes, competi-
tion is fierce and margins low.
WatsonsWater provides its products in various sizes, fromport-
able bottles to coolers that are suitable for offices and homes. That
distinctive green logo is seen as the sign of a discerning customer.
It is a similar story in nightclubs, where managements like
to offer Watson’s Mixer and Water, rather than poorly-pack-
aged local brands, as a sign of their commitment to high-end
products. Tastes are also changing rapidly in the nation of 1.3
billion people, with most younger clubbers now opting
for whisky combined with a mixer, instead of simply
beer or the traditional cognac.
To target those free-spending drinkers, the company
has hooked up with various liquor companies to ensure
that when they order their gin tonics and whis-
ky sodas they ask for the brand by name.
It is the custom in China to order an
entire bottle for a table, with drink-
ers diluting their drinks with
mixers.
“Our Watson’s Mixer
range will definitely be
the market leader in
the professional mixer
category with western spir-
its,” says Mr Cheung. “The price
is less sensitive in the entertainment
business. If you put Watsons Water
by the side of imported water then people
think this is the most premium local brand.
We are half the price of foreign bottled water but
double that of other local brands.
“We are the only brand investing heavily at night spots and
entertainment outlets on brand building with imported spirits.
We are offering innovative marketing services and already have
night-channel representatives in nearly all the major cities in
China that serve both mixers and water. We will expand our
service team to more secondary cities and towns.”
With juices, A S Watson is, once again, targeting the upper
middle classes who have plenty of cash to spend and are be-
coming avid consumers, keen to pursue the lifestyle they see
on their travels abroad or observe on television. Initially, the
company went into the market with ambient juice – the term
used for juice with a long shelf life – but increasingly there is a
demand for high-quality fruit juices that are stored in refriger-
ated conditions and have a more limited shelf life.