Summary of the Key Points
This article focuses on the emerging beverage category known as “Chinese health-promoting water,” analyzing its definition, cost and profit structure, market challenges, the truth behind its claimed health benefits, and its future prospects. The product uses ingredients that are both food and traditional Chinese medicine (TCM) herbs, such as red beans, coix seeds, and dendrobium. Although the cost of these ingredients is very low (only about 0.3 yuan per serving), the final product is sold for around 5 yuan, resulting in a gross margin of over 70%. However, due to a low repeat purchase rate and small scale of production, it is difficult for manufacturers to make a profit. The low repeat purchase rate is mainly due to the high price and poor taste of the water. The health benefits are limited, and this type of water essentially serves as a “mood-enhancing beverage” for young people. To become a sustainable business, it needs to adopt a similar strategy to herbal teas or sugar-free drinks by removing the health-related gimmicks and focusing on its role as a daily beverage.
Detailed Analysis
1. What is Chinese health-promoting water?
In simple terms, it is a plant-based beverage made from ingredients that are both edible and used in TCM. There are two main production methods:
- Traditional method: The ingredients are simmered (for example, red beans are first boiled over high heat and then slowly cooked on low heat before being bottled) or extracted (concentrated and filtered to remove sugar and fat).
- Cheaper method: The ingredients are mixed with water in powder form, and the cloudy residue is removed (even relatively decent factories can handle this process).
This product falls under the category of “plant-based beverages,” but it is essentially a regular beverage packaged with the guise of health benefits.
2. High gross margin but no profit?
Despite having a retail price of 5 yuan per bottle, the cost for manufacturers is only around 1.3 yuan (resulting in a gross margin of over 70%), they still struggle to make a profit due to several factors:
- Cost structure: Packaging accounts for a large portion of the cost—caps and labels cost between 8 cents and 1.3 yuan each, the bottle itself weighs 38 grams (at 0.085 yuan per gram), and the manufacturing fee is 0.4 yuan. This leaves only about 0.3 yuan for the actual ingredients in the bottle.
- Profit barriers: A low repeat purchase rate (consumers are unlikely to buy it again after trying it once) and a small production scale (leading brands like Yuanqi Forest have a revenue of only 700–800 million yuan, while others combined account for only 300 million yuan). Additionally, fixed costs such as distribution fees and employee salaries cannot be spread over a large volume, rendering the high gross margin ineffective.
3. The two main reasons for the low repeat purchase rate:
- High price: The price of 5 yuan or more is much higher than that of regular beverages like cola (which costs around 3 yuan), making it unaffordable to many young people.
- Poor taste: To emphasize its “healthy” properties, the water is made very bland (sometimes even less tasty than sugar-free teas), and it may have an unpleasant herbal flavor, leading consumers to prefer other options after trying it once.
4. Are health claims just a gimmick?
With only about 0.3 yuan worth of ingredients in each bottle, can you really expect this water to have significant health benefits such as removing dampness or replenishing energy? Experts argue that this type of water is more of a “mood-enhancing beverage” for people who stay up late, providing psychological comfort (e.g., “I drank health-promoting water, so I should be fine staying up all night”). Those who truly care about their health are unlikely to consume such beverages.
5. Can it become a sustainable business?
To become a long-lasting success, it needs to adopt a similar approach to herbal teas or sugar-free drinks by removing the health-related focus. For example:
- Herbal teas: Wanglaoji started as a “health supplement” sold in pharmacies but became a popular daily beverage, eventually achieving a market value of several billion yuan.
- Sugar-free drinks: Dongfang Shuye took eight years to gain popularity because it became a convenient and enjoyable drink option (quenches thirst without being sweet or causing discomfort).
- Future direction for health-promoting water: It should downplay its health claims and focus on being a pleasant-tasting, plant-based beverage that can quench thirst. The health benefits should be seen more as a secondary aspect, providing comfort rather than a primary selling point.
Conclusion
Chinese health-promoting water is currently an emerging trend with limited success. To become a sustainable business, it needs to abandon its health-related gimmicks and return to the essence of being a regular beverage that people are willing to drink daily, rather than something they buy occasionally for its supposed health benefits. Otherwise, it may remain a short-lived fad.