On the 13th, the Kensington Hotel in Yeouido, Seoul, was bustling. This was because the Jeju Development Corporation held a bidding briefing for the distribution rights of the spring water 'Samdasu'. According to the distribution industry, over 20 corporations showed interest at the bidding briefing for Samdasu's distribution rights. Nongshim, which once distributed and sold Samdasu but has since parted ways with it to sell the water brand 'Baiksan', is also reportedly considering participation.
On the 25th, industry sources stated that the reason corporations are interested in the bidding for Samdasu’s distribution rights is that Samdasu remains the number one bottled water brand in Korea. Samdasu's market share in the domestic bottled water market is around 40%. Although competition in the bottled water market has intensified, winning the distribution rights for Samdasu could significantly boost a company's revenue. Kwangdong Pharmaceutical, which held the distribution rights for Samdasu until recently, reportedly made over 300 billion won in sales annually through Samdasu.
Changes in bidding conditions are also a factor leading to more interest in this distribution rights bidding. Previously, the Jeju Development Corporation managed the distribution of Samdasu within Jeju, while the company that won the bidding managed distribution outside of Jeju. However, even for areas outside Jeju, the three major supermarkets, Emart, Lotte Mart, and Homeplus, have been managed directly by the Jeju Development Corporation.
But this time it's different. Distribution through major supermarkets will also be entrusted to the business that wins the distribution rights bidding. This means that the role, which was previously limited to convenience stores, online sales, and large supermarkets (SSM), has now expanded. As of last year, the revenue from Samdasu collected by the Jeju Development Corporation from major supermarkets like Emart, Homeplus, and Lotte Mart was approximately 93 billion won.
Several reasons are cited as the background for this situation. The most significant reason is that Samdasu's stronghold is not as it once was. Samdasu's market share was around 45% in 2014, but in August of last year, it temporarily fell below 40%. The distribution industry views Samdasu as a kind of 'elegant swan', drawing an analogy that maintaining elegance requires significant effort beneath the surface.
An industry source said, 'While Samdasu's market share still remains in the 40% range, in order to maintain this, distributors need to increase their operational expenses. Since the profit margin for bottled water distribution is not very high, if operational expenses rise, there is virtually nothing left for distributors. In that sense, the Jeju Development Corporation has effectively expanded the role of distributors.'
There are also views that point to the regular subscription system of the Samdasu exclusive app as a reason for the changes. Revenue from the online sector was originally the domain of companies that won distribution rights, but changes occurred in 2019 when the Jeju Development Corporation launched its own app. Currently, profits from sales made through app orders are retained by the Jeju Development Corporation. According to the Jeju Development Corporation, as of last year, the number of Samdasu app members was around 360,000, and cumulative order numbers exceeded 2 million.
An industry source stated, 'In the past, profits generated from the online sector were retained by the company that won the distribution rights, but now the Jeju Development Corporation takes a share of that, which has opened up the major supermarket sector.' They added, 'This decision appears to be a shrewd assessment by the Jeju Development Corporation.'
Although sales were minimal during the early days of the Samdasu app launch, it has now established itself to some extent, and the prevailing view is that it will continue to grow. Bottled water is often purchased periodically, making it suitable for subscription products. This is why the subscription feature in the Samdasu app is seen as a competitive edge.
In response to this, a representative from the Jeju Development Corporation stated that it is 'a change based on the innovation service for distribution structure and committee review.'
What will be the outcome of the bidding war for the Samdasu distribution rights, often dubbed 'the presidential election of the bottled water market'? Attention is focused on whether Kwangdong Pharmaceutical will continue to secure the distribution rights or if a new corporation will take its place.