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Earlier this year, the company — and Zhong himself — were barraged by criticism after the February death of Zong Qinghou, founder of key rival Hangzhou Wahaha Group.
Online sympathy after his passing morphed into a takedown of Nongfu, with some comments deriding its bottled water packaging as looking Japanese in design, and others recapping what they alleged were tricks Nongfu had used to gain an advantage over Wahaha.
An advertisement outside a Nongfu Spring store in Shanghai.Credit: Bloomberg
Users alleged that Zhong’s son holds a US passport and questioned the family’s allegiance to China. In a blow to Nongfu, Wahaha sales spiked. While Nongfu refuted some of the claims and said it had taken legal action against people who instigated malicious rumours, many Chinese internet users remained unmoved.
In April, China Resources Beverage Holdings filed for a Hong Kong listing, a move set to provide additional resources for its bottled water brand C’estbon — one of Nongfu’s major competitors.
Soon after, Nongfu introduced a new purified water in direct competition with C’estbon, pushing prices to the floor. The product is being sold at less than 1 yuan (20 cents) per 550ml bottle on Alibaba Group’s Tmall, less than half its normal retail price.
Looking too Japanese? Bottles of Nongfu Spring Co. oriental leaf tea drink at a Chinese supermarket.Credit: Bloomberg
Even as Nongfu reported stronger than expected earnings last year thanks to robust sales of its ready-to-drink teas, the proportion of revenue from packaged drinking water dropped to 47.5 per cent — from 54.9 per cent in 2022 — underscoring the rise in competition in the bottled water sector.
In the latest headwind, Hong Kong’s Consumer Council last week said Nongfu’s water had been found to contain the maximum limit of bromate, which could pose health risks when overconsumed. Shares plunged 7.3 per cent in two trading days before the council clarified its early findings had come as a result of evaluating Nongfu’s water against criteria used for a category to which it doesn’t belong. Shares bounced back after the watchdog apologised, but wiped out gains again on Friday.
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To shore up confidence, Nongfu announced earlier this month that Zhong intended to buy up to HK$2 billion ($387 million) of the company’s shares via Yangshengtang, a holding company he controls. On July 9, Yangshengtang bought about 3.5 million shares, according to regulatory filings.
Bloomberg
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