The extraordinary rise of bottled water company Nongfu Spring has made its founder Zhong Shanshan one of China’s richest men. But these days, being a Chinese business success story doesn’t make you immune from criticism.
Earlier this year, the Zhejiang-based Nongfu was hit by a nationalistic online pile-on claiming its products are “pro-Japan” and questioning whether Zhong’s son has a foreign passport. The campaign shook the company’s stock value, testing the resilience of China’s most recognizable bottled water brand.
This week, The Wire takes a closer look at Nongfu Spring and its near-three decade story.
100 PERCENT NATURAL
In a hopeful sign for journalists everywhere, the now-billionaire Zhong started out as a reporter with state-owned Zhejiang Daily, having also worked as a mushroom seller on the southern island of Hainan.
He founded the forerunner to Nongfu Spring in 1996, back when most bottled water in China was similar to tap water with natural minerals filtered out. Zhong distinguished his company’s products by offering spring water — or what Nongfu Spring calls ‘natural water’.
“Drinking water is an industry with relatively limited space for technological innovation,” says George Wang, professor of finance at the City University of New York (CUNY). “He [Zhong] created a new concept and went from being a latecomer to a saturated market to being an early adopter and a leader of a new market segment.”
Nongfu’s philosophy is to never use tap water: instead, it lives by company mottos such as “every drop of Nongfu Spring has its source” and “we don’t produce water, we are just nature’s porters.” The company has built a network of factories close to China’s highest-quality water sources, including the Tianshan mountain ranges of Xinjiang and Mount Emei in Sichuan.
Nongfu Spring’s growth coincided with Chinese consumers’ rising demand for bottled water. In 2013, China became the world’s largest consumer of the drink, surpassing the United States, according to the International Bottled Water Association.
By the time Nongfu Spring launched its initial public offering (IPO) in Hong Kong in 2020, China was consuming almost 30 billion gallons of bottled water annually, more than 25 percent of the global total. Nongfu Spring had around one-fifth of the Chinese market by then. Chinese consumers’ growing health consciousness contributed to the market’s growth, a trend that accelerated during the COVID-19 pandemic, particularly among older adults.
Meanwhile Nongfu’s surge in value after its IPO made Zhong the richest person in China in 2021, according to the Forbes Rich List: he stayed top in both of the following years, with a net worth now of $62.3 billion.
Nongfu Spring’s local competitors in China include Hangzhou Wahaha Group, Master Kong and Uni-President China, and it also competes with foreign beverage companies like Coca Cola, which offers drinking water in China under the brand name Chun Yue.
Check out the graphic below for a snapshot of Chinese consumers sugar-free beverage preferences:
In February, Wahaha’s founder Zong Qinghou died aged 79, sparking a frenzy of online discussion praising his company’s patriotism and comparing it favorably with Nongfu Spring. Online critics claimed the artwork on Nongfu’s packaging showed Japanese architecture instead of Chinese, and called for a boycott of its products, while one commenter asked whether Zhong was “afraid to admit that his son has American citizenship.” Amid the controversy, Nongfu Spring’s share price dropped by as much as 6 percent.
In 2018, Nongfu first moved overseas when it purchased New Zealand bottled water supplier Otakiri Springs for $6.3 million. Its plans to expand the plant have been delayed due to legal action taken by local Māori residents concerned about its environmental impact.
Whether Nongfu Spring’s focus on natural water could prove a winning formula overseas is open to question.
“It’s no longer a new concept for consumers in the U.S. and in Western markets,” says Wang from CUNY. “Whether or not Nongfu Spring can play the same game again on an international scale, I’m not so sure.”
Aaron Mc Nicholas is a staff writer at The Wire based in Washington DC. He was previously based in Hong Kong, where he worked at Bloomberg and at Storyful, a news agency dedicated to verifying newsworthy social media content. He earned a Master of Arts in Asian Studies at Georgetown University and a Bachelor of Arts in Journalism from Dublin City University in Ireland.