“Investors Network” Ye Xin

Accused of being “The Farmer and the Snake,” met with popular boycotts, sales declined, stock prices fell, and market capitalization evaporated...

Recently, Nongfu Spring (09633.HK), a well-known beverage brand in China, has been mired in a storm of public opinion, and a topic surrounding the old dispute between Nongfu Spring and Wahaha quickly fermented on the Internet.

Although Zhong Yuyi, founder of Nongfu Spring, published an article on “Two or Three Things Between Me and Zong Lao” to clarify and respond to online news, public opinion has not improved, and voices of questioning are still rising one after another.

Amid questions from netizens, Zhong Shuzi, the son of Zhong Yuyi, the founder of Nongfu Spring, is of American nationality and has become the focus of netizens' attention. However, parties such as Nongfu Spring and Zhong Yuyi avoided talking about this and did not respond, which continued to cause dissatisfaction among netizens.

Being in a vortex of public opinion

Recently, Nongfu Spring has been pushed to the forefront by many netizens.

Since Zong Qinghou, founder of Wahaha Group, passed away on February 25, netizens, while remembering Zong Qinghou, have also set their sights on Nongfu Spring and its founder Zhong Yi.

Wahaha and Nongfu Spring, which are two major beverage giants in China, have also recently been widely discussed by netizens. News such as “Zhong Yuyi previously worked as a dealer under Zong Qing but was expelled for trading”, “Zhong Shuzi, the son of Zhong Qi, is of American nationality”, “The packaging design of Nongfu Spring Oriental Leaf Series drinks has been questioned on the internet, containing images suspected of being Japanese architecture, and alleged pro-Japanese tendencies.”

Nongfu Spring and Zhong Yuyi, who were caught up in this public opinion storm, also responded to the market and clarified relevant details. On March 3, the WeChat account of Nongfu Spring published an article entitled “Zhong Yuyi: Two or Three Things Between Me and Zong Lao”.

In the article, Zhong Yuyi first clarified that her first pot of gold did not come from Wahaha, but from the Bupi business. She also claimed that the original idea for the well-known Wahaha Nutritional Rice Porridge product was proposed by herself to Zong Qinghou.

In response to the controversy over being a dealer, Chung Yuk said, “I have never received a salary in Wahaha, let alone been fired for washing goods.” Zhong said that due to the dispute between natural water and pure water, the two sides had mutual lawsuits, but in the end, they shook hands with Zong Qinghou and made peace. “Respect for Zong Lao's entrepreneurial spirit has never wavered.”

However, this response did not completely calm public opinion. Subsequently, Nongfu Spring's stock price recorded a decline for three consecutive days. By the close of trading on March 6, Nongfu Spring's stock price had fallen by a cumulative total of nearly 5%. The market value had declined from HK$499.3 billion to HK$474.6 billion, and the market value had shrunk by HK$24.7 billion (approximately RMB 22.7 billion).

In fact, since the incident began, Nongfu Spring's stock price fell 7.26% from February 28 to March 8; on March 11, the stock price picked up slightly, rising slightly by 0.48% to close at HK$41.75 per share, with a total market value of HK$466.728 billion, or 44.54 times the price-earnings ratio (TTM).

The crisis of China's richest man

Recently, the controversy over Nongfu Spring has caused an uproar in society. Although Nongfu Spring has given some response from the market, the public opinion crisis has not subsided.

Under the impact of public opinion, Nongfu Spring's product sales were boycotted, and sales were inevitably affected. Online, looking at Nongfu Spring Douyin's official flagship store, its sales volume went from an average of 100,000 to 250,000 yuan per day to 5,000 to 7,500 yuan, a drop of more than 90%. However, since March 1, the official Douyin account of Nongfu Spring has not started a live broadcast. Offline, according to media reports, Nongfu Spring's offline sales also showed a clear decline.

Also, convenience stores have stopped selling Nongfu Spring products. For example, a 711 convenience store in Changzhou, Jiangsu posted a notice saying, “Our store will stop selling all products related to Nongfu Spring from now on. The store can sell products from all countries, but it will not sell products from Chinese companies.” The payment units are 711 Starlight Store and 711 Lemon Store. On March 10, the 711 convenience store staff involved said that the situation was true and that the store no longer sells any products owned by Nongfu Spring. However, on March 11, 711 responded to the store's suspension of sales, Nongfu Spring stated, “The employee's personal behavior does not represent the position of the headquarters.”

According to the official website of Nongfu Spring, Nongfu Spring was founded in 1996. In addition to drinking water, its products have already laid out categories such as ready-to-drink tea, energy drinks, juice, vegetable protein, coffee, etc., and has formed a diversified product matrix. The company's product sales rank among the highest in the market. In terms of retail sales in 2019, Nongfu Spring's market share of tea drinks, energy drinks and juice drinks all ranked in the top three in the Chinese market. In the domestic packaged water sector, in 2022, Nongfu Spring's market share reached 26.5%, ranking first; China Resources Yibao ranked second, with a share of 21.3%. Wahaha Pure Water ranked fourth, with a market share of 9.9%, respectively.

In 2020, Nongfu Spring was listed on the main board of the Hong Kong Stock Exchange, and its market capitalization soared. It is known as “Maotai in the Water”. The net worth of its founder, Zhong Yuyi, also soared with it. According to the “2023 Hurun 100 Wealth List” published by Hurun Research Institute, in 2023, Zhong Yuying became the richest man in China for the third time in a row with a fortune of 450 billion yuan.

Zhong Shuzi, the son of Zhong Yuyi, the founder of Nongfu Spring, is of American nationality. In response to netizens' buzz about this, the company avoided talking about it in this public opinion response. According to Baidu Encyclopedia, Zhong Shuzi, born in Hangzhou in 1988, graduated from Zhejiang University and is of American nationality. In January 2014, he joined Nongfu Spring. In June 2017, he began working as a non-executive director. In January 2020, he became the general manager of Yangshengtang Brand Center and a non-executive director of Nongfu Spring.

Will Zhong Shuzi become Zhong Yuyi's successor and manage Nongfu Spring in the future? As early as 2004, while attending the China Enterprise Growth High-Level Forum, Zhong Yuyi said; he has a son and two daughters. His son can't take over the class. He has died of this heart; his daughter is still young, and she has no drama. However, now, after a lapse of more than 20 years, the considerations about Nongfu Spring's successor may have changed.

In the competitive beverage market, brand image and consumer trust are the keys to the long-term development of enterprises. As a leading enterprise in China's beverage industry, how to deal with the current public opinion crisis, how to restore consumer confidence, maintain market competitiveness, and ensure product quality and corporate reputation will be the focus of the industry's attention. (Produced by Thinking Finance) ■