Yangshengtang, the controlling shareholder of Chinese bottled water giant Nongfu Spring, has announced a major share repurchase plan. According to the latest announcement, Yangshengtang plans to use its own funds to repurchase the company's H shares in the next six months, and the funds involved are expected to be no more than HK$2 billion. This move is seen as a positive response by the company's founder Zhong Shanshan to the current market conditions, aimed at stabilizing Nongfu Spring's share price and maintaining its market position.
Recently, Nongfu Spring has faced a series of challenges, including controversy and falling stock prices, which have led to a significant reduction in its market value. Although the company previously announced record annual revenue and profit data and took a number of measures to restore market confidence, such as environmental protection initiatives and price competition strategies, these efforts have not been able to continuously boost stock prices. Therefore, this share repurchase is seen as a direct action taken by Zhong Shanshan to protect the company's market value and shareholder interests.
This is the first time that Zhong Shanshan has faced such a severe market test in the 28 years since he founded Nongfu Spring. Through this share repurchase, Nongfu Spring has demonstrated its strong financial strength and firm confidence in future development, while also demonstrating the management's commitment to safeguarding the interests of shareholders.
Nongfu Spring successfully established its leading position in China's bottled water market in 2016, surpassing its main competitor C'estbon, and has maintained this position for six consecutive years since then. However, by the end of 2023, the company encountered a severe public opinion challenge that had a significant impact on its reputation. In industry discussions, although Zhong Suisui’s Nongfu Spring once ignored the existence of its long-term rival Yibao, the latter has quietly begun to launch a market counterattack. Although Wahaha has gained an advantage in the public opinion war, its share of the bottled water market is still far lower than that of Nongfu Spring, which has a market share of 26.5%. Faced with the challenge, Nongfu Spring released its 2023 financial report, showing that the company has recovered tens of billions of Hong Kong dollars in market value lost due to the public opinion storm, demonstrating its strategy of using time to dilute the negative impact of the Internet.
After being silent in the bottled water market for six years, Yibibao suddenly became active in May this year and submitted an application for listing to the Hong Kong Stock Exchange. This move not only broke the calm of the market, but also posed a potential threat to the industry leader Nongfu Spring. In response, Nongfu Spring quickly launched a green-packaged pure water in an attempt to consolidate its market position.
Nongfu Spring has been able to stand out in the fiercely competitive market thanks to a strategic decision made by Zhong Shanshan in 2000: to stop producing purified water and focus on the production of natural water. This decision was in stark contrast to the position of Zong Qinghou, the founder of Wahaha, who advocated purified water, making Nongfu Spring unique in the market.
In the capital market, the rise in stock prices of listed companies depends on a number of key factors: market share, operating income, profitability, advanced technology, R&D capabilities and uniqueness. Although the bottled water industry is low-tech, its uniqueness is particularly critical. This uniqueness is mainly reflected in the lack of direct competitors in the market, while meeting conditions such as market share, operating income and profitability, making it possible for the listed company to achieve independent market performance. Nongfu Spring is an obvious example. In 2020, Nongfu Spring was listed on the Hong Kong Stock Exchange. With the brand concept of "supporting natural health", the market value reached HK$370.3 billion on the first day, and founder Zhong Suisui became a hot figure. Subsequently, Nongfu Spring's share price continued to rise, with a market value of more than HK$600 billion, making Zhong Suisui, who holds 83% of the shares, firmly ranked as the richest man in China. However, this year, Zhong Suisui gave up the unique brand positioning that he had insisted on for 28 years.
For those listed companies that were once unique, once they choose to go with the flow, their future fate will become unpredictable.
Nongfu Spring, a brand that has been deeply rooted in people's hearts with its slogan "a little sweet", recently launched a new advertising campaign: "Green bottle is a little sweet, red bottle is healthier." This change has not only attracted widespread attention in the market, but also sparked heated discussions among consumers. In May, the company launched a green bottle of purified water, which quickly became a hot topic on social media. Although some people think that this new product is similar to other brands in terms of packaging design, Nongfu Spring's market behavior undoubtedly shows its active attitude in product innovation and market competition.
Nongfu Spring Company has recently experienced a significant decline in market value in the capital market, which may be related to its decision to enter the purified water market and change the color of its product packaging. Analysts pointed out that the plunge in Nongfu Spring's stock price was not only due to market turmoil, but may also be related to investors' differences in the valuation of the pure water market. At the same time, its main competitor, Yibao, specializes in purified water products, and its listing valuation on the Hong Kong Stock Exchange is approximately HK$17.8 billion.
In China's bottled water market, C'estbon's market share is 21.3%, only 5% lower than Nongfu Spring. At the peak of Nongfu Spring's market value, 5% of its market value reached HK$30 billion, almost twice the valuation of C'estbon. Although Nongfu Spring's stock price has experienced a sharp decline, through this comparison, it can be clearly seen that Nongfu Spring's stock price in the field of pure water is significantly overvalued, which has prompted investors to adopt a negative investment strategy.
Some believe that Nongfu Spring's decision to change its product packaging to green may have been a bad business decision. However, the company's top brass don't seem ready to admit it.
In the movie Farewell My Concubine, there is an unforgettable line: "No one can live without madness." This sentence is interpreted in modern society as: whether it is outstanding figures in the field of art or science, they are often those who are extremely obsessed with what they do. Only this extreme dedication can enable them to achieve outstanding achievements.
Although the well-known entrepreneur Zhong Shanshan is not a giant in the scientific community, he also demonstrated this "crazy" spirit. He once said: "If the leader imitates the behavior of the followers, then the followers are not far from the leader." Nongfu Spring Company not only did not choose to imitate, but instead adopted a seemingly disadvantageous strategy - proactively reducing prices.
In May, Nongfu Spring launched its green-bottled products. In June, the company decided to reduce product prices across the board, becoming a market leader. During the "6.18" shopping festival, for example, the price of green-bottled pure water in Nongfu Spring's official flagship store dropped to 9.9 yuan per bottle, or only 0.825 yuan per bottle on average, which is lower than other major competing brands such as Yilibao and Wahaha. Faced with Nongfu Spring's strategic adjustment, these competitors also began to adjust their own strategies, reducing prices to 11-12 yuan per bottle.
Nongfu Spring has adopted a radical price reduction strategy in order to not give competitors room to challenge. Despite the strategy of price reduction, attacking competitors and expanding market share, the capital market has not responded positively to Nongfu Spring's stock price, causing its stock price to fall sharply in the past two months. Whether consumers are willing to pay for it remains an unknown. Faced with the continued decline in stock prices, some people began to feel uneasy.
This person is Zhong Shanshan.
As China's richest man, his wealth is mainly based on Nongfu Spring. His other listed company, Wantai Biological, is a leading vaccine company with a market value of 83.182 billion yuan in the A-share market, which has brought him additional wealth growth. Zhong Shanshan's crossover from the aquaculture industry to the vaccine industry is considered to be highly innovative. In contrast, it does not seem so rare for Internet technology people to turn to new energy vehicle manufacturing, because after all, they are still operating in the same field.
Zhong Shanshan is undoubtedly a rare genius, which may be one of the reasons why he can sit firmly on the throne of China's richest man. In the face of the controversy over Wahaha, he just responded at most by saying: "No matter how the Internet criticizes, consumers are always honest." However, what he did not expect was that "the capital market is also honest."
Investors in the A-share market are shifting from the virtual economy to the real economy, and their vigilance towards the Hong Kong stock market is also increasing. Companies that have submitted IPO applications to the Hong Kong Stock Exchange many times are still facing the risk of breaking the issue price, and the market is no longer buying into the growth story of the bottled water industry. Regardless of the color of the bottled water packaging, its market positioning and consumption trends have been clear. Consumers often no longer go back to choose purified water after choosing mineral water. The real business value lies in innovation, and it is technological progress that drives the progress of the times. Compared with the traditional bottled water business, cutting-edge technologies such as artificial intelligence, new energy vehicles, and chip semiconductors are the leading forces leading the development of the global market.
As the era of accumulating wealth simply by selling bottled water fades away, China's wealthy are beginning to look for new ways to get rich. Faced with the failure of new product launches and price cuts, they are beginning to seek stock market means to stimulate stock price increases, and the most common strategy is to increase holdings. For example, Nongfu Spring recently announced that its controlling shareholder Yangshengtang plans to use its own funds to acquire and increase its holdings of the company's H shares in the next six months, with an estimated investment amount of no more than HK$2 billion, in order to enhance market confidence and support stock prices.
As the controlling shareholder of Nongfu Spring, Zhong Shanshan, the actual controller of Yangshengtang, invested HK$2 billion in self-rescue, which not only avoided the loss of funds, but also demonstrated his superb business strategy. Influenced by this positive news, Nongfu Spring achieved a 4.44% increase in stock price at the end of trading on July 10, with a market value of HK$396.4 billion. Although there is still a gap of more than HK$200 billion compared with the historical highest market value of more than HK$600 billion, this market operation ensures that Zhong Shanshan continues to sit firmly on the throne of China's richest man. It is worth noting that although the stock prices of Nongfu Spring and Wantai Biological have experienced drastic fluctuations, Zhong Shanshan's personal wealth has not fluctuated significantly. According to the data of the Hurun Wealth Ranking, his wealth reached 365 billion yuan, 390 billion yuan, 455 billion yuan and 450 billion yuan from 2020 to 2023 respectively. The 2024 New Fortune 500 Wealth Creation List shows that his wealth has increased to 456.27 billion yuan this year. This phenomenon has aroused public attention on the growth trend of the wealth of China's richest man.
Yu Renrong, a leader in China’s chip industry, has experienced significant fluctuations in his fortune recently. As the founder of Weill Co., Ltd., his personal assets have dropped from 95 billion yuan to 45.5 billion yuan. Despite facing the situation of halving his wealth, Yu Renrong is still committed to promoting the development of China's semiconductor industry and actively promotes the concept of "technological power" . In addition, Yu Renrong also announced that he will invest 30 billion yuan to establish a university, with enrollment expected to begin in 2025. This move is aimed at cultivating more scientific and technological talents and supporting the country's scientific and technological innovation. In the capital market, investors are looking forward to the emergence of entrepreneurs like Yu Renrong who can not only create economic value but also contribute to society.
