Nongfu Spring’s Zhong Shanshan Suffers $4.4B Wealth Wipeout In A Day
![Nongfu Spring’s Zhong Shanshan Suffers .4B Wealth Wipeout In A Day Nongfu Spring’s Zhong Shanshan Suffers .4B Wealth Wipeout In A Day](https://i2.wp.com/imageio.forbes.com/specials-images/imageserve/66cec556c40a8aa120f7cd33/0x0.jpg?format=jpg&height=900&width=1600&fit=bounds&w=780&resize=780,470&ssl=1)
Nongfu Spring purified water for sale in a supermarket in Suqian, Jiangsu Province, in July.
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Zhong Shanshan, founder of Chinese beverage giant Nongfu Spring, saw his wealth plunge by a whopping $4.4 billion in a single day after the company’s core drinking water business was reported to have contracted in the first half of 2024 in interim results released late Tuesday.
The 69-year-old mogul still has a net worth of $45.6 billion largely based on a stake in Hong Kong-listed Nongfu Spring, according to Forbes estimates. But Zhong, who only regained the crown as China’s richest man on Tuesday, is on the cusp of losing it again as company shares plunged as much as 13% Wednesday. The billionaire’s wealth is now only a whisker above No. 2 Zhang Yiming, the founder of TikTok owner ByteDance, who has a fortune of $43.4 billion based on a stake in the privately held internet giant, according to the Real-Time Billionaires List.
Nongfu Spring’s problems are on two fronts. Stronger competition and public relations missteps have caused its drinking water business, which once accounted for about half of its sales, to contract by 18.3% year-on-year to 8.5 billion yuan ($1.2 billion) in the first half, according to the interim report. Faster growth in other business lines that include tea-based beverages and energy drinks helped to make up for the losses, leading total revenues to grow by 8.4% to 22.2 billion yuan during the same period. Profit was 6.2 billion yuan, up 8% year-on-year, which analysts say marks one of the slowest growth rates in several quarters.
“For Nongfu Spring, its other business units don’t represent the company’s biggest advantages,” says Kenny Ng, a Hong Kong-based securities strategist at Everbright Securities International. “The market is more worried about the slowing down of its core water business, and investors are no longer so sure about the company’s future potential.”
Ng says he doesn’t expect a quick turnaround for Nongfu Spring. He predicts the company might keep reporting single-digit profit growth over the next one to two years.
This is because the Hangzhou-based beverage giant is engaged in a prolonged price war with competitors Wahaha, which was founded by the late billionaire Zong Qinghou, and state-run China Resources Holdings, which received in July regulatory approval to list its beverage unit in Hong Kong. To fend off rivals and attract more budget conscious consumers, Nongfu Spring has lowered the price of its green-capped purified water products to less than 1 yuan per bottle. Its red-capped bottled water, which used to sell for about 2 yuan each and is near ubiquitous in China, now often carries a price tag of 1.2 yuan per bottle after the company cut its price.
Earlier this year, the company faced a consumer boycott over Zhong’s handling of his relationship with Wahaha, a former business partner, after the death of founder Zong Qinghou. Internet users also accused the mogul of being “pro-Japan,” pointing to the packaging design of certain tea-based products that they said resembled Japanese architecture.
In its interim report, Nongfu Spring called some of the criticism malicious, but admitted its impact.
“Since the end of February 2024, our brand and sales have been severely impacted in a negative way due to a surge of online attacks and malicious defamation against our company and its founder,” the company wrote in its English language release. “Due to the online public opinions in the first half of the year, the group’s brand reputation and sales of packaged drinking water products has been adversely impacted.”
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