Due to public opinion impact, the revenue of Nongfu Spring drinking water plummeted by nearly 20% in the first half of the year, and the growth rate of the group's revenue and net income hit a three-year low.
On August 28th, nongfu spring's Hong Kong stock market opened with a sharp decline, dropping as much as 12% at one point, hitting a new low since its listing. An even more astonishing figure is that nongfu spring's stock price has cumulatively plummeted by nearly 40% since the beginning of the year.
Regarding the sharp drop in nongfu spring's stock price, market analysis believes it is mainly related to the company's latest financial report data decline. Nongfu spring stated that malicious public opinion led to the first significant decline in the core revenue from its drinking water.
On the evening of August 27th, nongfu spring released a financial report announcement, stating that in January and February of this year, the group's sales of packaged drinking water products were good, with a 19.0% increase in sales revenue compared to the same period last year. However, starting from the end of February, there was a large amount of public opinion attacks and malicious slander against the company and its founder on the internet, which had a serious negative impact on its brand and sales, leading to a significant drop in the revenue of nongfu spring's packaged drinking water products for the first time.
In the first half of 2024, nongfu spring's packaged drinking water products achieved a revenue of 8.53 billion yuan, a decrease of 18.3% compared to the same period last year, with the proportion of total revenue dropping from over 50% in the past to 38.5%.
The performance of the core product has plummeted, directly affecting the group's overall profit-making ability.
According to the financial report released on Tuesday, Nongfu Spring's revenue in the first half of this year was 22.17 billion yuan, an increase of 8.4% year-on-year; the attributable net profit of the parent company was about 6.24 billion yuan, an increase of 8% year-on-year. Compared with the mid-term financial reports of the past three years, the growth rate of revenue and net profit of Nongfu Spring has reached a record low.
Affected by the public opinion turmoil, the group's revenue from drinking water plummeted by nearly 20% in the first half of the year.
According to a previous report by Interface News, in March this year, Nongfu Spring encountered a severe online attack since its establishment. The founder of Wahaha, Zong Qinghou, passed away, and the "grudge" between Nongfu Spring and Wahaha, as well as the past water war, was unearthed again. Wahaha's products received unprecedented attention, and consumers from all over the country began to rush to buy Wahaha products, leading to temporary shortages.
Meanwhile, Nongfu Spring's sales of water products have plummeted. Nongfu Spring disclosed to Interface News that industry insiders estimated that the prolonged public opinion turmoil caused Nongfu Spring to lose more than 7 billion yuan in revenue in the first half of the year.
To cope with the impact of public opinion, Nongfu Spring has been clarifying the truth to the public through various means since March and taking legal action against rumor-mongers.
In addition, Nongfu Spring has taken a series of marketing measures, including launching new products, investing in end terminals, and promoting price wars, in an attempt to save offline sales of packaged water.
In April, Nongfu Spring launched a new product of green bottled purified water. This is the first time the group has returned to the purified water track after focusing on natural drinking water for twenty-four years. This was followed by various aggressive promotional activities. Currently, the retail price of green bottles (550ml) in some channels has dropped to less than 70 cents per bottle.
However, this move quickly triggered a response from beverage giants such as Yi Bao, Kangshifu, and Jinmailang. Bulk and large-packaged purified water have seen significant price reductions, and the "price war" for drinking water has begun.
Nevertheless, the negative impact of public opinion is deeply rooted, and Nongfu Spring's drinking water sales in the first half of the year have plummeted.
At the subsequent mid-term performance communication meeting, Nongfu Spring management stated that the market share of packaged water in July and August has rebounded compared to the previous period. However, the impact of the public opinion event has not been completely eliminated, and it is expected that it will take a relatively long time for recovery in the future.
Nongfu Spring also expects that the net margin in the second half of the year will be slightly lower than in the first half. In 2023, the overall company has achieved a high level of net margin, and there will be a slight decrease in 2024, but overall it will remain at a stable level. The company is not limited by the OPM (expand and strengthen) strategy. The initial guidance is double-digit growth, and actions will not be taken just to achieve a certain goal. Long-term profitable and healthy development is the management's main focus.
Tea beverages support half of the company's market.
While sales of drinking water have plummeted, tea beverages have become the second largest growth engine for Nongfu Spring.
In the first half of the year, Nongfu Spring's tea beverages (including Oolong Tea, Tea ?) achieved a revenue of 8.43 billion yuan, a 59.5% increase over the same period last year, accounting for 38.0% of the total revenue, which is basically on par with packaged drinking water.
If functional drinks, fruit juice beverages, and others are included, the entire beverage sector of Nongfu Spring saw a 36.7% revenue increase compared to the same period last year, reaching 61% of the total revenue.
According to Nielsen's data published in August last year, the Oolong Tea, which was launched in 2011, has seen rapid growth for 3 consecutive years with a compound growth rate of over 90%; Oolong Tea, along with Tea ?, contributed to more than 60% of the incremental growth in the ready-to-drink tea market.
Nielsen data also shows that as of July this year, Oolong Tea has captured over 70% of the market share in the unsweetened tea category.
On August 10th this year, in the CCTV program "Dialogue", Nongfu Spring's founder Zhong Shanshan stated that Nongfu Spring's tea beverages were unprofitable for the first six years, but the growth curve started to rise in 2021. In the first three months of 2023, there were approximately 5 to 6 billion yuan in profit, and in 2024, there was explosive growth. Last year's market had only 10 follow-up varieties, and this year, there are estimated to be no less than two thousand. But this is a process, and in the end, the best ones will remain.