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Zebra Consumption Chen Xiaojing

The bromate incident has caused complications in the “water war” initiated by Nongfu Spring.

The market is in full swing, and Zhong Shanshan will not allow off-market factors to affect the trend of the battlefield. Nongfu Spring chose to confront the Hong Kong Consumer Council and demanded a sincere apology from the other party.

Since the end of February, the public opinion storm that has lasted for several months has seriously affected Nongfu Spring's market and stock price.

Zhong Shanshan finally decided that he could no longer tolerate it and launched an all-out war, even at the cost of fighting on multiple fronts.

Tough fight with the Hong Kong Consumer Council

The origin of this turmoil is Hong Kong.

On the 15th, the Hong Kong Consumer Council (hereinafter referred to as the Hong Kong Consumer Council) released a test report on 30 common bottled water samples. The results showed that bromate was detected in samples of four brands, including Baishuishan, Nongfu Spring, Meiguo, and Feixue.

The bromate detection value of Meiguo and Feixue was 2μg/L; the bromate detection value of Baishuishan and Nongfu Spring was 3μg/L, which are far lower than the WHO's provisional guideline value for bromate in drinking water (10μg/L). However, the bromate detection values ​​of Baishuishan and Nongfu Spring reached the maximum limit of bromate (3μg/L) set by the European Union for natural mineral water and spring water treated with ozone.

What is bromate? It is a byproduct derived from the oxidation of bromide naturally present in water by the disinfectant ozone. The Hong Kong Consumer Council pointed out that ingesting large amounts of bromate can cause nausea, abdominal pain, vomiting and diarrhea, and in severe cases may even affect the kidneys and nervous system. The International Agency for Research on Cancer has classified one of the bromates, potassium bromate, as a possible human carcinogen (Group 2B).

The Hong Kong Consumer Council is one of the statutory bodies in Hong Kong. Its responsibility is to protect the rights and interests of consumers in Hong Kong, China. The monthly magazine "Choice" under the organization regularly publishes product tests, service surveys and research reports.

During this peak season for bottled water consumption, the Hong Kong Consumer Council's report caused a huge uproar.

On the 15th, Nongfu Spring (09633.HK) stock price plummeted 4.56%, and its market value evaporated by nearly HK$18 billion in one day.

Yesterday, Nongfu Spring commissioned a Hong Kong lawyer to send a "lawyer's letter" to the Hong Kong Consumer Council, pointing out that the relevant articles published by the organization contained problems such as "incorrect application of standards, incorrect standard judgment, and obvious subjective misleading", and demanded that it solemnly apologize to the company and consumers.

The Hong Kong Consumer Council said it had received the lawyer's letter and was studying and following up. The agency reiterated that the relevant articles and press releases on the bottled water test report clearly pointed out that all 30 tested samples did not contain any harmful substances exceeding the relevant WHO guideline values ​​and were safe to drink. The focus of the article was on the cost-effectiveness of each sample and the impact of the plastic bottles of bottled water on the environment, not product safety issues.

Yesterday, Nongfu Spring's stock price continued to fall, reaching its lowest point since March 2022. It closed at HK$32.550 per share, down 2.84%.

Another brand involved in the report, Baishuishan, issued a statement through its official Weibo account and other channels late yesterday, saying that its product quality met the standards. The statement did not point the finger at the Hong Kong Consumer Council, but pointed out that some media outlets had misinterpreted the test results and reported seriously inaccurately.

Water battle in full swing

This summer, the bottled water price war is in full swing, with Nongfu Spring, the initiator, clearly having the upper hand.

In 1996, Nongfu Spring's predecessor, Yangshengtang Drinking Water Co., Ltd., was established, and its first production base was started on the shores of Qiandao Lake in Jiande, Zhejiang.

In the era when bottled water was just emerging in China, Wahaha, led by Zong Qinghou, was the absolute industry leader with its strong advertising, marketing and channel expansion capabilities.

In 2000, four years after entering the bottled water business, Nongfu Spring announced its transformation. To this day, the company's official website clearly records the development history: Because purified water is not good for the human body, Nongfu Spring solemnly announced to the industry that it would no longer produce purified water, but would instead produce all natural water.

In 2012, Nongfu Spring, which took a differentiated approach, finally became the number one bottled water brand in the country.

In an article a few months ago, Zhong Shanshan said: "To this day, I still insist that the minerals in water are essential to human health, which is why I insist on producing natural water."

And after a lapse of 24 years, in April this year, Nongfu Spring suddenly returned to the pure water track and launched "Green Farmer", wedge a nail into the strong market of Yilibao and Wahaha.

Nongfu Spring kept a low profile on this major adjustment, waiting for the distribution to be completed before launching a price "blitzkrieg". "Green Farmer" was the vanguard of this war.

As soon as the war broke out, the mainstream bottled water market, which had been stable at the 2 yuan price range, was directly pulled back to below 1 yuan.

Recently, Green Farmer has been placed in a prominent position in many online and offline channels. The unified promotional price of 12 bottles/box of Green Farmer is 9.9 yuan, which means the price of a single bottle is less than 0.83 yuan. In some supermarkets, the price is even as low as 8.9 yuan, which is about 0.74 yuan per bottle.

In previous summers, when the peak season for bottled water consumption arrived, various brands would also promote sales through large packages or bulk packaging, but low-price competition like this year has not been seen in many years.

Nongfu Spring has already set up its battle posture, and Yilibao, Wahaha and others have also chosen to follow suit at the first opportunity. However, none of them has yet lowered the price to the bottom like Nongfu Spring did.

Total defense war

Selling water, a seemingly insignificant business, has made Zong Qinghou and Zhong Shanshan two of the richest men in China in Hangzhou.

Being from the same city and the same industry, Zong Qinghou and Zhong Shanshan have inextricable ties and endless stories and past events to tell.

In February this year, Zong Qinghou passed away due to illness. When people from all walks of life were mourning the death of Zong, a large number of slanders against Zhong Shanshan and Nongfu Spring suddenly appeared on the Internet.

On the first day after Zong Qinghou's death, Zhong Shanshan published a eulogy titled "Two or Three Things Between Me and Zong Qinghou". In the not-so-long article, Zhong Shanshan briefly recalled his entrepreneurial experience and his interactions with Zong Qinghou, and also took the opportunity to clarify various misunderstandings of himself by the outside world.

Unexpectedly, this article not only failed to calm public opinion, but also pushed him and Nongfu Spring to the forefront. The removal of products and market obstacles directly affected Nongfu Spring's sales. At the same time, the company's stock price once again ushered in a wave of sharp declines. In just over a month, the market value of 150 billion yuan was wiped out.

Zhong Shanshan cannot sit idly by when faced with a sudden and unexpected blow. He must win back the market while also protecting the stock price, as the two complement each other.

The price war should be launched in this context. As for the stock price, Zhong Shanshan adopted the most direct strategy - increasing holdings.

After the market closed on July 9, Nongfu Spring announced that its controlling shareholder, Yangshengtang, plans to invest no more than HK$2 billion in the next six months to increase its stake in Nongfu Spring in the open market. The day after the news was disclosed, Nongfu Spring's stock price once soared by more than 8%.

However, the good market atmosphere did not last for a few days, as the bromate incident suddenly occurred.

In the face of a major war, Zhong Shanshan will not allow any off-field factors to affect the trend of the battlefield. He is already fighting on multiple fronts, so he won't care about one more battle.