This is perhaps the most painful year since Nongfu Spring went public.
On August 2, Nongfu Spring closed at HK$30 per share, the lowest intraday price was HK$29.25, a new low since listing, and its market value fell to HK$337.394 billion. Compared with 539.268 billion Hong Kong dollars in May, more than 200 billion Hong Kong dollars have evaporated, so that the richest man Zhong Sui, who has always been low-key, "can't sit still".
Recently, the founder of Nongfu Spring, Zhong Sui, responded to the company's many turmoil this year on social platforms, "Since February 25, the competition black hand has taken turns" "Competitors are hateful and hateful, Nongfu Spring is not hard-working, it has long been killed!" ”
In fact, from the death of Wahaha founder Zong Qinghou at the end of February to the bromate detection incident of the Hong Kong Consumer Council in July, Nongfu Spring has stood at the center of the whirlpool of public opinion many times, and both the business side and the capital market have been affected.
To become one of the top three in China's beverage industry, Nongfu Spring is not a "soft persimmon". If, as Zhong said, the repeated turmoil is caused by competitors, then Nongfu Spring's "counterattack" has actually begun a long time ago, and the intensity is not small.
Offline "encirclement and suppression" Wahaha
The departure of national entrepreneur Zong Qinghou has brought Wahaha back to the field of vision of young consumers, and has also exposed its weakness in the channel to the public.
Many netizens found that it was not easy to find Wahaha's products in nearby convenience supermarkets. Purified water, in particular, is either placed in an inconspicuous position in the corner of the beverage cabinet, or the merchant does not stock it at all. Some supermarket owners were affected by public opinion and spontaneously replaced Nongfu Spring products with Wahaha, and Wahaha Company also increased its efforts to launch offline freezers.
Freezers are the "battleground" for offline channels of beverage brands, and during the peak sales season in summer, there is even a saying in the industry that "there is no sales without freezer display". However, the store space is limited, and the launch of new freezers may touch the interests of old players, and Nongfu Spring is one of the brands with strong offline channels.
In June, a sniper campaign against Wahaha launched by Nongfu Spring began.
According to the screenshots circulating in the market, the slogan "Send the baby home, grab my money, and take back my store" was played in the chat group of Nongfu Spring Liaobei District. The "baby" here does not refer to the child, but to its competitor Wahaha.
Another incentive plan for Nongfu Spring Co., Ltd. in Liaoning Region shows that from June 13th to June 30th, dealers can get a reward of 50 yuan if they replace the core competing product (Wahaha) product stacking box with Nongfu Spring product display. A heap of crates refers to beverage crates placed in piles. A convenience store clerk in Shanghai told reporters that this is an important sales display space, and the store space is limited, and the manufacturers who usually put it out will give certain rewards.
This is undoubtedly Nongfu Spring's encirclement and suppression of Wahaha's offline channels.
In fact, the use of financial advantages to contain competitors has also been used by Nongfu Spring before.
According to media reports, after the explosion of Yuanqi Forest sparkling water a few years ago, it is planned to intensively launch 80,000 smart networked freezers in the sinking market across the country, and give high rewards to open traditional channels such as stores and restaurants.
In order to consolidate the original advantages of Nongfu Spring, Zhong Sui personally led the team to swear and carried out the "God of Wealth from the Sky" activity in some areas, requiring dealers to put their own sparkling water into the refrigerator of Yuanqi Forest, and the reward given was that for every bottle of Nongfu Spring sparkling water displayed, a bottle of Changbai Snow with a terminal price of 3 yuan was given, with a cap of 48 bottles.
Push low-priced new products to grab the market
Nongfu Spring's response is obviously more than just a sniper move.
In May, a new Nongfu Spring purified water product packaged in a green bottle sparked heated discussions.
Previously, Nongfu Spring had made it clear that it would no longer produce pure water. Nongfu Spring's flagship product, Honggai Natural Water, stood out more than 20 years ago, relying on the concept that natural water is more beneficial than pure water.
At that time, the drinking water market was the world of pure water, and major manufacturers competed to see who could filter the water more cleanly. Through an experiment, Zhong explained that drinking pure water for a long time is not beneficial to people's health, and said that "Nongfu Spring no longer produces pure water, but only natural water".
Photo by Sun Wanqiu
Breaking his promise of "no longer producing pure water" he made more than 20 years ago, or Nongfu Spring's helpless move to seek new growth under the competition in the market.
From 2020 to 2023, Nongfu Spring Drinking Water will have revenue of 13.966 billion yuan, 17.058 billion yuan, 18.263 billion yuan, and 20.262 billion yuan respectively, with a growth rate of 22.14%, 7.06%, and 10.95% during the period. From this point of view, the performance growth rate of Nongfu Spring's drinking water segment has slowed down in the past two years, which is the company's most important business, accounting for half of the company's total revenue for a long time. Last year, the proportion of the drinking water sector in Nongfu Spring's revenue fell below 50% for the first time.
In addition, Nongfu Spring's biggest competitor in the water business, Cestbon, is about to go public.
In April, China Resources Beverage, the parent company of the Cestbon brand, submitted a prospectus to the Hong Kong Stock Exchange. In 2023, the retail sales of packaged drinking water of Nongfu Spring and China Resources Beverage will be 50.7 billion yuan and 39.6 billion yuan respectively, and the overall share of drinking water will be 23.6% and 18.4% respectively, ranking first and second respectively, with a gap of about 5% in market share. If China Resources Beverage is successfully listed and its influence is enhanced, Cestbon market share may further increase, and it currently occupies the first market share in the pure water segment.
According to a research report by Everbright Securities, purified water is the largest category in China's packaged drinking water market, accounting for more than 54% of the overall market all year round, and its market share is expected to continue to increase in the future. If Nongfu Spring insists on not making pure water, it means that half of the drinking water has been voluntarily abandoned.
Source: Everbright Securities Research Report
Coincidentally, Cestbon's main product is green bottle pure water, and Nongfu Spring's new product is also pure water in green packaging, and it has set off a "price war" just one month after its launch.
The reporter visited a Century Lianhua supermarket in Shanghai and found that the "9.9 yuan 12 bottles" Nongfu Spring green bottle pure water promotion was placed in the most conspicuous position at the door, and a bottle of water was less than 0.83 yuan. In the Auchan supermarket in Yangpu, the price of Nongfu Spring green bottle pure water is as low as 8.8 yuan for 12 bottles, which is converted into 0.73 yuan for one bottle, which is far lower than the price of competing products. Previously, the water in the price segment of 1 yuan was almost impossible to find, and the market had already formed a consensus on high-end.
From the pricing point of view, the price of Nongfu Spring Green Bottle Purified Water is always cheaper than that of Honggai Natural Water.
According to the online platform of Lianhua Supermarket, the price of Nongfu Spring natural water is 1.6 yuan, and the price of pure water is only 1.3 yuan, while the price of natural water is 12.8 yuan for the combination of 550ml*12 bottles, and the price of new pure water is only 8.9 yuan. Some people in the industry believe that from a marketing point of view, consumers are prone to form a perception that "natural water is more high-end than pure water" under price anchoring.
Set off a "price war" for sugar-free tea
"3 pieces of 10 yuan" and "2 pieces of 1 yuan"...... In Lawson and FamilyMart convenience stores, the promotional display board of Oriental Leaf Sugar-free Tea is particularly conspicuous, and many products are placed next to the self-service cash register. A bottle of Oriental Leaves at the event price is only about 3.3 yuan, which is almost discounted compared with the previous guide price of 6.5 yuan.
Photo by Zuo Yu
Nongfu Spring hopes to maintain the competitive advantage of Oriental Leaf in the sugar-free tea market through low prices.
In 2023, the revenue of Nongfu Spring Tea Beverage segment will exceed 10 billion yuan for the first time, which is the company's "second growth curve". However, the threshold of sugar-free tea category is low, the ingredient list only contains water and tea, and after the outbreak of the category market potential, independent brands and traditional beverage manufacturers have laid out, and many manufacturers have increased their investment in marketing.
Suntory, the biggest competitor of Oriental Leaves, also lowered the price, with two bottles of 500ml oolong tea costing only 6.5 yuan, and the discount for large-sized products is even greater, with the "add 2 yuan, one more piece" promotional sign in the Lawson convenience store showing that two bottles of Suntory sugar-free tea in large packages cost only 10.9 yuan.
Diet tea is undoubtedly the most competitive track in the beverage market this summer, and the competitive landscape is quietly changing.
Watchmaking: Water Hibiscus
According to the data of the sugar-free ready-to-drink tea market from April to May, Nongfu Spring and Suntory are still the first and second largest brands in the market, but the combined market share (CR2) of the two companies has decreased from more than 84% in the same period last year to about 75%, which means that the market that originally belonged to them is being carved up by other brands.
The third and fourth places have increased their competitive advantages, and the combined market share (CR4) of the top four brands has increased from 85% in the same period last year to more than 92%. Specifically, the independent brand fruit ripened this year's market share fell third, the reporter noticed that the brand since last year has frequently occupied the Shanghai area of FamilyMart, Lawson and other convenience store channels more golden display space; Master Kong Holdings ranked fourth in market share, the same as last year.
Oriental Leaves' opponents are not only the above brands, Wahaha and Dongpeng Beverage appeared in the top ten list of sugar-free tea market share this year, although they only ranked ninth and tenth, but one is the largest manufacturer in China's beverage industry, and the other is the fastest growing company in the industry last year, and the potential market competitiveness can be imagined.
Dongpeng Beverage's sugar-free tea product "Oolong Tea" photo by Shui Hibiscus
In the past three months, the shaking and declining stock price has affected the hearts of Nongfu Spring shareholders, and Zhong intends to "save the market" by increasing his shareholdings.
On July 9, Yangshengtang, the controlling shareholder of the company, said that out of recognition of the value of Nongfu Spring Company and confidence in the overall business development and growth potential in the future, it plans to acquire and increase the company's shares with its own funds within about six months from the date of the announcement, with an estimated total amount of no more than HK $2 billion. On July 26, it completed the increase of 1.83 million shares in Nongfu Spring. However, judging from the stock price trend, the increase in holdings may have little effect on boosting market confidence, and the current stock price is still not talking about stopping the decline and stabilizing.
To this day, the negative impact of the public opinion turmoil at the beginning of the year on Nongfu Spring has not completely dissipated, and even if Pan Zhanle, the men's 100m freestyle champion of the Paris Olympics, is signed as the brand ambassador, the comment area of social platforms is still mixed. In order to improve the brand image, Nongfu Spring has recently focused on public welfare and agricultural assistance projects.