A FORAY INTO NEW WATERS
Having already achieved success in the bottled water market in China, Nongfu Spring is now eyeing a share of the global pie
Zhong Shanshan knows very well what headlines are all about, having written his fair share of them during his years of working as a journalist at Zhejiang Daily in Hangzhou, East China’s Zhejiang province.
These days, however, as the chairman of China’s leading bottled water company Nongfu Spring, Zhong has instead become accustomed to making the headlines.
In 1993, Zhong set up his first business, naming it Yang Sheng Tang Group, and it sold health products made from soft-shell turtles. It was only in 1996 that he decided to set up Nongfu Spring to enter the bottled water market. Not long after its inception, Nongfu Spring raised eyebrows when it announced that it would cease sales of its purified water and focus on producing just mineral water, saying that the former was found to possess no health benefits.
Zhong said that the move was partly due to his training as a journalist, which taught him to constantly seek out the truth.
Although the bold gesture isolated Nongfu Spring from the other players in the market, it actually managed to bolster their sales of bottled water. The company had also diversified into other beverages with health benefits to build on this success. It introduced products such as fruit juices, vitamin water, bottled tea and even a sports drink called Scream which in 2010 became the only Chinese brand among the top five bestselling sports beverages in China, alongside Red Bull, Gatorade and Suntory’s Super Ultima.
“Every product sold by my company has been developed to be beneficial to health. And we keep improving them by challenging the limits of our knowledge and understanding. There is only a starting point. There is no end to our quest for innovation,” said the 62-year-old.
The company grew steadily in strength and stature over the years under Zhong’s leadership, achieving revenues of more than 10 billion yuan ($1.53 billion) in 2011. Today, Nongfu Spring’s red-capped mineral water bottles — the company’s main revenue generator — are so ubiquitous in China they can be found in practically every convenience store and supermarket.
The company again made the headlines in 2013 when it got embroiled in a massive food safety scandal. In the course of a month, the Beijing Times had ran 76 news stories questioning the quality of Nongfu Spring’s bottled water. In response, Nongfu Spring filed a lawsuit against the newspaper, claiming that the publication had intentionally and systematically ran the articles in an attempt to tarnish the former’s image and reputation.
“It was totally fabricated,” said Zhong, who added that his company suffered from a 25 percent drop in sales that year as many supermarkets pulled Nongfu Spring’s water from their shelves because of the scandal.
Nongfu Spring’s name was cleared and its water deemed safe for consumption following tests done by the Zhejiang provincial government, which presence of additional minerals with health benefits.
The premium table water, packaged in an artistically designed glass bottle sporting silhouettes of animals found in the mountain range, is the priciest water sold by Nongfu Spring, costing about 50 yuan for a 750 ml bottle. The company’s famous red-capped, 550ml bottles usually cost no more than 3 yuan.
“These are not just meant for quenching thirst,” said Zhong, in an exclusive interview with China Daily USA, about his new range of bottled water. “Twenty years ago, people were drinking water because they were thirsty. Nowadays, people are using water to clear their palates after indulging in a bottle of wine.”
Zhong believes that the luxury water segment in China will see explosive growth over the next few years, and that this new product will help the company distinguish itself against the stiff competition in China.
According to research group Canadean, China had in 2013 overtaken the United States as the world’s largest bottled water market and is home to more than a thousand brands, local and foreign. In another report by research firm Euromonitor, China’s global consumption of bottled water had increased nearly two-fold since 2006. Euromonitor also expects sales in China to reach $16 billion by 2017.
But Zhong is not content with just being a leader in China as he is also seeking to make an impact in the global scene with Nongfu Spring.
“In terms of our capability of producing quality products, we can compete with any drink conglomerate such as Dannon or Coca Cola, except in carbonated soft drinks. However, if you’re talking in terms of brand image, we are at an disadvantage because we are, after all, made in China,” said Zhong
In order to tackle this problem, Nongfu Spring is already planning to manufacture and sell its products in foreign markets.
“Plans are already in the pipeline. The company is set to go global in 2017,” added Zhong.