CHINA – Nongfu Spring, China’s largest bottled water producer, reported a significant slowdown in profit growth for the first half of 2024, attributing the decline to intense market competition and economic uncertainty.
The company’s net income grew by 8 percent year-on-year to 6.24 billion yuan (US$876 million), a sharp drop compared to the 23.3 percent profit growth recorded in the same period in 2023.
While Nongfu Spring’s profit narrowly surpassed analysts’ expectations of 6.17 billion yuan, the increase was less than a third of the 25.3 percent growth achieved in the first half of 2023.
Revenue for the period rose by 8.4 percent to 22.2 billion yuan (US$3.11B), a slower pace compared to the 23.3 percent jump in the previous year.
“The market potential of China’s soft beverage industry remains enormous, but the competition among brands is increasingly intense,” Nongfu Spring stated.
The company noted a growing consumer preference for healthier beverages, which is driving market trends towards more natural and innovative products.
However, the company’s revenue from packaged drinking water, which constitutes 38.5 percent of its total revenue, saw a significant decline of 18.3 percent, falling to 8.53 billion yuan (US$1.2B) from 10.44 billion yuan (US$1.46B) in the same period last year.
Nongfu attributed this drop to increased competition, an online backlash, and what it described as “malicious defamation” affecting its brand reputation and sales.
“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,” it said.
In contrast, revenue from tea beverage products, accounting for 38 percent of the company’s total revenue, surged nearly 60 percent.
Despite this growth, Nongfu Spring’s stock, listed in Hong Kong, has experienced a 41 percent decline so far this year, with shares dropping an additional 12 percent on Wednesday, according to LSEG data.
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