(Bloomberg) — China’s wealthiest individual faces the possibility of relinquishing his top spot after nearly three years, as his fortune has diminished more than any other billionaire globally. This decline stems from escalating competition and public relations difficulties affecting his bottled water enterprise.
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Zhong Shanshan, chairman of Hangzhou-based Nongfu Spring Co., has seen his net worth plummet by $13 billion in 2024, bringing his total to $54.8 billion as of Monday, according to the Bloomberg Billionaires Index. This leaves him just ahead of Colin Huang, the founder of the online shopping platform PDD Holdings Inc., whose fortune is currently $47.3 billion.
This potential shift in rankings underscores the increasing complexity of the consumer sector, as businesses navigate a slowing economy and heightened competition from emerging brands.
Faced with intense competition in its primary bottled water market, Hong Kong-listed Nongfu Spring has recently been challenged by a surge in nationalistic sentiment and increasing health awareness among Chinese consumers. This has resulted in nearly a 20% drop in its share price since February 1, in stark contrast to Pinduoduo (PDD), whose share price has risen approximately 6% due to its ultra-low-cost products and aggressive promotions.
“Recent issues with Hong Kong’s consumer watchdog regarding product quality, intensified competition in the sector due to reduced consumer spending, and a boycott earlier this year over business practices have likely contributed to these concerns,” said Ada Li, a consumer analyst at Bloomberg Intelligence.
The majority of Zhong Shanshan’s wealth is derived from his holdings in Nongfu Spring and the pharmaceutical company Beijing Wantai Biological Pharmacy Enterprise Co.
Nongfu Spring did not immediately respond to a request for comment on Monday regarding its founder’s wealth and the challenges the company has faced this year.
Roller Coaster Ride for Nongfu Spring
Earlier this year, Nongfu Spring and its founder, Zhong Shanshan, faced intense scrutiny following the February death of Zong Qinghou, the founder of key competitor Hangzhou Wahaha Group Co.
The online community’s initial sympathy for Zong quickly transformed into criticism of Nongfu. Comments surfaced accusing Nongfu of using Japanese-inspired designs for its bottled water packaging and alleging that the company had employed questionable tactics to gain an edge over Wahaha.
Further allegations targeted Zhong’s son, claiming he holds a US passport, which cast doubt on the family’s loyalty to China. This backlash resulted in a significant spike in Wahaha’s sales. Despite Nongfu’s efforts to refute some of the accusations and pursue legal action against those spreading malicious rumors, the sentiment among many Chinese internet users remained largely unchanged.
Adding to the competitive pressure, in April, China Resources Beverage Holdings filed for a Hong Kong listing, aiming to bolster its bottled water brand C’estbon — one of Nongfu’s primary rivals.
Shortly thereafter, Nongfu launched a new purified water product directly competing with C’estbon, significantly lowering prices. The product is being sold for less than 1 yuan per 550-milliliter bottle on Alibaba Group Holding Ltd.’s Tmall platform, which is less than half its usual retail price.
Despite Nongfu reporting stronger-than-expected earnings last year, driven by robust sales of its ready-to-drink teas, the revenue share from packaged drinking water decreased to 47.5% from 54.9% in 2022, highlighting increased competition in the bottled water market.
In a recent setback, Hong Kong’s Consumer Council announced last week that Nongfu’s water was found to contain the maximum allowable limit of bromate, a substance that can pose health risks if overconsumed. This news caused Nongfu’s shares to plummet by 7.3% over two trading days. However, the council later clarified that their initial findings were based on criteria for a different category of water, leading to a partial recovery in share prices. Despite this, the gains were erased again by Friday.
In an effort to restore confidence, Nongfu revealed earlier this month that its founder, Zhong, plans to purchase up to HK$2 billion ($256 million) worth of the company’s shares through Yangshengtang Co., a holding company under his control. Regulatory filings show that on July 9, Yangshengtang acquired approximately 3.5 million shares.