NONGFU SPRING and its founder, Zhong Shanshan, have successfully navigated a severe crisis, but questions remain about the company's long-term safety.
Two years ago, the bottled water giant was engulfed in an unprecedented public opinion storm. Issues ranged from philanthropic disputes and historical brand entanglements to questions about the founder's nationality and accusations of "Japanese-style" product packaging. This wave of online criticism triggered a severe brand trust crisis. Compounding the problem, the overall soft drink industry was experiencing slowing growth and intensifying competition. Against this backdrop, NONGFU SPRING's core water business was hit hard, with revenue and profit growth slowing significantly, and its stock price nearly halved at one point. Amid these internal and external challenges, many wondered if a recovery was possible.
On March 24, 2026, NONGFU SPRING answered with an annual report that exceeded expectations. The financial results showed that for the full year 2025, the company achieved revenue of 52.553 billion yuan, a year-on-year increase of 22.5%, breaking the 500 billion yuan mark for the first time. Net profit attributable to shareholders reached 15.868 billion yuan, surging 30.9% year-on-year, with both metrics hitting record highs. Notably, the gross profit margin rose to 60.5%, and the net profit margin exceeded 30%, reaching their best levels since 2017. The following day, the stock price surged over 9%, as the capital market voted with its money. In his financial report address, Zhong Shanshan's statement that the "new management team has withstood the test of public sentiment" underscored the significance of these results.
However, a crucial question arises: in a beverage industry with slowing growth and fierce competition, what is the true source of NONGFU SPRING's growth? Is it a post-crisis rebound, or has the company built a genuinely durable competitive advantage? Can the momentum of this strong recovery support steadier, longer-term growth?
Analyzing the growth structure of the 52.553 billion yuan revenue reveals a significant shift: NONGFU SPRING is no longer just a "water company." In 2025, the tea beverage segment generated annual revenue of 21.596 billion yuan, a 29.0% increase year-on-year, now accounting for 41.1% of total revenue. After surpassing packaged water in 2024, tea beverages have officially become the company's primary growth engine, with the Oriental Leaf brand being the standout performer.
Remarkably, this product, once voted one of the "worst-tasting drinks" by netizens, has become the dominant leader in the unsweetened tea segment after nearly a decade of slow development. Its sales trajectory is impressive: from approximately 400 million yuan in 2018 to about 6.7 billion yuan in 2023. Industry insiders estimate its total sales exceeded 10 billion yuan in 2024.
The rise of Oriental Leaf is tied to the broader trend of unsweetened tea. Around 2020, rising health consciousness created a boom for these beverages. Public data shows China's unsweetened tea market grew from about 4 billion yuan in 2019 to approximately 9 billion yuan in 2024, with a compound annual growth rate exceeding 20%.
However, by 2025, industry growth slowed noticeably, with negative growth in February and March. Even during the peak sales season from April to September, growth rates in several months were less than half of the 2024 levels. Many second and third-tier brands saw sharp sales declines, accelerating industry consolidation. Yet, amidst this downturn, Oriental Leaf demonstrated the "strong get stronger" principle: its market share increased from 75% in 2024 to nearly 80% in 2025—meaning four out of every five bottles of unsweetened tea sold were Oriental Leaf, indicating continued market concentration.
This outcome is not accidental. Long before unsweetened tea was popular, NONGFU SPRING made sustained brand investments and consumer education for Oriental Leaf, embedding "real tea extraction, 0 sugar, 0 calories" in consumers' minds, creating a formidable brand barrier. In response to market changes, Oriental Leaf continued to iterate, launching new flavors like Chenpi White Tea and Chrysanthemum Pu'er in 2025, and introducing 1.5L large packages to expand into family consumption scenarios. Crucially, leveraging its distribution advantage of over 3 million retail outlets and 5,000 distributors, combined with point-of-sale activities like "win prizes under the cap" and "one-yuan exchanges," NONGFU SPRING maintained strong sales momentum even during the industry slowdown, continuously squeezing the market space for smaller brands.
Regarding the packaged water business, revenue in 2025 was 18.709 billion yuan, a 17.3% increase year-on-year, successfully reversing the decline seen in 2024. This recovery is attributed to the company's timely adjustments to its channel strategy, helping to regain market share.
In 2024, affected by public pressure and market share loss, the company launched a green-bottled purified water with low-price promotions, but market response was below expectations. In 2025, the focus shifted back to the red-bottled natural water, consolidating point-of-sale performance through refined channel placements like the "10,000-case display" strategy. Simultaneously, to deepen the brand perception of "natural water sources, transparent factories," the company added three new water sources, bringing the national total to 16, and launched new products like high-end pure edible ice, actively exploring new consumption scenarios such as the food service sector.
As the impact of public sentiment gradually faded, the market share for packaged water continued to recover. According to Mashang Win data, by the end of September 2025, the company's packaged water market share stabilized at the industry's top position (33.0%), an increase of 4.8 percentage points from the low point in April 2024 (28.2%). However, the proportion of water revenue to total revenue fell by 1.6 percentage points to 35.6%, still below 2023 levels.
Beyond water and tea, the juice and functional beverage segments also contributed significant growth in 2025. Functional drinks benefited from sports and health trends and upgrades to the "Scream" product line, with revenue growing 16.8% year-on-year to 5.762 billion yuan. Juice revenue, driven by premium products like the 17.5° NFC series selling well in channels like Sam's Club, reached 5.176 billion yuan, a 26.7% increase year-on-year. Together, these segments contributed over 20% of total revenue.
Compared to revenue growth, NONGFU SPRING's profitability was even more impressive. The net profit attributable to shareholders of 15.868 billion yuan in 2025 represented a substantial 30.9% year-on-year increase, 8.4 percentage points higher than the revenue growth rate. The gross profit margin improved by 2.4 percentage points to 60.5%, and the net profit margin rose by 1.9 percentage points to 30.2%, both reaching record highs.
The gross margin improvement stemmed partly from lower costs. According to the company's prospectus, PET, the main material for bottle production, accounts for about 30% of total costs. PET prices remained relatively low throughout 2025, and simultaneous decreases in costs for materials like cardboard boxes and sugar also contributed directly to the higher gross margin.
Product mix optimization was another key factor. High-margin tea beverages have become the largest business pillar. In the water segment, focusing on the higher-profit red-bottle natural water and reducing subsidies for the lower-margin green-bottle purified water helped boost margins. Furthermore, the company deliberately controlled the proportion of e-commerce sales to maintain price discipline within the offline distribution system, avoiding profit erosion from price wars.
Beyond lower costs and structural optimization, the company effectively converted high gross margins into high net profits by improving capacity utilization, optimizing logistics networks, and strictly controlling expenses. The financial report showed the sales expense ratio decreased by 2.7 percentage points year-on-year to 18.6% in 2025, primarily due to rationalized advertising and promotion spending and lower logistics rates resulting from the improved product mix. According to CICC estimates, EBIT margins for water, tea, functional drinks, and juice all improved significantly, with juice and water seeing increases of 11 and 9.4 percentage points, respectively, indicating a comprehensive recovery in profitability across all product lines.
However, behind the impressive performance, concerns about the sustainability of growth are emerging.
On the cost side, upward pressure is building. Entering 2026, geopolitical conflicts in the Middle East pushed up international oil prices, leading to a rapid rebound in prices for petrochemicals like PET. By early April, PET prices had risen approximately 40% compared to pre-conflict levels. Additionally, multiple global meteorological agencies warn of a moderate or stronger El Niño phenomenon likely in the second half of 2026. Historically, El Niño tends to reduce sugarcane yields in major producers like India, Thailand, and Brazil, often triggering sugar price increases. The potential simultaneous price hikes for PET and sugar, two core cost components, could directly squeeze future profit margins.
On the growth side, the tea beverage business, the core profit driver, faces slowing growth against a high base. Its revenue growth rate has declined annually from 83.3% in 2023 to 29.0% in 2025. Amid strong penetration by competitors like Tingyi and Genki Forest and a slowing industry growth rate, even with nearly 80% market share, the marginal difficulty for Oriental Leaf to achieve further breakthroughs is increasing, making it challenging to sustain high growth long-term.
Furthermore, the improvement in the sales expense ratio in 2025 was partly due to a high base from Olympic-related spending the previous year. However, 2026 marks the company's 30th anniversary, implying more active marketing activities. Plans include expanding the "win prizes under the cap" campaign and enhancing consumer interaction through promotions like "buy-one-get-one-free" lucky draws. Management explicitly stated that the operating expense ratio will depend on sales performance and competitive intensity, and the company will maintain flexibility, not necessarily aiming to keep it at the 2025 historical low. This suggests sales and marketing expenses might increase in 2026 to support growth and market competition.
The year 2026 marks NONGFU SPRING's 30th anniversary. In the recent financial report and subsequent earnings call, management frankly outlined the approach for the new year: the target remains double-digit growth, but the operating philosophy has shifted towards being "steadier, slower, and focused on the long term."
Management emphasized this is not a strategic shift but a reaffirmation of the core focus on product quality, execution discipline, and serving consumers and distributors. Yet, details in the report and strategic deployments reveal a sense of urgency.
The first major challenge is restoring the core packaged water business to its peak. Although water business growth resumed in 2025, revenue of 18.709 billion yuan remains nearly 1.6 billion yuan short of the 2023 peak of 20.262 billion yuan. During the earnings call, management clearly stated the first short-term goal for 2026: packaged water sales volume must return to and exceed 2023 levels.
To reclaim lost ground, NONGFU SPRING is implementing a multi-pronged strategy. Regarding water sources, the company plans to further strengthen the "natural and healthy" brand moat through ongoing consumer education about its sources, while continuing to expand its source portfolio, having added the Yunnan Jiaozi Snow Mountain source in early 2026. In channels, the "10,000-case display" strategy continues to penetrate deeper, with more refined point-of-sale presentations. For consumption scenarios, the company is actively targeting B2B markets like home cooking and restaurant kitchens, seeking incremental growth beyond existing demand.
Although the tea beverage business is the "primary engine," the slowdown in high growth is undeniable. In response, management stated: "Tea is still far from its ceiling—Chinese tea culture is profound, tea varieties are diverse, and there is significant room for improvement in both penetration rate and per capita consumption." Nevertheless, maintaining high growth on a high base is challenging. The strategy for 2026 is "strengthen water, expand tea, develop new products." Besides continuously launching new flavors, Oriental Leaf will continue to consolidate its share through consumer engagement activities like "win prizes under the cap."
Beyond tea and water, another focus in 2026 is the "heavy investment" in new growth areas. The company is optimistic about the electrolyte water category, believing it is driving a second wave of growth in the functional beverage industry, and launched a new electrolyte water product in early 2026. Expansion into new categories like ready-to-drink coffee is also on the agenda. Looking further ahead, international expansion is accelerating. After introducing core products to Hong Kong and Singapore markets in 2025, NONGFU SPRING extended its reach to Malaysia in early 2026.
Capital market views on NONGFU SPRING's future performance are mixed.
Capital Securities believes that relying on its strong supply chain and brand upgrades, NONGFU SPRING is poised for steady growth in 2026, potentially further expanding market share, but warns of risks from rising raw material prices eroding profits.
CMB International points out that despite the company's solid industry position, it faces multiple challenges, including intensified competition, geopolitical factors raising PET costs, and a sluggish macro consumer environment. Based on the strong 2025 performance, the bank raised its target price to HK$60.88, maintaining a "Buy" rating, but cautioned about potential slowing profit growth.
CICC maintains an "Outperform" rating and a HK$61 target price. Analysts expect revenue to maintain steady growth in 2026, benefiting from new product launches and marketing investments. Despite uncertainty around PET price fluctuations, the company's high profitability and diversified product structure provide strong risk resilience.
Nietzsche's adage carries another often-overlooked nuance: hardship itself does not directly produce "strength"; true evolution comes from the continuous honing of core capabilities and adherence to long-term principles during the storm. The 2025 results demonstrate NONGFU SPRING's systemic resilience after navigating public sentiment and intense competition. The future key test, as it enters its "thirty而立" years, will be whether it can transform this recovery "momentum" into lasting "resilience" under the new normal of rising costs and industry slowdown.
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