China’s richest man risks losing crown after US$13 billion wipe-out
CHINA’S richest man is at risk of losing the pole position he has held for almost three years, with his wealth slipping the most among billionaires worldwide as intensifying competition and public relations challenges plague his bottled water giant.
Zhong Shanshan, chairman of Hangzhou-based Nongfu Spring, has lost US$13 billion so far in 2024, according to the Bloomberg Billionaires Index, with a fortune of US$54.8 billion as at Monday (Jul 22). That keeps him a whisker above Colin Huang, founder of online shopping platform PDD Holdings. Huang’s fortune stands at US$47.3 billion.
The potential changing of the guard reflects a consumer sector that is increasingly complex for businesses to navigate, as the economy slows and competition from upstart brands intensifies.
Besieged by a price war in its core bottled water space, Hong-Kong listed Nongfu has also found itself on the wrong side of increasingly nationalistic and health-conscious Chinese in recent months.
This has led to an almost 20 per cent plunge in its share price since Feb 1, compared to a roughly 6 per cent rise for PDD, with its dirt-cheap products and aggressive deals.
“Recent issues with Hong Kong’s consumer watchdog regarding product quality, heightened competition in the sector amid decreased consumer spending, and a boycott earlier this year due to concerns over business practices are likely to have contributed to these apprehensions,” Bloomberg Intelligence consumer analyst Ada Li said.
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Most of Zhong’s fortune is derived from stakes in the beverage company and pharmaceutical business Beijing Wantai Biological Pharmacy Enterprise.
Nongfu did not immediately respond to a request for comment on Monday about its founder’s wealth and any setbacks it has encountered this year.
Roller coaster
Earlier this year, the company and Zhong himself were barraged by criticism after the February death of Zong Qinghou, founder of key rival Hangzhou Wahaha Group.
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Online sympathy after his passing morphed into a takedown of Nongfu, with some comments deriding its bottled water packaging as looking Japanese in design, and others recapping what they alleged were tricks Nongfu had used to gain an advantage over Wahaha.
Users alleged that Zhong’s son holds a US passport and questioned the family’s allegiance to China. In a blow to Nongfu, Wahaha sales spiked. While Nongfu refuted some of the claims and said it had taken legal action against people who instigated malicious rumours, many Chinese Internet users remained unmoved.
In April, China Resources Beverage Holdings filed for a Hong Kong listing, a move set to provide additional resources for its bottled water brand C’estbon – one of Nongfu’s major competitors.
Soon after, Nongfu introduced a new purified water in direct competition with C’estbon, pushing prices to the floor. The product is being sold at less than one yuan per 550-millilitre bottle on Alibaba Group’s Tmall, less than half its normal retail price.
Even as Nongfu reported stronger-than-expected earnings last year thanks to robust sales of its ready-to-drink teas, the proportion of revenue from packaged drinking water dropped to 47.5 per cent – from 54.9 per cent in 2022 – underscoring the rise in competition in the bottled water sector.
In the latest headwind, Hong Kong’s Consumer Council last week said Nongfu’s water had been found to contain the maximum limit of bromate, which could pose health risks when overconsumed. Shares plunged by 7.3 per cent in two trading days before the council clarified that its early findings had come as a result of evaluating Nongfu’s water against criteria used for a category to which it does not belong. Shares bounced back after the watchdog apologised, but wiped out gains again on Friday.
To shore up confidence, Nongfu announced earlier this month that Zhong intended to buy up to HK$2 billion (S$344 million) of the company’s shares via Yangshengtang, a holding company he controls. On Jul 9, Yangshengtang bought about 3.5 million shares, according to regulatory filings. BLOOMBERG
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