A blockbuster IPO briefly made a bottled water
Nongfu Spring, a Chinese bottled water giant, saw its stock soar as much as 85% in its first day of trading on the Hong Kong stock exchange on Tuesday. Its debut is the fourth-best ever among firms raising at least $1 billion in Hong Kong, and it briefly crowned founder Zhong Shanshan as China’s richest man.To get more news about Nongfu Spring, you can visit en.nongfuspring official website.
Nongfu’s stock opened at 38.4 HKD ($4.95), nearly twice its pre-trading price of 21.5 HKD ($2.76), which sent Zhong’s net worth skyrocketing to $59 billion. The spike briefly put Zhong’s wealth ahead of China’s two richest tech billionaires: Jack Ma, founder of e-commerce giant Alibaba, who is worth $57 billion, and Pony Ma, founder of tech giant Tencent, whose personal fortune totals some $52 billion.
The company’s stock closed at 33.1 HKD ($4.27). The IPO raised $1.1 billion. With a net worth of $51 billion, Zhong, who owns 84% of Nongfu’s stock, ended Tuesday as China’s third wealthiest man, according to Bloomberg. Before the IPO, Zhong’s net worth was an estimated $19 billion. In 2019, Forbes ranked him No. 186 on its list of billionaires in China.
Zhong founded Nongfu Spring in 1996 in the eastern Chinese city of Hangzhou, bottling and selling water from a nearby reservoir. He has since built Nongfu into China’s leading bottled water distributor, tapping water and building factories around the country. In 2018, the company controlled 26.4% of China’s $30 billion bottled water sector, according to Daxue Consulting. Nongfu’s closest competitor, China Resources Beverage, controlled 20.9% of the market.
In building Nongfu into a giant, Zhong was able to capitalize on a booming bottled water market. In 1997, China consumed 2.8 billion liters of bottled water. By 2013, consumption rose to 39.5 billion liters, according to the International Bottled Water Association.
The growth stems, in large part, from China’s lack of access to clean tap water. In 2016, China’s Ministry of Water Resources declared that more than 80% of the country’s groundwater is unsafe for drinking, meaning citizens must boil water or purchase bottled water.
Zhong’s clever marketing is also a factor in Nongfu’s success. Its slogan, “Nongfu tastes a bit sweet,” is well known in China, and Nongfu has deftly expanded into energy drinks and vitamin waters.The bottled water industry is also highly profitable, and Nongfu makes a roughly 60% profit on every bottle of water it sells.
“The key here is that there are good profits in water,” Andrew Sullivan, an independent analyst in Hong Kong, told the Wall Street Journal. “Once you have your source and bottling sorted, it is then a matter of where you pitch your brand, the distribution, and price point.”