Breaking the internal competition in the stock era, Nongfu Spring has provided the right answer

Ask AI · How does high trading quality drive a positive cycle in the industry?

Introduction: In the past year, Nongfu Spring’s “counter-cyclical growth” performance has become particularly significant in the era of stock competition. It fully demonstrates the value of rejecting low-price internal competition and pursuing high “trading quality” in business.

Lishi/Author Lishi Business Review/Produced

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Nongfu Spring’s Counter-Cyclical Growth

With the disappearance of population dividends and the market demand approaching saturation, China’s economy has recently undergone a pivotal change, shifting from the past fast-growing incremental era to a low-growth stock era.

In the stock era, commercial opportunities for companies are becoming increasingly scarce, leading to intensified competition among enterprises and reigniting price wars across many industries. However, low-price competition is merely a stopgap measure that helps maintain sales in the short term but quickly becomes ineffective, making it even more difficult for companies to survive due to a significant decline in profitability.

Recently, many listed companies in China have released their financial reports for the entire year of 2025, and many enterprises have experienced varying degrees of performance stagnation. Among them, the food and beverage industry, particularly hard-hit, has seen poor performance from listed companies like Master Kong and Uni-President China, with some only achieving low single-digit growth and others experiencing significant declines in revenue and profit.

However, in the overall unprofitable food and beverage industry, one company has achieved impressive counter-cyclical growth: the well-known beverage giant Nongfu Spring. Financial reports indicate that in 2025, Nongfu Spring’s total revenue was 52.553 billion yuan, a year-on-year increase of 22.5%; the net profit attributable to the parent company was 15.868 billion yuan, a year-on-year increase of 30.9%.

Specifically, in segmented fields, Nongfu Spring also achieved growth across all core businesses. The revenue from packaged drinking water reached 18.709 billion yuan, a year-on-year increase of 17.3%; tea beverage revenue was 21.596 billion yuan, a year-on-year increase of 29.0%; functional beverage revenue was 5.762 billion yuan, a year-on-year increase of 16.8%; fruit juice beverage revenue was 5.176 billion yuan, a year-on-year increase of 26.7%; and other business revenues, including soda water, coffee beverages, plant-based beverages, and fresh fruits, reached 1.309 billion yuan, a year-on-year increase of 10.7%.

In the context of the industry’s overall decline, how did Nongfu Spring achieve its comprehensive counter-cyclical growth? After systematically studying Nongfu Spring’s business over the past year, I found that rather than choosing a low-price strategy to cope with the internal competition of the stock era, Nongfu Spring took the lead in maintaining the industry’s price system and building a healthy, sustainable industry ecosystem, which pleasantly surprised me.

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Rejecting Low-Price Competition: Nongfu Spring’s Pricing Determination

With the continuous development of China’s e-commerce industry, the sales proportion of goods such as food and beverages in e-commerce channels has been increasing, significantly encroaching on the survival space of offline channels.

Currently, the Chinese e-commerce industry has formed an oligopoly, with each e-commerce platform having an enormous sales scale, attracting many food and beverage companies to use these e-commerce platforms as the main battleground for low-price competition. For example, packaged drinking water that retails for 2 yuan per bottle offline, some companies set the price below 1 yuan online, which not only directly impacts these companies’ profitability but also disrupts the normal price system of China’s packaged drinking water industry, hindering the industry’s healthy development.

As a leader in the Chinese packaged drinking water industry, Nongfu Spring recognized early on the significant damage that low-price competition could bring to enterprises, the industry, and even society as a whole. This is because, a healthy ecosystem within an industry requires a reasonable price system as a guarantee. Without a reasonable price system, the profitability of companies and the interests of participants up and down the industry chain cannot be guaranteed.

When companies lack reasonable profits, they not only lose the motivation for business and technological innovation but will inevitably reduce costs at the expense of quality, jeopardizing food safety. When the interests of participants in the industry chain are not satisfied, they cannot provide employees with adequate salary guarantees, and employees will not have enough purchasing power to improve their living standards, making high-quality development driven by domestic demand in the Chinese economy a source-less endeavor.

Due to a deep understanding of the above logic, Nongfu Spring has been committed to stabilizing the industry’s price system for over 20 years. For example, in the packaged drinking water sector, Nongfu Spring has consistently resisted competition, maintaining a retail price standard of 2 yuan per bottle, slightly higher than the industry average. Additionally, to control low-price competition from e-commerce channels against offline channels, Nongfu Spring established a rule in 2015 that the proportion of e-commerce sales should not exceed 3% of the company’s overall sales, far below the industry average.

Nongfu Spring’s adherence to pricing and channel selection has provided ample survival space for other competitors and played a crucial role in the healthy development of China’s entire drinking water industry. It also allowed the company to gain considerable profitability, enabling it to persist with its “source-based factory, source-based bottling” heavy asset strategy, ultimately building a deep economic moat in the natural water sector.

In the current era of intensified internal competition, many companies have been forced to view e-commerce channels as a lifeline for survival. At this time, Nongfu Spring once again demonstrated the profound insight of an outstanding enterprise and its responsibility to maintain the industry’s overall situation. In 2025, it not only did not expand its layout in e-commerce channels but actively controlled the sales proportion of e-commerce channels, implementing a channel strategy of “controlling online, stabilizing offline, rejecting internal competition, and growing together.”

The implementation of the above channel strategy effectively ensured the health and stability of Nongfu Spring’s offline distribution system. For example, for a bottle of red cap water priced at 2 yuan, the factory price is 0.7 yuan, allowing distributors to earn a gross profit of 0.3 yuan, while small stores can earn a gross profit of 1 yuan, successfully stimulating the enthusiasm and loyalty of all parties involved, ensuring product visibility on retail shelves, and providing considerable profit guarantees to distributors and small stores. Furthermore, as the largest market share holder, Nongfu Spring’s maintenance of a stable price system helps prevent further deterioration of competition in the Chinese drinking water industry, allowing the industry to continue to develop healthily.

At the same time, due to its insistence on a reasonable price system, Nongfu Spring has maintained relatively healthy profitability, giving it greater strategic foresight and patience in business and technological innovation. For instance, in 2025, Nongfu Spring added three water sources: Mount Badagong in Hunan, Longmenshan in Sichuan, and the Nyainqentanglha Mountains in Tibet, laying a solid foundation for the growth of its drinking water business from the supply chain end.

Additionally, the ready-to-drink tea and juice beverage businesses, which led the entire group in growth in the 2025 financial report, did not achieve this overnight but were the results of Nongfu Spring’s forward-looking layout and long-term cultivation, leading to a cumulative effect of thick accumulation and thin release.

Just as Nongfu Spring shifted from pure water to more beneficial natural water based on the public’s long-term health needs, it has also tightly focused on the core concept of “health” in the tea and juice beverage sectors, investing higher costs and product pricing than its peers to ensure product quality.

For example, the sugar-free tea brand Dongfang Shuye was established 15 years ago in 2011, at a time when the dominant products in the Chinese tea beverage market were still sugar-added ones, and the sugar-free tea market was very small. However, Nongfu Spring anticipated that Chinese consumers would increasingly value health, thus refraining from following the trend of entering the then-mature sugary tea market, instead introducing the concept of “0 sugar, 0 calories, 0 fat, 0 flavoring, and 0 preservatives,” creating the “Five Zeros Era” of ready-to-drink tea.

The overly forward-looking strategic layout and excessively high product prices led to the Dongfang Shuye brand not gaining mainstream user favor for seven years after its launch, resulting in continuous losses. However, during these seven years, Nongfu Spring firmly believed in the long-term potential of sugar-free tea and continued to increase its investment to refine the product. To ensure the pure taste of sugar-free tea, Nongfu Spring invested heavily in introducing log6 sterile production lines. Log6 represents a standard for microbial control, meaning that out of one million bottles produced, only one may be contaminated by microorganisms. Even today, log6 remains the highest standard in the domestic beverage industry.

Due to the initial low sales of the Dongfang Shuye brand, this sterile production line was only operational two days a week, yet Nongfu Spring persisted. It wasn’t until 2019 that, with the promotion of national policies and the awakening of people’s health consciousness brought about by improved living standards, Dongfang Shuye experienced explosive growth, propelling the tea beverage business to surpass the drinking water business and become Nongfu Spring’s core growth driver.

In the fruit juice beverage sector, Nongfu Spring invested huge amounts of money and energy to delve into the source cultivation of fruits like Gannan navel oranges to provide consumers with the highest quality products, leading to long-term losses. However, Nongfu Spring remained committed to continuous innovation in this field, ultimately solving the flavor alteration and Huanglong disease issues encountered in the juicing and sterilization process of Gannan navel oranges, resulting in the emergence of NFC juice and the 17.5° juice brand. In recent years, to support the better development of the tea beverage business, Nongfu Spring has also ventured into the upstream planting and production of the tea industry chain, striving to control the quality of tea beverages from the source end and aiming for industrial methods to achieve the intensification of tea farmers in tea planting and production.

As brands like Dongfang Shuye, NFC juice, and 17.5° juice emerged, industry competitors began to follow suit, adopting low-price strategies for competition. However, Nongfu Spring remained steadfast in its pricing determination, fully maintaining a healthy industry price system. Although it lost some users due to pricing, Nongfu Spring’s high standards and investments in food safety and quality created a significant differentiation in product strength, ultimately strengthening its position in consumers’ minds and attracting more users, resulting in performance growth instead of decline.

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The Value of High “Trading Quality”

After decades of market economy development education in China, the current scientific business concepts among the populace have made some progress. However, there still exists a cognitive misunderstanding in social discourse that is worth noting, which is that people tend to believe that lower profits for enterprises are more beneficial to consumers and social economic development.

This notion is often exploited by companies engaging in malicious competition through low-price strategies to mislead users and investors. However, the reality is that such low-price competition not only fails to benefit the companies themselves but also undermines the healthy development of the entire industry, leaving consumers without truly high-quality products.

In response, Nongfu Spring’s founder Zhong Shanshan proposed an excellent concept of “trading quality,” effectively correcting the aforementioned cognitive misunderstanding. “Trading quality” refers to “the value generated by commercial transactions for the positive cyclical development of the industry.” Businesses that rely on low-price competition and disrupt market order belong to low “trading quality” businesses; those that drive the industry towards positive cyclical development through quality and innovation belong to high “trading quality” businesses. Zhong Shanshan believes that engaging in price wars is a manifestation of incompetence, and only by pursuing high “trading quality” business can true user value be created, leading to a positive cycle in the industry.

Therefore, whether it is Nongfu Spring’s choices in natural water or its business decisions in the tea and juice beverage sectors, or Zhong Shanshan’s long-standing appeal for every employee in the company to be a guardian of market prices, all revolve strictly around the concept of high “trading quality.” The “counter-cyclical growth” achievement created by Nongfu Spring over the past year is particularly significant in today’s era of stock competition. It fully proves to the world the value of rejecting low-price internal competition and pursuing high “trading quality” business.

If enterprises across various industries in China could abandon the short-sighted thinking of drinking poison to quench thirst, insist on “upward competition,” reject “downward internal competition,” promote the establishment of a reasonable price system and profitability in the industry, and continuously invest profits into employee salaries and benefits, and into technological innovation that benefits industry development, then the entire industry would likely enter a “employee-driven technology, technology-driven products, products-driven performance, and performance-reciprocating employees and technology” virtuous cycle. As more enterprises embody this “virtuous cycle,” high-quality development of the Chinese economy would follow naturally. Otherwise, as Zhong Shanshan warns, “low-price competition can only trap enterprises in a downward spiral, searching for a life-and-death competition. A clever woman cannot make a meal without rice; low price cannot create a high-quality product, and without high-quality products, there can be no high-quality industry, no high-quality society, and no well-being of a happy life.”