-01- On July 31, 2020, the China Securities Regulatory Commission approved Nongfu Spring's issuance of 1.38 billion overseas listed foreign shares, each with a par value of RMB 0.1, all common shares, meaning Nongfu Spring could officially list on the Hong Kong Main Board. In its prospectus, people were surprised to find that such a small bottle of water could be so profitable. Data showed that Nongfu Spring's 2019 revenue was RMB 24.021 billion, with net profit of RMB 4.954 billion. To put it in perspective, although the old food giant Tingyi (Master Kong) reported revenue of RMB 35.6 billion in 2019, its net profit was only RMB 946 million, far less than Nongfu Spring. This meant that if Nongfu Spring's founder Zhong Shanshan succeeded in listing, even at the median valuation of 22.58 times for Hong Kong food stocks, Nongfu Spring's market value would be as high as RMB 111.9 billion, and Zhong Shanshan's personal wealth could exceed RMB 100 billion. Meanwhile, Wahaha, which once dominated the Chinese bottled water market, saw its performance decline sharply, struggling to regain its former glory. In 2019, Wahaha's revenue was RMB 52.91 billion, a growth rate of -6.5%, a decline of over RMB 20 billion from its peak. It is unknown how Zong Qinghou, known as China's "beverage godfather," felt seeing Zhong Shanshan, a former Wahaha distributor, rise so quickly. Both came from scholarly families, suffered unfair treatment during the special era, and started businesses around age 40. Zong Qinghou and Zhong Shanshan had such similar experiences yet took completely different paths. One controlled the whole scene, steady and methodical; the other was low-key and mysterious, deeply focused. In China's bottled water market, Zong Qinghou and Zhong Shanshan had overt and covert struggles, but also mutual appreciation, ultimately rising and falling in the waves of competition.
-02- In 1977, at a tea farm in Shaoxing, 32-year-old ordinary educated youth worker Zong Qinghou was anxious and restless after leaving his hometown of Hangzhou 14 years earlier. After junior high school, due to his poor family background, Zong Qinghou first went to a farm in Zhoushan, then drifted to a tea farm to work as a tea worker. Affected by the resumption of college entrance exams and the return of educated youth to cities, many were studying for exams or returning to cities, and even Zong Qinghou's younger brothers who had been sent to the countryside gradually returned to Hangzhou. Although Zong Qinghou, who was tired of the monotonous life at the tea factory, also wanted to return home, his weak educational foundation meant he couldn't change his fate through the college entrance exam, nor did he have the ability to find a unit willing to accept him. While Zong Qinghou was at a loss, in Zhuji, Zhejiang that year, Zhong Shanshan, who had been away for a long time, suddenly returned to the city, saying he wanted to take the college entrance exam with his sister. Zhong Shanshan was already 23 years old at the time, having been sent to Jiaxing to work as a bricklayer. Influenced by his parents who were labeled as rightists, Zhong Shanshan had to drop out of school from the fifth grade and work in other places. Although Zhong Shanshan was confident, he failed the exam as expected, not even knowing basic algebra formulas. In 1978, for the sake of family reunion, Zong Qinghou's mother retired and let her son take over her position at the Workers' and Peasants' School-run Carton Factory. The waiting Zong Qinghou finally returned to Hangzhou. However, Zhong Shanshan was not so lucky. He continued to retake the exam and failed again, only passing on his third attempt to get into a TV university, finally escaping the countryside. In 1984, just after graduation, Zhong Shanshan aimed at the open recruitment of Zhejiang Daily, renting a dormitory in the Zhejiang Federation of Literary and Art Circles to prepare for the exam. Downstairs was an unremarkable young man preparing for his third college entrance exam, named Ma Yun. Ma Yun had just turned 20 but had already failed the exam twice. With similar circumstances, the two quickly became acquainted, and after encouraging each other, they decided to make a final push for life. Soon, Ma Yun, who was almost at his limit, heard the news that his "comrade-in-arms" Zhong Shanshan had been admitted to Zhejiang Daily. Seeing hope, he washed his face and took the exam for the third time. Although he was still 5 points short of the undergraduate line, he was lucky that the English major at Hangzhou Normal University lowered its score, and he finally realized his dream of university.
-03- In 1987, Zong Qinghou, who had been a salesman at the carton factory for nine years, saw the surging economic tide. With 140,000 yuan borrowed and two retired teachers, he contracted the loss-making Shangcheng District School-run Enterprise Distribution Department in Hangzhou, deciding to start a business from scratch at the age of 32. Relying on consignment sales of soda, popsicles, and stationery, Zong Qinghou rode his tricycle to the gates of primary and secondary schools in Hangzhou, hawking his goods, sweating profusely as he saved every penny. A year later, an oral liquid company approached Zong Qinghou, wanting him to process their products, which gave him his first stable income. It was this opportunity that sparked Zong Qinghou's shrewd calculations. These little emperors sipping cold drinks had no worries about food or clothing, but they suffered from poor appetite and malnutrition. Looking at the oral liquid in front of him and the deep pockets of parents behind them, Zong Qinghou had an idea. In 1989, with the help of a colleague's introduction, 44-year-old Zong Qinghou, with the assistance of a professor from Zhejiang University's food science department, successfully developed "Wahaha Children's Nutritional Oral Liquid" and immediately launched the Hangzhou Wahaha Nutritional Food Factory, starting full-scale distribution. With the overwhelming advertising slogan "Drink Wahaha, eat with a good appetite," Wahaha became an instant hit and rose rapidly. Within just two years, with the support of the Hangzhou municipal government, Wahaha, despite having only RMB 60 million in book funds, acquired the poorly managed Hangzhou Canned Food Factory, which had 60,000 square meters of factory space and 2,000 employees, through loans, formally establishing the Hangzhou Wahaha Group Company and becoming the industry leader. During the same period, Zhong Shanshan, who had worked in the rural department of Zhejiang Daily for five years and traveled to over 80 counties in Zhejiang, interviewing more than 500 entrepreneurs, also got the idea to start a business. At 34, he plunged into the newly established Hainan Special Economic Zone. However, unlike Zong Qinghou's success, Zhong Shanshan, empty-handed, had no clue in Hainan and, after several setbacks, could only lament the difficulties of life.
-04- In 1991, the rapidly growing Wahaha Group's output value quickly exceeded 100 million yuan, and Zong Qinghou was making a fortune. At this time, Zhong Shanshan saw the potential of the Wahaha brand and returned from Hainan to Hangzhou to apply for a distributorship. Out of fellow townsman friendship and considerations of expanding new markets, Zong Qinghou gave Zhong Shanshan a preferential price for Hainan sales and also packaged Guangxi's distribution rights to him. However, Zhong Shanshan soon spotted another opportunity. At that time, Wahaha had a good reputation in Guangdong, and market prices were much higher than in Guangxi and Hainan. Hearing the news, Zhong Shanshan came up with the idea of "reselling." He quietly diverted the low-priced Wahaha oral liquid from the planned Hainan market to Zhanjiang, Guangdong, where he sold it at a high price, profiting from the price difference. But paper can't wrap fire. Such blatant "channel crossing" was soon discovered by Zong Qinghou. Seeing this fellow townsman's dishonesty, he immediately announced the cancellation of Zhong Shanshan's distributorship. Zhong Shanshan, knowing he was in the wrong, had nothing to say, but he realized the huge potential of the health products market. At a banquet hosted by a Hainan friend, Zhong Shanshan discovered that locals liked to drink a nourishing soup made from turtles and soft-shelled turtles. Zhong Shanshan had a brainwave: such good ingredients could be packaged as health products. Soup is hard to transport, but pills are easy! So, following Zong Qinghou's approach, Zhong Shanshan hired three experts from a traditional Chinese medicine university and, after half a year, successfully developed "Yang Sheng Tang Turtle and Soft-shelled Turtle Pills." In 1993, using the money earned from "channel crossing" with Wahaha, 39-year-old Zhong Shanshan established Hainan Yang Sheng Tang Co., Ltd. in Haikou, focusing on "Yang Sheng Tang Turtle and Soft-shelled Turtle Pills." If Zong Qinghou could use Wahaha to dominate the children's market, then Zhong Shanshan could use turtle pills to enter the middle-aged and elderly health products market! With the overwhelming advertising slogan "The kindness of nurturing is beyond repayment" and the high-sounding formula, "Yang Sheng Tang Turtle and Soft-shelled Turtle Pills" quickly carved out a place in the health products market. Zhong Shanshan, using the same playbook, successfully earned his first pot of gold.
-05- Although he saw Zhong Shanshan's rise, Zong Qinghou didn't take this young upstart seriously. After completing his initial capital accumulation, Zong Qinghou began to withdraw from the chaotic health products market and focus on developing the bottled water market. But Wahaha's transformation was not as smooth as Zong Qinghou imagined. In 1996, when Chinese people were still drinking plain boiled water, the newly born purified water quickly hit a wall. However, just as Zong Qinghou was anxious, the international beverage giant Danone from France proactively approached him, wanting to cooperate with Wahaha. With the vision of "exchanging market for technology," a delighted Zong Qinghou quickly signed a cooperation agreement: Wahaha held 49% of the shares, while Danone and Hong Kong's Peregrine Investments Holdings jointly held 51%. At this time, Zong Qinghou did not realize the huge hidden danger of this agreement. Stimulated by the top position in China's beverage industry, he gave up the majority of Wahaha's shares. But Danone indeed had its ways. Under its operation, Wahaha hired a professional advertising company for marketing. With a love theme and popular songs, Wahaha brought in the then-famous Jing Gangshan as spokesperson, vividly telling the story of a pair of lovers searching and waiting for each other. Driven by the advertisement, Wahaha purified water quickly stimulated consumers' resonance with love, and the brand successfully shed its children's image. With the advertising lyrics "My eyes only have you" echoing through the streets, Wahaha successfully entered thousands of households. In 1997, amid the "call of love," Wahaha purified water became the leader in domestic bottled water, with Mao Ning and the more sunny and international Wang Leehom becoming spokespersons in succession. Eating hot pot and singing songs, 52-year-old Zong Qinghou made money effortlessly.
-06- While Zong Qinghou was laying out his bottled water strategy, Zhong Shanshan quietly returned to Hangzhou. But he didn't go to West Lake; he headed straight to Qiandao Lake, 300 miles away. Following Zong Qinghou's footsteps, his goal was simple: if Zong Qinghou could do it well, he could do it just as well, or even better! Perhaps the success of Yang Sheng Tang made Zhong Shanshan feel that Zong Qinghou was his "lucky star," and as long as he followed Zong Qinghou's pace, he couldn't go wrong. In September 1996, 42-year-old Zhong Shanshan used the money earned from "Yang Sheng Tang Turtle and Soft-shelled Turtle Pills" to establish Zhejiang Qiandao Lake Yang Sheng Tang Drinking Water Co., Ltd. in Qiandao Lake, launching "a little sweet" Nongfu Spring. Clearly, Zhong Shanshan was targeting the vast bottled water market, aiming to snipe at Wahaha purified water. At this time, Zong Qinghou, after a series of operations, had become a benchmark for China's private economy, with a status in the business world comparable to Ren Zhengfei's today. In his eyes, the "imitating" Zhong Shanshan was still just a low-level profiteer. Zong Qinghou, who didn't take him seriously at all, only saw Coca-Cola and Pepsi as his competitors. Having deeply cultivated the market for years, he keenly noticed that although Coca-Cola and Pepsi had been in China for years, they hadn't truly captured the rural market. Moreover, their overemphasis on deep distribution in big cities left distributors with very thin profit margins. Seeing the opportunity, Zong Qinghou made up his mind: to create a cola brand exclusive to China. In 1998, under the guidance of "encircling the cities from the countryside," 53-year-old Zong Qinghou launched Future Cola, entering the rural market at a low price. Within just two years, Future Cola had taken root in the vast rural areas of China. However, just then, the newly established Nongfu Spring suddenly jumped out, proposing the "theory that purified water is not beneficial to human health," and then launched its long-planned "Nongfu Spring Natural Mineral Water," openly confronting 69 "purified water" companies, becoming the public enemy of the entire industry. Hearing the news, Zong Qinghou couldn't sit still. He immediately joined forces with six purified water companies, including "Shanghai Zhengguang" and "Robust," to denounce Nongfu Spring's "troublemaking." Nongfu Spring was not to be outdone, suing Wahaha for "spreading false facts" and counter-suing for "unfair competition." At this time, Zhong Shanshan, known as the "lone wolf," truly emerged. Unlike Zong Qinghou, who had excellent political and business relations, Zhong Shanshan almost never participated in entrepreneur associations or dined with government officials, and even refused all interviews at one point. Those hidden underwater are the ruthless ones. The battle between Nongfu Spring and Wahaha officially began.
-07- However, Zong Qinghou couldn't focus on the "water war" of the millennium; the more pressing issue was the equity problem. During the 1998 financial crisis, Hong Kong's Peregrine Investments transferred all its shares to Danone. Danone, with 51% of the shares, smoothly took control, and its ambitions gradually grew. In years of cooperation, Wahaha had hoped to rely on Danone's support, but it turned out to be wishful thinking. Danone not only repeatedly vetoed Zong Qinghou's proposals on production lines, new products, and increased investment but also unashamedly invested in Wahaha's competitors, successively acquiring 92% of Robust, 20.1% of Bright Dairy, and 22.18% of Huiyuan. Danone's China head also served as a director in multiple companies simultaneously. This practice of playing the field made Zong Qinghou very unhappy, but for the sake of the overall situation, he could only hold back. However, Danone, with its 51% stake, soon made a move, demanding that its own person, Fan Yimou, become the new chairman and that the "Wahaha" trademark be completely transferred to the joint venture. Unable to bear it any longer, Zong Qinghou angrily refused. In 2007, Danone sued Zong Qinghou in court. The 62-year-old Zong Qinghou was thoroughly provoked and decided to "fight to the end" with Danone. From then on, Zong Qinghou taught himself law while organizing a massive legal team, conducting over 80 lawsuits worldwide, ultimately winning. In July 2008, the Stockholm Chamber of Commerce Arbitration Tribunal rejected Danone's request to clean up non-joint venture companies. Under pressure, Danone had no choice but to settle with Wahaha, selling all its shares in the joint venture to the Wahaha Group, thus ending the "Danone-Wahaha dispute." However, in this case, although the approach of elevating it to national righteousness forced Danone to compromise, the Zong Qinghou family's operations regarding immigration and green cards caused a stir, putting Zong Qinghou in the spotlight. After being stabbed in the back by capital, Zong Qinghou publicly declared, "Wahaha will never go public."
-08- While Wahaha was in the thick of its battle with Danone, Nongfu Spring also set its sights on a new competitor, the Tingyi Group, and began to snipe at this company with annual sales of billions. In 2008, Zhong Shanshan cleverly used the scientific topic of water's acidity and alkalinity to trigger a public opinion climax. Nongfu Spring first conducted pH value testing activities, accusing Tingyi's mineral water of being "pseudo-healthy," and then netizens revealed that "Tingyi's mineral water source comes from tap water." With heavy publicity, Tingyi's "water source gate" crisis intensified. That year, Tingyi's mineral water market share dropped by 5%, while Nongfu Spring's market share rose by 0.7%. It is said that in the conference room of Nongfu Spring's advertising department, there was a slogan: "Good advertising not only attracts user attention but, more importantly, makes users discuss it." The deep meaning was clear. However, Nongfu Spring soon faced a counterattack. A year later, with the publication of "Re-investigation of Tingyi's Water Source Gate: Who Is Destroying Bottled Water," a series of reports pointed out that Qiandao Lake, one of Nongfu Spring's water sources, had been listed as a Class IV water source for industrial use. Although Nongfu Spring accused competitors of malicious rumors, the "water source gate" curse fell back on itself. Overall, however, Nongfu Spring grew stronger through several "water wars." By 2012, Nongfu Spring's series product sales exceeded the 10 billion yuan mark for the first time, enjoying a period of great prominence. But for Zong Qinghou, this was just a drizzle. In 2013, Wahaha achieved revenue of RMB 78.3 billion, and 68-year-old Zong Qinghou became China's richest man. It was also during this period that Zong Qinghou began a larger layout. Under the slogan "Create a second Wahaha," Wahaha announced its entry into the milk powder industry, launching the high-end infant milk powder "Edison"; at the same time, it began to venture into commercial real estate, opening the Wahaha department store targeting the middle class; more significantly, Zong Qinghou invested RMB 15 billion to enter the liquor industry. A vast business empire seemed about to rise.
-09- Amid the general trend, Zong Qinghou and Zhong Shanshan let bygones be bygones. In November 2009, Nongfu Spring was found by the Haikou Administration for Industry and Commerce to have excessive levels of total arsenic and sulfur dioxide in some products, failing to meet food standards. Nongfu Spring's "arsenic gate" intensified. Amid the uproar, Zong Qinghou publicly voiced support for Nongfu Spring, saying the test results were inaccurate and might be problematic. Sure enough, the event soon took a dramatic turn. The Haikou Administration for Industry and Commerce admitted the test was wrong, revoked the previous inspection report, and the director was replaced. At the critical moment, Zong Qinghou's public support gave Zhong Shanshan more confidence. In 2013, Beijing Times, over more than 10 days, used over 70 pages to engage in a war of words with Nongfu Spring, accusing it of not meeting drinking water standards. Many competitors smelled blood and fanned the flames, but Wahaha remained silent throughout. Interestingly, Beijing Times never provided solid evidence against Nongfu Spring's water quality. Nongfu Spring, without making a fuss, published its standards to the world, with 21 indicators better than national standards by 21-1000 times and 45 indicators better than US FDA standards by 11-1000 times, becoming the industry standard setter. A crisis public relations campaign turned into a beautiful event marketing opportunity for Nongfu Spring. However, amid numerous doubts, Nongfu Spring had to withdraw from the Beijing market, suffering economic losses of RMB 2 billion, and only returned to the capital three years later. In the cold winter, Wahaha also had a hard time. Stimulated by the e-commerce economy, Zong Qinghou, shouting "the wolf is coming," was caught off guard. Many of his previous projects either died midway or ended in heavy losses. The Future Cola series was acquired by Coca-Cola and eventually completely phased out. And the dozens of beverages he spent billions on, such as Piers, Qili, and Galvar, none could surpass the former star product, Nutrition Express. In contrast, Zhong Shanshan, lurking underwater, successively launched brands like Yang Sheng Tang Turtle Pills and Duo'er Capsules. After Nongfu Spring, he introduced Nongfu Orchard and Scream, and Zhong Shanshan, having emerged from the thorns, had a bright future.
-10- At the 2016 Hangzhou G20 Summit, sharp-eyed reporters noticed that the bottled water on the podium was not Wahaha from the local area but Nongfu Spring from Qiandao Lake. In the silent contest, the outcome was self-evident. Whether Zong Qinghou admitted it or not, Wahaha was no longer a match for the follower Nongfu Spring. Now, Wahaha is struggling to move forward. In an interview, the host asked Zong Qinghou: "What does Wahaha plus Zong Fuli equal?" Zong Qinghou replied: "It equals a stronger Wahaha." The host then asked Zong Fuli: "What does Wahaha minus Zong Qinghou equal?" "It equals zero." This is the current state of Wahaha. In the entire Wahaha Group, Zong Qinghou carries the burden alone. In a group worth tens of billions, there is not a single vice president, and all decisions are still made by Zong Qinghou alone. During his 30 years at the helm of Wahaha, Zong Qinghou personally reviewed every product and every advertisement, never delegating to others. It is even rumored that Zong Qinghou knows exactly how many ridges are on the cap of a Wahaha bottled water bottle. To this day, at the six-story Wahaha headquarters at 160 Qingtai Street in Hangzhou, Zong Qinghou can still be seen from 7 a.m. to 11 p.m., seven days a week, without fail. But the leader Zong Qinghou finds it hard to reverse the market decline. His former vow never to go public has also begun to soften under the push of his daughter Zong Fuli: "Wahaha will also consider going public." After all, of the "four great families that never go public," Huawei is facing severe challenges, SF Express has long gone public through a backdoor listing, and Laoganma has repeatedly visited the Shenzhen Stock Exchange for research. And the rising star Nongfu Spring has already been gearing up for the final sprint to go public. 66-year-old Zhong Shanshan remains behind the scenes, strategizing. In 2019, Nongfu Spring had revenue of RMB 24 billion and shareholder dividends of up to RMB 9.6 billion. "We don't produce money; we're just movers of money." The wind rises from the end of the duckweed, and waves form from the ripples. Under the tide, being complacent and sticking to old ways inevitably makes progress difficult; only by cutting through thorns can one have the opportunity to ride the wind. This is the rule of the game: there is no absolute leader, nor an absolute follower. Source: Shouzhuoshi (ID: dtszs2020); Editor: Xiaoyaohou; Proofreader: Xia Xueyi Tips will be paid 400-2000 yuan upon adoption.