The controversy over Nongfu Spring's water source has finally been settled.

The controversy over Nongfu Spring's water source has finally been settled. On January 12, the Wuyishan National Park WeChat account responded to the incident of 'suspected nighttime destruction of forest in Wuyishan National Park by Nongfu Spring', stating that after verification, the water intake point is not within the park's boundaries, being more than 50 meters away.

Industry insiders say that water source prospectors naturally choose high-quality sources at the edges of protected areas, which are also fiercely contested in the premium bottled water market.

**-01- ** Was the construction illegal?

'It's meaningless to avoid the issue or dwell on the trivial.' This was the comment by Qiang Wen (Weibo user 'Qiang小Qiang') on January 13 at 3:30 AM regarding a notice about the investigation into Nongfu Spring's nighttime destruction of forest in Wuyishan National Park.

On January 11, Qiang Wen exposed on Weibo that Nongfu Spring had illegally dug a makeshift road and destroyed trees within Wuyishan National Park, attaching videos and photos of large excavators working at night.

On January 12, Nongfu Spring stated that this was a dispute with a tourism company, and that their operations were approved and legal.

That evening, the WeChat public account 'Wuyishan National Park' released a notice about the online public opinion regarding the 'suspected nighttime destruction of forest in Wuyishan National Park by Nongfu Spring', stating that Nongfu Spring Wuyishan Company's actions did not constitute forest destruction. It detailed the water intake project and marked the location of the intake point and the road construction on a map.

However, the whistleblower Qiang Wen did not agree with this conclusion.

She questioned on Weibo, 'For construction, Nongfu Spring needs to use trucks to transport large amounts of cement and other materials through nearly 2 kilometers of the national park. Was the entry of construction vehicles approved? Are there permits? Was it mentioned in the original project's environmental impact assessment? How can supervision occur in such a sensitive area without an environmental assessment?'

Screenshot of Qiang Wen's Weibo

Additionally, she provided a document submitted to the Wuyishan City Environmental Protection Bureau.

The document shows that Nongfu Spring Wuyishan Company began construction in the Da'anyuan Eco-Tourism Area in Wuyishan since the second half of 2018, and that the facts of forest destruction and tree cutting by Nongfu Spring (Fujian Wuyishan) Drinking Water Co., Ltd. have been reported to the local forestry department and forest police.

The Wuyishan City Forestry Bureau has clearly confirmed that Nongfu Spring has not obtained any approval procedures for land use, nor do they have a tree cutting permit.

Qiang Wen claims that Nongfu Spring Wuyishan Company seriously violated the 'Environmental Impact Assessment Law', as the actual construction did not match the EIA design, and they arbitrarily changed the location of the construction road.

She stated that according to the 'Environmental Impact Assessment Report' for the project from the local environmental protection bureau, page 38 clearly states: 'The construction road should first be excavated and filled along the riverbank edge to form a construction road 4.5 to 5 meters wide, with the road surface 50 cm above the water level, to allow machinery to enter the construction site.'

However, Nongfu Spring violated the regulations in this report.

The construction party did not actually build a construction road along the riverbank edge that was 50 cm above the water level, but instead directly used excavators to destroy trees and open a road through the forested mountains, forcibly creating a 240-meter-long, 5-6 meter wide dirt road.

Partial screenshot of the document provided by Qiang Wen

Partial screenshot of the document

The document is signed by Da'anyuan Eco-Tourism Co., Ltd., with a date of January 7, 2020. Qiang Wen is the daughter of Yang Duanfeng, the legal representative of the company.

Qiang Wen stated that she is not currently demanding compensation from Nongfu Spring to her mother's company, and that her exposure is based on the protection of the national park's forest resources and ecology.

Nongfu Spring has not yet responded to whether the construction violated the EIA report.

**-02- ** Water source near protected area

According to industry insiders, in fact, Nongfu Spring's water source prospectors do not search for water across all of China, but within certain ranges. These ranges include: water source protection areas, national nature reserves, national geological parks, and their peripheral areas.

As early as its establishment in 1996, Nongfu Spring had already begun its strategy of nationwide land acquisition and water source exploration. Zhejiang Qiandao Lake Health Food Drinking Water Co., Ltd. (the predecessor of Nongfu Spring Co., Ltd.) was established in September 1996 in Jiande City, Zhejiang Province. The company is located on the shores of Qiandao Lake, a national first-class water resource protection area.

In April 1997, the first factory started production. From 1997 to 2003, Nongfu Spring successively built modern drinking water and juice beverage production factories in Qiandao Lake, Changbai Mountain Mineral Water Protection Area in Jilin, and Danjiangkou in Hubei.

Since then, Nongfu Spring has gradually developed the Wanlv Lake Reservoir in Guangdong. To date, Nongfu Spring has eight major water sources nationwide: Qiandao Lake, Changbai Mountain, Danjiangkou, Wanlv Lake, Emei Mountain, Taibai Mountain, Tianshan, and Wuling Mountain, including deep lake water, mountain spring water, and underground springs.

Economist Song Qinghui stated that Nongfu Spring, which dominates retail channels with low-end pricing, has always considered opening new water sources as a key part of its strategic development to avoid high logistics costs and insufficient production capacity.

Industry analysts believe that Nongfu Spring's large-scale land acquisition for water and factory construction highlights the strategic considerations of modern water companies in addressing high logistics costs and expanding production capacity.

Currently, Nongfu Spring's nationwide layout of water sources can basically outline its sales channels. The Guangdong Wanlv Lake plant mainly supplies the South China market, the Hubei Danjiangkou plant corresponds to the Central China market, Zhejiang Qiandao Lake stabilizes its East China market, Changbai Mountain basically serves the North China market, and other water sources supply local markets.

**-03- ** Intensifying competition in bottled water

Industry analysts believe that in recent years, the growing health awareness of Chinese people and the fierce competition in bottled water will become survival tests for companies like Nongfu Spring in the future.

According to the 'China Tea Beverage Industry Production and Sales Demand and Investment Forecast Analysis Report' (hereinafter referred to as the 'Tea Beverage Report') released by Forward Industry Research Institute, in 2018, the sales scale of China's bottled water industry reached 183.09 billion yuan, becoming the sub-industry with the largest market share in soft drinks. Currently, the industry is in a prosperous period, and the market size will continue to grow. It is expected that the industry scale will exceed 300 billion yuan in the next 3-5 years.

However, the 'Tea Beverage Report' also points out that although the market size is increasing, the growth rate will decline, and with the trend of consumption upgrading and demand diversification, industry competition will become more intense, and differentiation will become the main competitiveness of enterprises.

At the same time, the bottled water industry is also developing in four directions: high-end, segmentation, category diversification, and channel diversification. Under these four trends, how to create differentiated products, supplemented by matching channels, will be one of the core strategies and main competitive advantages for enterprises in the future.

Food industry analyst Zhu Danpeng stated that against the backdrop of consumption upgrading, the continuous improvement of residents' consumption capacity and the attraction of high profit margins in high-end water have led many companies to start staking their claims. The competition in the bottled water market is focusing on the high-end water market. The competition in the high-end water market ultimately comes down to competition for high-quality water sources. Therefore, for bottled water companies like Nongfu Spring, seizing water sources is a crucial step in the future.

Source: Beijing Business Today, Jiemian News

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