---
title: "Nature's \"Transporter\" Transforms into a \"Money Printer\" About to Go Public: What Has Nongfu Spring Done?"
description: "On July 31, according to the CSRC official website, Nongfu Spring Co., Ltd. was approved to issue up to 1.38 billion overseas listed foreign shares with a par value of RMB 0.1 per share, all common shares. After the issuance, the company can list on the main board of the Hong Kong Stock Exchange. Nongfu Spring's official listing is imminent, and after its generous sponsorship of the space industry, it has now achieved space-like speed. Today, we share a few things you should know about Nongfu Spring."
author: "高级研究员 海游"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2020-08-21"
language: "en"
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# Nature's "Transporter" Transforms into a "Money Printer" About to Go Public: What Has Nongfu Spring Done?

> On July 31, according to the CSRC official website, Nongfu Spring Co., Ltd. was approved to issue up to 1.38 billion overseas listed foreign shares with a par value of RMB 0.1 per share, all common shares. After the issuance, the company can list on the main board of the Hong Kong Stock Exchange. Nongfu Spring's official listing is imminent, and after its generous sponsorship of the space industry, it has now achieved space-like speed. Today, we share a few things you should know about Nongfu Spring.

**Click the image above for details**
On July 31, according to the CSRC official website, the China Securities Regulatory Commission approved Nongfu Spring Co., Ltd. to issue up to 1.38 billion overseas listed foreign shares, with a par value of RMB 0.1 per share, all common shares. After the completion of this issuance, the company can list on the main board of the Hong Kong Stock Exchange. **Nongfu Spring's official listing is imminent; after its generous sponsorship of the space industry, it has now achieved space-like speed**. Today, let's share a few things you should know about Nongfu Spring.

**-01- Classic water pile display + water test combination: The earliest BC integration**
## I remember in 2008, I went on a business trip to a county under Luoyang, Henan. I walked into a small shop and handed over 5 yuan, saying, "Give me two bottles of Nongfu Spring." The shop owner went to the small warehouse in the back and brought me two bottles, giving me 2.5 yuan in change. I said, "Why did you give me 2.5 yuan in change?" (I meant it should be 1.5 yuan per bottle, so I got 0.5 yuan extra.)
## The shop owner hurriedly said, "This water has a high purchase price, and I didn't make much money from you. We all hide it and are reluctant to promote it, unless a customer like you specifically asks for it."
## Indeed, **at that time, many terminal store owners were not confident about Nongfu Spring's retail price of 1.5 yuan. There are more water illiterates in China than illiterates. If consumers don't understand water, they are unwilling to pay more for bottled water of the same capacity.**
## In addition, because Nongfu Spring builds factories at water sources, its price system is higher than other waters on the market. Nongfu faced only three paths:
> ## First, prepare high costs for long-term education of Chinese consumers about water knowledge;
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> ## Second, join the industry in making purified water, go with the flow, and develop by leveraging the demographic dividend;
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> ## Third, let market share slowly wither and be eroded by other bottled water brands. As long as the direction is right, don't fear the long road.
## Nongfu Spring chose the first path, and has been on it for over a decade, continuing still.
## A few days ago, Mr. Liu Chunxiong published an article on his official account describing what BC integration means, involving three steps:
> Step one, use the B-end to enter the C-end.
> Step two, blow up the C-end to form momentum. What does "blow up" mean? It means having density: in a county with 500,000 people, you need 100,000 to 200,000 fans to follow.
> Step three, use the momentum to force the B-end, making those B-ends that ignored us and are particularly hard to enter proactively seek cooperation with us.
The core here is to first go from B-end to C-end, then use C-end to force B-end.
In fact, Nongfu Spring started doing this fifteen years ago. Of course, there was no live streaming or fan traffic concept back then; it was entirely another form of the same idea. I once served Nongfu Spring for five years, and during those five years, the team I insisted on checking did mostly two things.

**1. Terminal store visualization (B-end: ensure every store has a water pile, large stores have large water piles, small stores have small water piles)**
1) In terms of channels, standardized operations: the position of the water pile, the water test comparison bottle blanks that must be placed on the water pile, pasting water knowledge posters, doing water tests for store owners, and distributing water knowledge leaflets, etc.
2) What kind of water pile scene should be created to attract target consumers to stop and watch? For example, special-shaped water piles in supermarkets, pillar displays on main roads, etc.

**2. Consumer education (C-end: community water station activities + water tests)**
1) Guide consumers to understand the difference between natural water and purified water, creating demand for natural water.
2) Use event marketing to attract consumer attention and enhance the brand awareness of Nongfu Spring natural water.
3) Use communities and business districts as bases, through regular (Saturday designated as water test activity day, all staff do market activities, requiring to cover every residential area within a certain time, and each area must have multiple sessions) water tests + free tasting activities for consumer communication, establish natural water awareness, then build brand loyalty, and increase consumers' willingness to buy natural water.

Summary: The marketing department solves C-end demand management, the sales department solves B-end transaction execution, and the grassroots sales organization units should integrate BC and coordinate with each other. Nongfu Spring uses both methods (now commonly called BC integration), through terminal store visualization + consumer communication, successfully making consumers "name" Nongfu Spring when they go to small shops.
Some terminal store owners who once refused to stock Nongfu Spring, under the pressure of the "God" (consumers), had to call the salesperson to restock, and the market situation and atmosphere changed dramatically.

**-02- Nongfu Spring distributor management system**
Nongfu Spring's distributor management system underwent a major reform in 2014, redefining the rights and responsibilities of the manufacturer and distributor, returning the market to distributors. Distributors changed from a supporting role as delivery agents to a leading role as operators.
It should be mentioned here: Nongfu Spring's exclusive distributor system and Jinmailang's four-in-one distributor system are essentially the same, both achieving "farmers have their own fields" through supervision and assistance, thereby activating the organization. The difference is that Nongfu Spring activates distributors, while Jinmailang activates regional contracted small bosses (Jinmailang believes: the more decentralized the distribution rights, the stronger the competitiveness).
Next, let's briefly understand Nongfu Spring's distributor management model.
The core idea of the exclusive distributor model is: **the enterprise fully authorizes distributors and provides timely assistance and services.**
1. Distributors' rights are: distribution rights, market leadership, and suggestion rights; their obligations are: achieving goals, price maintenance, brand building, and market expansion.
2. Enterprise service and assistance content includes: conveying policies and information, providing market and execution data, providing distributor training, mentoring sales representatives, and helping potential distributors, etc.
3. Expense lump sum: Based on comprehensive factors such as city level, modern channel share, and university/scenic spot share, distributors are given market expenses of 7%-10% of annual sales.
It is stipulated that the ratio of market expenses (used for terminal store displays and other visualization or consumer education activities) to channel expenses (used for promotional activities such as product gifts) is 7:3. The enterprise also supports part of the expenses, with the verification ratio being 7.5:2.5 between the manufacturer and distributor. For example, if the manufacturer and distributor jointly do a market activity, the enterprise bears 75% of the cost, and the distributor bears 25%.
4. Expense verification: Distributor expenses are proportional to their cumulative task completion. If completion is below 80%, there is no expense support. Distributors can apply to advance 2 months of expenses based on market needs, and later make up for it when tasks are met. At the same time, the enterprise will arrange inspectors to verify the actual use of expenses on-site to ensure the effectiveness of expenses.
5. Business assessment model: Business salaries are set by distributors based on their own market conditions. After monthly formulation, photos are taken and kept by the office and region. For co-employed sales representatives, the company pays basic salary, no KPI, and commissions are paid by the distributor. For exclusive sales representatives, they have no direct relationship with the company; the company pays a monthly base salary subsidy, and the rest is borne by the distributor.
6. Grassroots managers go deep into distributor internal management: Nongfu's grassroots managers are called customer managers, managing 4-7 sales personnel, going deep into distributor operations, organizing and participating in distributor morning meetings, discussing market strategies, participating in formulating market activities, personnel assessment, order delivery, warehouse management, and other daily business operations.

Summary of pros and cons:
**Advantages:**
1) Distributors are the first touchpoint in the market. Flexible use of market expenses increases distributors' market adaptability and makes cost-effectiveness higher;
2) Lump-sum expenses, high gross profit drive, high distributor enthusiasm, and strong terminal network control;
3) Role change: the enterprise changes from a user of expenses to a verifier of expenses, focusing on inspection, supervision, and control mechanisms, resulting in better market order;
4) Result-oriented, simple processes, flexible execution, fast financial verification, improving market operation efficiency;
5) Through contracts, gradually improve the distributor communication, training, and development system, continuously enhancing market competitiveness.

**Disadvantages:**
1) Distributors' abilities in market, management, and assessment vary;
2) Distributors are profit-oriented, and Nongfu's management of distributor business processes is relatively loose. In peripheral suburban counties, due to relatively low output, coverage and service levels are low.

**-03- Product logic: Adhere to market innovation, be a long-termist**
In my impression, Boss Zhong is a perfect productist. If the product is right, the rest is to sell the product in the right place, right scene, and right location to the right people, not to everyone or all channels. **Nongfu Spring will not easily produce a product. Once a product is launched, it will be given time and resources for long-term cultivation.**
Take Oriental Leaf as an example. In 2012, it launched sugar-free tea, at a time when sugary teas from Kangshifu, Uni-President, Tianwo, etc., were fiercely competing. The launch of Oriental Leaf reopened a new era in the tea beverage segment. Innovators are always lonely. Nongfu staff pulled ice buckets in summer and warm cabinets in winter to "fight sugar," and only now is this product gradually being understood and accepted by consumers.

**Nongfu Spring's product logic is very clear: products should become the standard of lifestyle and attitude for consumers.** It never makes category hits, meaning you rarely have the chance to see Nongfu Spring make internet-famous products or products that explode in sales in a short time, whether in the past, present, or future. Nongfu Spring insists on making brand hits.
What is a brand hit? One hundred million US dollars, that is, a 1 billion yuan single product. Without a 1 billion yuan single product, it cannot enter company-level strategy; it is only a tactical brand and product. Tactical level is regional brand, strategic level is global brand.

Summary: **In market innovation, Boss Zhong is more like a Jobs-style super product manager, always user-centered, giving users more and better experiences and surprises.**
As he said: "I think the post-80s and post-90s have too rich knowledge and information. They clearly know whether a product is imitative or innovative. For this generation of consumers, there is only one point of conquest: to show them new things and good things. Let young people feel good products; that is hope." This is also the business philosophy and logic behind Nongfu Spring's product success: only use disruptive innovation that can conquer users to change the landscape and lead the future.

**-04- Strategic layout of Sesame Stores**
In 2018, Nongfu Spring deployed vending machines to new retail scenarios—underground parking lots of high-end residential areas—and named this project "Sesame Store." A Sesame Store is a fully controllable small store with precise target consumer positioning, precise purchase scenario positioning, within 100 meters of consumers' homes, and directly associated with cars. This new scenario has enormous imagination space.
In the first half of unmanned retail, with capital support, it grew wildly and deviated from the correct track of FMCG. In the second half, without capital support, everything returns to the original intention. Brand owners build their own points to directly form their own channels, establish private domain traffic pools, and thus directly reach the C-end. This is a very big strategy.
In the near future, every Sesame Store can be built into a consumer drinking water pickup point, creating an online-offline integrated marketing closed loop, serving e-commerce, group buying, and other platforms, ultimately forming its own competitive barrier. This process is long, not about initial investment, but about long-term operation and maintenance capabilities.
Of course, some industry insiders misunderstand: Nongfu Spring's move has been losing money. How long can Sesame Stores last? In fact, the Sesame Store strategy is a strategic loss, aimed at building Nongfu's future new retail layout and connecting with community systems. All software and hardware belong to Nongfu's channel assets; it is investment, not expense.


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