---
title: "Nongfu Spring Releases Half-Year Report: Revenue and Net Profit Both Increase, Sugar-Free Tea Drinks Lead New Direction!"
description: "On August 24, Nongfu Spring Co., Ltd. released its 2022 interim results. The report shows that in the first half of 2022, Nongfu Spring's revenue was RMB 16.599 billion, a year-on-year increase of 9.4%; profit attributable to owners of the parent was RMB 4.608 billion, up 14.8% year-on-year. Basic earnings per share were RMB 0.41, up 13.9% year-on-year."
author: "New Distribution"
publisher: "New Distribution"
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published: "2022-08-26"
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# Nongfu Spring Releases Half-Year Report: Revenue and Net Profit Both Increase, Sugar-Free Tea Drinks Lead New Direction!

> On August 24, Nongfu Spring Co., Ltd. released its 2022 interim results. The report shows that in the first half of 2022, Nongfu Spring's revenue was RMB 16.599 billion, a year-on-year increase of 9.4%; profit attributable to owners of the parent was RMB 4.608 billion, up 14.8% year-on-year. Basic earnings per share were RMB 0.41, up 13.9% year-on-year.

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On August 24, Nongfu Spring Co., Ltd. (hereinafter referred to as "Nongfu Spring") released its 2022 interim results.
The report shows that Nongfu Spring's revenue in the first half of 2022 was RMB 16.599 billion, a year-on-year increase of 9.4%; profit attributable to owners of the parent was RMB 4.608 billion, a year-on-year increase of 14.8%. Basic earnings per share were RMB 0.41, a year-on-year increase of 13.9%.
Among them, revenue from packaged drinking water products increased by 4.8% compared with the same period last year, accounting for 56.3% of total revenue. Revenue from beverage products increased by 18.8% compared with the same period last year, accounting for 43.0% of total revenue.
Since the beginning of this year, the international environment has been complex and volatile, and domestic epidemics have occurred frequently. Unexpected situations beyond expectations have impacted the stable operation of the economy. Especially in the second quarter, under the impact of the domestic epidemic, downward pressure on the economy increased significantly.
According to the financial report, due to changes in international crude oil prices leading to an increase in the group's PET material procurement costs, the company's gross margin in the first half of 2022 fell from 60.9% in the same period last year to 59.3%, a year-on-year decrease of 1.6 percentage points.
However, thanks to the strategy of focusing on operational efficiency and further concentrating resources, in the first half of 2022, despite the impact of the epidemic and the international environment, Nongfu Spring maintained a certain degree of growth in all categories except other products. Revenue and net profit also maintained a double growth momentum in the first half of the year.
**01**
**Packaged Drinking Water Products Continue to Perform Strongly**
According to the financial report, sales of packaged drinking water were generally good in the first quarter of 2022, but the COVID-19 epidemic in the second quarter impacted sales of packaged drinking water products.
According to the latest data from third parties, in the current domestic packaged drinking water market, Nongfu Spring and China Resources C'estbon are the two giants, occupying market shares of 26.4% and 20.9% respectively. Ganten, ranked third, has a market share of less than 10%, only 9.6%. From the current market share, it can be seen that Nongfu Spring firmly ranks first in the industry.
Nongfu Spring's ability to maintain its leading position is due to timely strategic adjustments and a reduction in advertising expenses during the reporting period.
In addition, according to data disclosed in Nongfu Spring's prospectus, the gross margin of its packaged drinking water in 2019 was as high as 60.2%, and its transportation costs for packaged water could be controlled at 4%. This is largely attributed to its abundant water sources, as it has 11 major water sources across the country. Nongfu Spring's high gross margin makes it highly favored by terminals in the competition for 2-yuan water.
In addition, during the 2022 Chinese New Year, Nongfu Spring launched a "Tiger" zodiac commemorative collector's edition glass bottle mineral water. It also continued to release two documentary-style advertisements, "Every Snow Has Unexpected Surprises" and "Mothers of Changbai Mountain," conveying to consumers the product characteristics of "Changbai Snow" as snow mountain mineral water from Changbai Mountain and the brand value of "What kind of water source nurtures what kind of life."
In terms of natural water, it chose to co-brand with Disney and launched limited-edition IP bottles, conveying the brand concept of "Born with love, accompanied by nature" to consumers.
Data shows that last year, the market size of packaged drinking water in China exceeded RMB 200 billion, and it is estimated that it will exceed RMB 300 billion by 2025.
But with the end of the 1-yuan water era, the competitive landscape of the packaged drinking water market will only intensify. For Nongfu Spring, packaged drinking water products are still the basic business. Therefore, whether the second growth curve can grow efficiently is one of the many issues Nongfu Spring currently faces.
**02**
**Beverage Products Grow Against the Trend**
According to data from the Ministry of Industry and Information Technology, from January to June 2022, the output of beverage manufacturing enterprises above designated size nationwide fell by 1.5% year-on-year to 90.662 million tons. In June alone, beverage output was 18.28 million tons, a year-on-year decrease of 2.8%.
Although national beverage sales are declining, according to Nongfu Spring's financial report, revenue from beverage products increased by 18.8% compared with the same period last year. This data actually shows growth against the trend.
By category, Nongfu Spring's tea beverage products performed excellently, with a year-on-year increase of 51.6%, and their revenue share further increased; functional beverage products were lukewarm, with a year-on-year increase of only 0.9%; juice beverage products increased by 4.2% year-on-year; other product categories saw a year-on-year decrease of 23.8%.
**1. Tea Beverage Category**
In the first half of the year, the tea series added two new products: Tea Pie-Citrus Pu'er Lemon Tea and Green Grape Oolong Tea, and simultaneously launched a "New Flavors, New Tea Style!" tasting activity. By launching Tea Pie series Grapefruit Jasmine Tea and Grapefruit Green Tea in 900ml sharing bottles, the Tea Pie product matrix was further enriched, meeting different consumer needs and broadening consumption scenarios.
Oriental Leaf also continued to invest in brand advertising, strengthening its product advantages of 0 sugar, 0 calories, 0 fat, 0 flavoring, and 0 preservatives. In the spring of 2022, it timely launched the spring-limited product "Longjing New Tea," combined with the theme promotion "Spring starts with a cup of new tea," conveying Chinese tea culture to more and more consumers who love "Oriental Leaf."
According to distributors, Oriental Leaf, a sugar-free tea product, has become increasingly active in market sales recently. According to recent data from AC Nielsen, its market share exceeds 50%, making it the number one sugar-free tea brand for many consecutive years.
In addition to new products, another magic weapon to capture consumers is new flavors.
In March 2022, Nongfu Spring launched a new carbonated tea series product "Qi Cha," inheriting the classic slogan "Full of bottom gas," breaking the inherent boundaries between tea and carbonated beverages.
Through three innovative flavors: Passion Fruit Oolong, Green Orange Pu'er, and Yellow Peel Jasmine, it emphasizes the concept of real tea and low sugar, aiming to bring consumers a refreshing and low-burden drinking experience.
**2. Functional Beverage Category**
The performance report shows that due to the impact of the COVID-19 epidemic, consumers' outdoor activities decreased, and demand for functional beverage products declined. Revenue was basically flat compared with the same period last year.
During the reporting period, "Scream" beverage launched co-branded bottles with Ultraman and carried out brand theme activities with "Scream Energy, Light Guardian." "Vitamin Water" continued its trend-setting functional beverage route, partnering with Strawberry Music Festival to launch the "Vitamin Water Sends You to Strawberry" Douyin selection contest, providing "music vitamins" for young people who love music.
According to third-party data, the domestic functional beverage market is growing rapidly, with the market size expected to grow from RMB 123.8 billion in 2021 to RMB 182 billion in 2026.
From a market perspective, the slowdown in Nongfu Spring's functional beverage sales is partly due to the objective factor of the epidemic, but on the other hand, it is also related to intensified market competition. In this track, besides Dongpeng Special Drink being the dominant player, there are also Huabin Group and Tiansi Red Bull catching up, and Genki Forest's Alien series products continuing to make efforts. The intensity of competition can be imagined.
**3. Juice Beverage Category**
During the reporting period, revenue from juice beverage products was RMB 1.275 billion, an increase of 4.2% compared with the same period last year, accounting for 7.7% of total revenue.
During the 2022 Chinese New Year, Nongfu Spring carried out a combined display and brand joint activity of NFC juice and 17.5° fresh fruit, showcasing the high-end positioning of NFC juice as making good juice from the agricultural source.
**4. Other Product Categories**
Other products mainly include soda water beverages, carbonated flavored beverages, coffee beverages, and other beverage products, as well as fresh fruit and other agricultural products.
Under the epidemic environment, Nongfu Spring adopted a strategy of focusing on operational efficiency and further concentrating resources, so sales in this category decreased. During the reporting period, revenue from other products was RMB 645 million, a year-on-year decrease of 23.8%, accounting for 3.9% of total revenue.
In the fastest-growing ready-to-drink coffee category, Nongfu Spring's Carbon Bing coffee beverage has not yet achieved impressive results.
According to the "Development Strategy" section of the financial report, in the second half of the year, due to external factors such as the Ukraine crisis and the Fed's interest rate hikes, the international environment remains complex and severe, and Nongfu Spring's cost control pressure will further increase in the second half of the year.
Founder Zhong Shanshan once said in an interview: **"Nongfu Spring's competitors have always been international brands. What we compete on is water research. It's not competition just because there's an extra brand on the shelf. Such competition is not called competition for Nongfu."**
Overall, in addition to maintaining its dominant position in the bottled water field, Nongfu Spring has seen a brief explosion in tea beverage sales through years of deep cultivation. Under the current mainstream consumption trend of "sugar-free" and "healthy," this growth trend has clearly not yet peaked.
[Unified Central Control Dairy and Beverage Circulation Group General Manager Deng Gang] Pay tribute to channel partners, meet in Chengdu, August 31-September 2, 2022 (7th) China FMCG Channel Innovation Conference.
**__**-END-**_


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