China’s Richest Man Faces Losing Title After $13 Billion Loss

China’s richest man is on the verge of losing the top spot he’s held for nearly three years, with his wealth falling the most among billionaires globally as rising competition and public relations issues afflict his bottled water conglomerate.

Zhong Shanshan, chairman of Hangzhou-based Nongfu Spring Co., has lost $13 billion so far in 2024, according to the Bloomberg Billionaires Index. His fortune is $54.8 billion as of Monday. This puts him slightly ahead of Colin Huang, the founder of PDD Holdings Inc., an online retail platform. Huang’s fortune is valued at $47.3 billion.

The prospective changing of the guard mirrors a consumer sector that is becoming increasingly difficult for corporations to navigate as the economy slows and competition from emerging brands heats up.

Nongfu, a Hong-Kong-listed company, has recently found itself on the wrong side of more nationalistic and health-conscious Chinese, as it faces a price war in its primary bottled water market. This has resulted in an almost 20% drop in its share price since February 1, compared to a roughly 6% increase for PDD, which offers dirt-cheap products and aggressive bargains.

“Recent issues with Hong Kong’s consumer watchdog regarding product quality, heightened competition in the sector amid decreased consumer spending, and a boycott earlier this year due to concerns over business practices are likely to have contributed to these apprehensions,” said Ada Li, a consumer analyst at Bloomberg Intelligence.

The majority of Zhong’s fortune comes from his investments in the beverage industry and pharmaceutical company Beijing Wantai Biological Pharmacy Enterprise Co.

Nongfu did not immediately react to a request for comment Monday on its founder’s fortune or any problems this year.

Following the February death of Zong Qinghou, founder of important rival Hangzhou Wahaha Group, the company and Zhong were subjected to a storm of criticism.

Following his death, online condolences turned into a criticism of Nongfu, with some comments mocking its bottled water packaging for having a Japanese design and others recounting what they claimed were techniques Nongfu used to gain an advantage over Wahaha.

Users claimed Zhong’s son holds a US passport and questioned the family’s devotion to China. Wahaha sales surged, dealing Nongfu a setback. While Nongfu denied some of the allegations and stated that company has taken legal action against those who spread false accusations, many Chinese Internet users remained unconvinced.

China Resources Beverage Holdings filed for a Hong Kong listing in April, with the intention of providing greater resources for its bottled water brand C’estbon, which is one of Nongfu’s main competitors.

Soon after, Nongfu launched a new filtered water in direct rivalry with C’estbon, driving costs to the floor. On Alibaba Group Holding’s Tmall, the product is sold for less than one yuan every 550-millilitre bottle, which is less than half of its typical retail price.

Even while Nongfu announced higher-than-expected profitability last year due to strong sales of its ready-to-drink teas, the proportion of revenue from packaged drinking water fell to 47.5%, down from 54.9% in 2022, highlighting the increase in competition in the bottled water industry.

In the most recent setback, Hong Kong’s Consumer Council announced last week that Nongfu’s water had the maximum allowable amount of bromate, which could pose health hazards if taken in excess. Shares fell 7.3% in two trading days before the council acknowledged that its first conclusions were the consequence of comparing Nongfu’s water to criteria used for a category to which it does not belong. Shares recovered after the watchdog apologised, but lost ground again on Friday.

To boost trust, Nongfu said earlier this month that Zhong planned to buy up to HK$2 billion (S$344 million) in firm shares through Yangshengtang, a holding company he controls. According to regulatory documents, Yangsheng Tang purchased around 3.5 million shares on July 9. BLOOMBERG

Leave a Reply