Farmer Springs released its interim report recently, showing a decline of 18.3% in revenue from packaged drinking water products in the first half of the year compared to the same period last year. As a result, on Wednesday (28th), the company’s stock price plummeted, with the total market value briefly falling below 300 billion Hong Kong dollars.
In the morning of August 28, Farmer Springs (09633.HK) stock price dropped by over 12%, and at one point during trading, it fell by nearly 13%, causing the total market value to dip below the significant 300 billion Hong Kong dollar mark. By the market close, the decline narrowed to 10.43%, closing at 27.05 Hong Kong dollars. Year-to-date, Farmer Springs’ Hong Kong stocks have accumulated a decline of around 40%, with the latest market value at 304.2 billion Hong Kong dollars.
On the news front, on the evening of August 27, Farmer Springs disclosed its mid-term financial performance.
According to the financial report, the revenue from packaged drinking water products in the first half of the year was 8.531 billion yuan, a decrease of 18.3% compared to the same period last year, marking a significant drop for the first time, with the proportion of total revenue dropping from over 50% to 38.5%.
Farmer Springs stated that since the end of February, there has been a large amount of public opinion attacks and malicious defamation against Farmer Springs and its founder on the internet, which has had a serious negative impact on the brand and sales, leading to a significant decline in revenue from packaged drinking water products for Farmer Springs.
According to “Investment Express,” before the influence of public opinion, in the months of January and February 2024, revenue from Farmer Springs’ bottled water sales increased by 19.0% compared to the same period last year. However, in the first half of 2024, revenue from packaged drinking water products decreased by nearly 20% compared to the previous year.
Farmer Springs disclosed to “Jiemian News” that industry insiders estimated that the prolonged public opinion crisis caused Farmer Springs to lose over 7 billion yuan in revenue in the first half of the year.
The performance of core products directly impacts the company’s overall profitability. In the first half of the year, the company achieved revenue of 22.17 billion yuan, an 8.4% year-on-year increase; net profit was 6.24 billion yuan, an 8% year-on-year increase. Basic earnings per share were 0.55 yuan, an 8% year-on-year increase. Compared to the mid-term financial reports of the past three years, Farmer Springs’ revenue and net profit growth rates have reached record lows.
After the death of the founder of China’s beverage industry giant “Wahaha,” Zong Qing, in late February, Zhu Shulun and Farmer Springs experienced a significant impact from public opinion, leading to a continuous sharp decline in sales of Farmer Springs products in China.
Various articles and videos on the Chinese internet claimed that China’s richest man, Zhu Shulun, was a former agent of Wahaha in his youth and received his first entrepreneurial income from Wahaha under Zong Qing’s guidance. However, as Zhu Shulun started Farmer Springs and became a competitor to Zong Qing, he was accused of being “ungrateful.”
Furthermore, the news of Zhu Shulun’s son, Zhu Shuzi, obtaining American citizenship also sparked criticism from some Chinese netizens. Farmer Springs’ product named “Oriental Maple Leaf Original Tea” was also criticized, with the temple architecture on its packaging being considered closely related to elements of Japanese shrines. Farmer Springs faced a series of accusations of being “unpatriotic” and “pro-Japanese,” leading to a boycott of its products.
On March 3, Zhu Shulun publicly stated that his first bucket of gold came from the textile business, not from Wahaha as claimed by netizens. He also admitted that Farmer Springs and Wahaha had sued each other in the past but had long since reconciled.
Interestingly, the beneficiary of this public opinion battle is alleged to be the largest shareholder of Wahaha, tied to the Chinese government.
The largest shareholder of Wahaha is the Wenshan Travel Investment Holdings Group in Shangcheng District, Hangzhou, Zhejiang, with a 46% stake. This company is wholly controlled by the Shangcheng District Finance Bureau, the Shangcheng District State-owned Assets Supervision and Administration Commission, and the Shangcheng District State-owned Capital Operation Company, representing the sole state-owned assets in Shangcheng District, Hangzhou.
Zong Qing himself held a 29.4% stake in Hangzhou Wahaha, making him the second-largest shareholder, while the Wahaha employee stock ownership association held the remaining 24.6% stake.