China’s richest man risks losing crown after $17.5 billion wipe-out

SHANGHAI - China’s richest man is at risk of losing the pole position he has held for almost three years, with his wealth slipping the most among billionaires around the world as intensifying competition and mishaps plague the bottled water giant he founded.

Mr Zhong Shanshan, chairman of Hangzhou-based Nongfu Spring, has lost US$13 billion (S$17.5 billion) so far in 2024, according to the Bloomberg Billionaires Index, with a fortune of US$54.8 billion as at July 22.

That keeps him a whisker above Mr Colin Huang, founder of online shopping platform PDD Holdings, whose fortune stands at US$47.3 billion.

The potential changing of the guard reflects a consumer economy that is increasingly complex for businesses to navigate, as the economy slows and competition from upstart brands intensifies.

Besieged by a price war in its core bottled water space, Hong-Kong listed Nongfu has also found itself on the wrong side of growingly nationalistic and health-conscious Chinese in recent months.

This has led to an almost 20 per cent plunge in its share price since Feb 1, compared with a roughly 6 per cent rise for PDD, with its dirt-cheap products and aggressive deals.

“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,” Bloomberg Intelligence consumer analyst Ada Li said.

Most of Mr Zhong’s fortune is derived from stakes in the beverage company and pharmaceutical business Beijing Wantai Biological Pharmacy Enterprise.

Earlier in 2024, the company – and Mr Zhong himself – were barraged by criticism after the death in February of Mr Zong Qinghou, founder of key rival Hangzhou Wahaha Group.

Online sympathy after his passing morphed into a takedown of Nongfu, with some comments deriding its bottled water packaging as looking Japanese in design, and others recapping what they alleged were tricks Nongfu had used to gain an advantage over Wahaha.

Users alleged that Mr Zhong’s son holds a US passport and questioned the family’s allegiance to China. In a blow to Nongfu, Wahaha sales spiked. While Nongfu refuted some of the claims and said it had taken legal action against people who instigated malicious rumours, many Chinese internet users remained unmoved.

In April, China Resources Beverage Holdings filed for a Hong Kong listing, a move set to provide additional resources for its bottled water brand C’estbon – one of Nongfu’s major competitors.

Soon after, Nongfu introduced a new purified water in direct competition with C’estbon, pushing prices to the floor. The product is being sold at less than one yuan (19 Singapore cents) per 550ml bottle on Alibaba Group Holding’s Tmall, less than half its normal retail price.

Even as Nongfu reported stronger than expected earnings in 2023 thanks to robust sales of its ready-to-drink teas, the proportion of revenue from packaged drinking water dropped to 47.5 per cent – from 54.9 per cent in 2022 – underscoring the rise in competition in the bottled water sector.

In the latest headwind, Hong Kong’s Consumer Council last week said Nongfu’s water had been found to contain the maximum limit of bromate, which could pose health risks when overconsumed.

Shares plunged by 7.3 per cent in two trading days before the council clarified that its early findings had come as a result of evaluating Nongfu’s water against criteria used for a category to which it does not belong. Shares bounced back after the watchdog apologised, but wiped out gains again on July 19.

To shore up confidence, Nongfu announced earlier in July that Mr Zhong intended to buy up to HK$2 billion (S$345 million) of the company’s shares via Yangshengtang, a holding company he controls. On July 9, Yangshengtang bought about 3.5 million shares, according to regulatory filings. BLOOMBERG