Chinese Bottled Water Giant Nongfu Spring Takes Legal Action Against Its Haters

Nongfu Spring Co. Ltd., a prominent Chinese beverage manufacturer, recently faced a significant public backlash following allegations against its founder and products. This crisis led the company to take legal actions against those spreading alleged false rumors [para. 1].

The controversy arose on February 25 when Zhong Shanshan, Nongfu Spring’s billionaire founder, attended a memorial service for Zong Qinghou, the late founder of Hangzhou Wahaha Group Co. Ltd., a rival company. Unexpectedly, this event sparked online fury, where internet users accused Zhong of having previously undermined Zong in past business encounters [para. 3]. Additionally, they criticized the packaging of Nongfu Spring’s tea beverages for featuring “Japanese-style elements” [para. 3]. Consequently, some retail outlets, such as two 7-Eleven stores in Changzhou, ceased selling Nongfu Spring products [para. 3].

This online furor negatively impacted Nongfu Spring’s stock and sales. The company's shares, listed in Hong Kong, dropped by 5.4% from February 29 to March 11, shedding approximately HK$27 billion ($3.45 billion) in market value, marking it as one of the poorest performers on the Hang Seng China Enterprises Index over this period [para. 4]. Additionally, there was a sharp decline in the sales of Nongfu Spring’s bottled water and tea beverages. Specifically, bottled water sales plummeted by 31.7% from February 20 to March 7, while tea beverage sales went down by 22.6% during the same timeframe, according to data from Win Win Network [para. 5].

In response to these events, Nongfu Spring published a comprehensive statement on social media, refuting 20 claims against Zhong, the company, and its products [para. 6]. Among various points, the company contested the allegation that it had been fined 200,000 yuan in 2000 for unfair competition with Wahaha [para. 7]. Moreover, it declared that Nongfu Spring is wholly a Chinese company established in Hangzhou and not registered in the Cayman Islands as claimed by some [para. 7]. The company further asserted its adherence to tax regulations and clarified that the packaging inspiration for its tea beverages came from the Jingshan Temple in Hangzhou, known for its traditional tea-making ceremony [para. 8].

Moreover, Nongfu Spring has initiated legal proceedings against individuals who they believe maliciously spread misinformation about the company [para. 9]. This series of events led to a further decline in Nongfu Spring’s shares, which closed down 2.14% on the following Tuesday [para. 10].

This public relations debacle highlights the unpredictable nature of doing business in China, particularly as the government has recently committed to enhancing support for the private sector to help achieve a growth target of around 5% for the year [para. 11]. To foster a more favorable business environment, the Supreme People’s Court has pledged to crack down on “malicious attacks” against entrepreneurs, aiming to curb extreme language and actions that could destabilize private enterprises [para. 12].