Nongfu Spring's Long-Term Growth Driven by Value Chain Profit Distribution

📌 Background

In 2026, Nongfu Spring maintained growth by avoiding aggressive e-commerce push and ceding profits to distribution channels: 2025 revenue reached 52.553 billion RMB, a year-on-year increase of 22.5%, with net profit attributable to shareholders of 15.868 billion RMB, up 30.9% year-on-year (based on the 2025 annual report); in the first half of 2026, revenue hit 29.7 billion RMB, up 16% year-on-year, while tea beverage revenue reached 13.122 billion RMB, surging 30.1% year-on-year to surpass packaged water for the first time as the largest revenue segment. Profit distribution is tilted toward offline small shops and distributors, trading value chain symbiosis for channel exclusivity and long-term water source investments.

👤 Target Customers

Physical channel partners centered around nationwide offline small shops, distributors, and terminal refrigerator systems, alongside end-consumers (family, individual drinking water, and tea beverage demands).

💰 Revenue Streams

1) Core earnings stem from sales of packaged drinking water (natural water core product) and tea beverages (Orient Leaf), with tea beverages surpassing water to become the primary revenue segment; 2) Channel profit distribution is skewed toward offline physical entities, driving net profit margin growth through economies of scale and product portfolio upgrades (high-margin tea beverages); 3) Chain replication: charging project-based opening and supply chain service fees to newly added stores.

🧮 Cost Structure

Primary costs include water source exploration and plant construction (water source assets), production equipment and logistics/transportation (water products involve heavy logistics), offline channel refrigerator placement and distributor rebates, as well as upstream farmer procurement and collaboration costs.

🛡️ Moat

The moat lies in long-term monopolistic layout and plant construction period barriers regarding scarce water source locations, coupled with a continuous channel partner mechanism—transforming small shops and distributors into a community of shared interests—and the first-mover mindset established by tea beverage brands in the sugar-free tea track.

🔑 Keys to Success

• Continuously bet on high-margin tea beverage key products while maintaining stable taste and quality
• Deepen the offline channel partner system by ceding profits to terminal merchants to form exclusive product displays
• Adhere to long-term investment in water sources, using profit distribution to bind upstream farmers and distributors

⚠️ Risks

• If tea beverage growth slows down while packaged water remains sluggish, the revenue structure will become imbalanced
• Continuously rising offline channel costs (refrigerators, rebates) may erode profit margins
• Risks of environmental and public opinion controversies arising from the public attribute of water sources

🏢 Cases

• Full-year revenue in 2025 exceeded 50 billion RMB for the first time, with net profit at 15.9 billion RMB (Yuanzhan Huiku)
• In the first half of 2026, tea beverage revenue grew by 30%, with Orient Leaf driving tea beverages to surpass water beverages (Sina Finance)
• Maintaining double-digit growth in offline small shop channels through profit-sharing with the real economy (Tencent News)

📊 SWOT Analysis