REAL CASE 033

Nongfu Spring's Water Grew Only About 2.1%—So How Did Group Revenue Still Grow Around 16%?

What should a company do when its brand has long been closely identified with one core product category and that category suddenly suffers a trust shock? The most obvious answer might be: Put everything into restoring the core product. Nongfu Spring did not do only that. Packaged water remained important. The company still needed to protect consumer trust, maintain distribution, and repair its core business. But the national distribution system built through water had another important value: It could sell other beverages. That is the central idea in Case 033. Nongfu Spring spent years building its brand through packaged water. Consumers could find the product in convenience stores, supermarkets, restaurants, and many other retail outlets. This high distribution density became a commercial asset in its own right. Building that asset is difficult. The company needs water sources, factories, packaging, warehousing, transportation, distributors, retail relationships, and long-term brand investment so that consumers will choose its products on the shelf. Once that system exists, it does not have to serve only one bottle of water. The same retail outlet can carry Nongfu Spring water and Oriental Leaf. The same distributor network can deliver water and tea. The same manufacturing and supply-chain organization can support multiple beverage categories. The infrastructure originally built around packaged water can therefore become the starting point for growth in tea. The 2024 trust shock made this capability much more important. If Nongfu Spring had only one meaningful growth engine, pressure on packaged water would expose the entire Group to the same category risk. Instead, the company continued defending water while allowing tea to take on more responsibility. Oriental Leaf became particularly important because it was no longer simply another beverage sold alongside water. It increasingly became a product line capable of making a meaningful contribution to Group growth. In 2025, Group revenue reached approximately RMB52.6 billion, up roughly 22.5%. In 1H 2026, Group revenue reached approximately RMB29.7 billion, up around 16%. But packaged water grew only about 2.1%. These figures must be read together. Looking only at 16% Group growth could create the impression that every category was expanding rapidly. That was not the case. Looking only at 2.1% packaged-water growth could create the opposite impression that Nongfu Spring had lost its ability to grow. That was not the case either. What actually changed was the source of growth. Water remained an important foundation, while tea and adjacent beverage categories took on a larger share of the growth burden. That is the value of product mix. A national distribution network that can sell only one product has limited resilience. If the same system can repeatedly bring new products with genuine consumer demand into existing retail channels, distribution itself becomes a reusable growth asset. This does not mean Nongfu Spring can ignore packaged water. Water still provides major consumer reach, brand recognition, and channel presence. If trust in packaged water were to weaken for a prolonged period, the effect could extend beyond the water category and damage the broader brand. The correct strategy is therefore not "replace water with tea." It is: **Repair water while allowing tea to become a second engine.** Both must happen together. Nongfu Spring must continue protecting water sources, quality, brand trust, and distribution while using Oriental Leaf and other products to expand consumption occasions. This also reduces category-concentration risk. Historically, consumers primarily associated Nongfu Spring with water. If the brand increasingly becomes associated with water, tea, and other beverage categories, dependence on one category becomes lower. But the second engine also carries risk. Strong tea growth does not mean the category can grow at the same rate forever. Competition can intensify, consumer preferences can change, channel inventory can build, and competitors can imitate successful products. The company therefore should not replace dependence on water with dependence on tea. The more durable capability is: **Use brand, manufacturing, and national distribution repeatedly to turn consumer demand into a broader product portfolio.** That is the deeper value of Nongfu Spring's system. The 2024 shock tested the brand. The 2025–2026 results tested whether the business system had another route to growth. As of September 12, 2026, it did. That is why the Outcome is Success. Not because packaged water returned to every previous high-growth level, but because Group revenue could still grow around 16% while the core water category grew only about 2.1%.

ChinaFood / Packaged Drinking Water / Tea Beverages / Beverage Manufacturing / National DistributionSuccessWhy Nongfu Spring did not devote all of its resources only to restoring packaged water after the category suffered a trust shock, but instead continued repairing water while allowing Oriental Leaf and other beverages to become larger growth engines.Group revenue was approximately RMB52.6 billion in 2025, up roughly 22.5%. In 1H 2026, revenue reached approximately RMB29.7 billion, up around 16%, while packaged-water growth was only about 2.1%. This case examines how a brand built through packaged water used national distribution, manufacturing, and consumer access to turn a second beverage category into a meaningful source of growth.

BEFORE

Before 2020, Nongfu Spring had already built a very clear consumer identity around packaged drinking water. Water is a high-frequency mass-market product, but brand, source perception, price, availability, and long-term trust all influence consumer choice.The company invested over time in water sources, manufacturing, packaging, logistics, and national distribution so that its products could appear across a very large number of retail outlets. The denser the network became, the easier it was for consumers to find Nongfu Spring when they needed water, reinforcing both brand recognition and availability.This structure also created an advantage beyond water. The same delivery routes, distributor relationships, and retail outlets could carry tea and other beverages.Nongfu Spring therefore already possessed much of the infrastructure needed to build a second category. Packaged water was simply so dominant that the company was often perceived primarily as a "water company."Number

AFTER

By 2025–2026, that description was no longer sufficient.Group revenue was approximately RMB52.6 billion in 2025, up roughly 22.5%. In 1H 2026, revenue reached approximately RMB29.7 billion, up around 16%. Yet packaged-water growth during the period was only about 2.1%.If Nongfu Spring still depended almost entirely on packaged water, Group revenue could not grow around 16% while the core water category grew at a low-single-digit rate.The revenue structure had therefore changed materially. Tea and other beverages were using Nongfu Spring's existing brand, manufacturing, and national distribution network to contribute more growth, with Oriental Leaf becoming one of the most important products in that shift.The After is not "packaged water has returned to its previous high-growth trajectory." It is that Nongfu Spring has demonstrated that Group growth no longer has to come only from packaged water. The company is evolving from a business dominated by one powerful core category toward a broader multi-category beverage platform.Number

OUTCOME

SuccessCase Result

MODEL

Nongfu Spring is a branded consumer-beverage manufacturer. The company develops its own brands, organizes water sourcing, beverage production, packaging, and supply-chain operations, and distributes packaged water, tea beverages, and other drinks through a broad national retail network.This is fundamentally different from a franchise model. Nongfu Spring does not rely on franchisees to finance tens of thousands of terminal stores. It must manage water sources, manufacturing capacity, products, inventory, warehousing, transportation, distribution relationships, and brand investment itself. Manufacturing scale and national distribution are competitive advantages, but they also create capital and operating responsibilities.Packaged water helped Nongfu Spring build extremely dense distribution. Convenience stores, supermarkets, restaurants, and other retail outlets already carry the company's products. The value of that network is not limited to water.If the same retail outlet can sell both Nongfu Spring water and Oriental Leaf, the company can use existing routes, distributor relationships, and shelf access to scale a second category without rebuilding a national channel from zero.Nongfu Spring's economic engine can therefore be understood through three connected elements: brand trust creates consumer choice, distribution density creates availability, and large-scale manufacturing plus product mix converts that demand into revenue.This also helps explain why Group revenue could grow around 16% in 1H 2026 while packaged water grew only about 2.1%. The distribution system is capable of supporting more than one category.Business Model

Read the Case

# [SECTION

background] Before 2020: Packaged Water Built More Than a Product—it Built National Distribution

One of Nongfu Spring's most important early assets was the brand and national distribution network created through packaged drinking water.

Water is a frequent, mass-market purchase, but individual products can be difficult to differentiate. Brand trust and retail availability therefore matter greatly. When consumers need water, being present in a nearby convenience store, supermarket, or restaurant directly affects sales.

Nongfu Spring invested over time in water sources, manufacturing, packaging, warehousing, logistics, and channel relationships, allowing brand recognition and product availability to reinforce each other.

That infrastructure later became an important foundation for expanding other beverage categories.

# [SECTION

timeline] 2020-2026: From a Water-Led Brand to Multi-Category Growth

After 2020, Nongfu Spring listed publicly and continued expanding its beverage business. Packaged water remained the most important brand foundation, while tea and other products gradually gained scale.

In 2024, the packaged-water business faced a significant brand and trust shock, making the risks of dependence on a single core category more visible. The company needed to defend water while finding additional sources of growth.

In 2025, Group revenue reached approximately RMB52.6 billion, up roughly 22.5%, with tea becoming an important driver of the recovery.

In 1H 2026, Group revenue reached approximately RMB29.7 billion, up around 16%, while packaged water grew only about 2.1%. Group growth could increasingly no longer be explained by water alone.

The company had entered a new stage: packaged water remained the foundation, but tea was becoming a genuine second growth engine.

# [SECTION

problem_opportunity] Problem and Opportunity: After a Brand Shock, Can Distribution Keep Creating Value?

The 2024 problem was first a question of trust. Consumers buying packaged water are not purchasing only the liquid itself; they also make judgments about source, quality, safety, and brand credibility. Brand controversy can therefore influence purchasing behavior quickly.

But Nongfu Spring already had a national distribution system, creating a second opportunity.

Even when one core category is under pressure, distributors, retail outlets, manufacturing, and logistics capabilities still exist. If the company has another product with genuine consumer demand, the existing network can help scale it rapidly.

The strategic question therefore evolved from "How do we make water grow rapidly again?" toward "How do we repair water while allowing the same distribution system to generate new growth?"

# [SECTION

business_model] Business Model: Brand, Manufacturing, and Distribution Create Scale Together

Nongfu Spring's economics are built on the combination of brand, manufacturing, and national distribution.

Before revenue is realized, the company must invest in water sources, production facilities, packaging, inventory, warehousing, transportation, and brand building. It is not an asset-light digital platform with minimal physical-product risk.

But once these investments reach scale, they can be reused. Manufacturing and supply-chain capabilities can support multiple beverage categories, while distributor relationships and retail outlets can carry more than one product.

A new beverage category therefore does not need to build a national route to market from zero.

One reason Oriental Leaf could scale was that it entered an already established distribution system.

# [SECTION

execution] Execution: Repair Water While Investing Behind the Second Growth Engine

Nongfu Spring did not abandon its core water business after the shock. Packaged water still required brand repair, channel maintenance, product quality, and consumer trust.

At the same time, the company continued investing behind tea products, particularly Oriental Leaf, and used its existing distributor and retail network to broaden the product mix.

This is more resilient than a "water only" recovery strategy.

If water recovers, the company retains its core business. If tea continues growing, it has a second engine. Both categories can share parts of the manufacturing and distribution infrastructure, reducing the need to place the entire future of the Group on a single product category.

# [SECTION

turning_points] Turning Point: Allowing Tea to Become a Genuine Second Growth Engine

Nongfu Spring's first major foundation was packaged water, which built the national brand and distribution system. For years, the water business was strong enough to define the company's consumer identity.

The 2024 trust shock became the second Turning Point. It exposed the risk of relying too heavily on one core category: when water came under pressure, the entire growth narrative became more vulnerable.

The true strategic Turning Point came when the company did not require packaged water to carry all future growth. Instead, Oriental Leaf and other tea products were allowed to take on a larger role.

By 1H 2026, the change was visible in the numbers: Group revenue grew around 16%, while packaged water grew only about 2.1%.

The second engine was no longer just a concept.

It was materially changing the Group's growth structure.

Nongfu Spring's most valuable asset is not only packaged water, but the brand, manufacturing, and national distribution system that water helped build. In 1H 2026, Group revenue grew around 16% while packaged water grew only about 2.1%, showing that the second growth engine had begun carrying real responsibility. A strong distribution network can do more than sell more of the original product—it can redirect growth toward a new category when the core category comes under pressure.

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DECISION

What would you do?

After packaged water suffered a trust shock and slower growth, which option best reflects Nongfu Spring's actual recovery path through 2026?

AExit tea and other beverages, concentrate all resources on packaged water, and require water to carry all future Group growth again.BContinue repairing packaged-water brand trust and distribution while using existing manufacturing and national distribution to make Oriental Leaf and other beverages larger growth engines.CAbandon the national distributor and retail network, stop large-scale offline distribution, and shift primarily to direct online sales.DCut overall manufacturing and distribution capacity sharply because packaged-water growth slowed, even while demand for tea and other beverages remained strong.

Full Analysis

Nongfu Spring's first Turning Point was building a national brand and dense distribution system through packaged drinking water. Water generated revenue, but it also gave the company access to convenience stores, supermarkets, restaurants, and other retail outlets across China. The second Turning Point was the 2024 trust shock. It exposed the risk of allowing one core category to define too much of the company's growth and consumer identity. The third and most important Turning Point was management's decision not to require packaged water to carry the entire recovery. Oriental Leaf and other tea beverages were allowed to become genuine growth engines. By 1H 2026, the change was visible in the revenue structure. Group revenue grew around 16%, while packaged water grew only about 2.1%. The gap shows that growth was increasingly coming from a broader product portfolio. The strategic shift was therefore not that water became unimportant. It was that Nongfu Spring accepted a broader identity: a company whose foundation was built through water, but whose future growth could come from multiple beverage categories.

Turning Point

Before vs After

BEFORE

Before 2020, Nongfu Spring already had a recognizable operating model. Own brands, source water and beverage production, then distribute packaged drinks through a national retail network. The economic engine is brand, distribution density and high-volume manufacturing. That starting point matters because the pandemic did not create the economics of the company; it exposed them. Businesses with high fixed cost, inventory exposure or long contractual obligations reacted differently from marketplace, franchise or fee models. A good baseline asks three questions. First, who pays the company and for what unit? Second, which costs arrive before revenue is certain? Third, how much capital is required to add the next unit of growth? Those questions make later strategic choices comparable across years rather than treating every management presentation as a new story. The six-year sequence is the spine of the case. After listing, Nongfu Spring faced a sharp packaged-water setback in 2024, followed by a 2025 recovery led by tea and other beverages. In 1H 2026 water growth was modest while tea remained the more dynamic growth engine. The period should not be read as a smooth trend. 2020 changed customer behavior and capital markets; 2021 rewarded growth; 2022 exposed inflation, rates or operating stress; 2023–2024 forced many companies to choose between retrenchment and renewed expansion; 2025–2026 show which changes became durable. For Nongfu Spring, the decisive point is not the calendar year itself but the moment management could no longer rely on the old growth assumption.

AFTER

The evidence through the cutoff is: 2025 revenue was about RMB52.6 billion, up roughly 22.5%. 1H 2026 revenue reached about RMB29.7 billion, up around 16%, while packaged-water growth was only about 2.1%. These figures must be interpreted in context. A high growth rate can come from acquisitions or a depressed comparison; a low growth rate can still be attractive if margins, cash flow or partner economics improve. The most useful comparison is therefore between the operating model before the strategic change and the economics after it. The result type for this case is **success**. That label is descriptive, not moral. It summarizes the state of the strategy at the cutoff and should not be read as a prediction of what will happen after September 2026. The major risks are: Brand trust, social-media shocks, category concentration, source-water regulation, channel inventory and the possibility that tea growth slows after an unusually strong period. There is also a measurement risk. Public disclosures differ by accounting standard, geography and business model. Some companies publish rich quarterly operating metrics; private or post-bankruptcy companies publish far less. Missing data should not be filled with invented precision. Finally, this case has a hard information cutoff of 12 September 2026. Events after that date may change the conclusion, but they are outside this case and should not be smuggled backward into the analysis.

GoGoUp Five Powers

Discover

5/5

★★★★★

Analyze

5/5

★★★★★

Execute

5/5

★★★★★

Decide

5/5

★★★★★

Create

5/5

★★★★★

Discover5/5

Nongfu Spring initially discovered that packaged water could become a powerful mass-market business through brand trust, source perception, and national availability. The second discovery was that national distribution itself had cross-category value. A network capable of putting water into large numbers of convenience stores, supermarkets, and other outlets could also carry tea and other beverages. After the 2024 shock, the third discovery became more important: when the core category is under pressure, the company does not have to wait for that category to recover completely before growing again. A second category with genuine consumer demand can use the same network to scale. Moving from "sell water effectively" to "use the same distribution system to support multiple beverage engines" supports a Discover score of 5.

Analyze5/5

Nongfu Spring cannot be analyzed only through Group revenue growth or only through packaged-water growth. In 1H 2026, Group revenue was approximately RMB29.7 billion, up around 16%, while packaged water grew only about 2.1%. Looking only at Group growth could create the false impression that every category was growing rapidly. Looking only at water could underestimate the contribution from tea and other beverages. The correct analysis asks where growth is coming from. Channel inventory, product mix, manufacturing utilization, and brand trust also matter. A beverage manufacturer produces physical products and sells them through distributors and retailers. If channel inventory becomes excessive, strong shipments today can create pressure later. Revenue mix, category growth, and channel quality therefore need to be analyzed together. Analyze receives 5.

Execute5/5

Nongfu Spring's execution was not simply launching a successful tea product. The company had to make a second category work through infrastructure originally built at large scale around water. It needed to continue protecting water sources, quality, brand trust, and distribution while simultaneously expanding Oriental Leaf and other products through manufacturing, warehousing, logistics, distributors, and retail outlets. The challenge is to do both without sacrificing either side. Packaged water still requires consumer confidence and channel support, while tea requires product innovation, marketing, production capacity, and shelf space. The difference between Group growth and packaged-water growth in 2025–2026 shows that the product-mix strategy had produced real operating results rather than remaining a strategic statement. Therefore, Execute receives 5.

Decide5/5

Nongfu Spring's most important decision was not to interpret the 2024 water shock as meaning that every available resource had to be redirected back into packaged water. Doing so might have protected the core category while preserving the same concentration risk. Instead, the company pursued two paths simultaneously. Water remained essential because it supported the brand and distribution foundation. Tea was allowed to become more than an adjacent product and take on genuine growth responsibility. This decision involved an opportunity cost. Investing more heavily behind tea meant accepting that Nongfu Spring's future would no longer be defined only by packaged water. But it also reduced dependence on one category. The gap between roughly 16% Group revenue growth and about 2.1% packaged-water growth in 1H 2026 provides evidence supporting that decision. Therefore, Decide receives 5.

Create5/5

Nongfu Spring's original major creation was a system combining water sources, brand, manufacturing, and national distribution into a high-frequency mass-market consumer business. The next creation is upgrading that infrastructure from a "packaged-water system" into a broader multi-category beverage platform. Oriental Leaf and other tea products did not need to build national distribution from zero. They could use existing manufacturing, logistics, distributor relationships, and retail access to reach consumers more quickly. The durable creation is therefore not replacing water with tea. It is building a commercial system capable of carrying multiple beverage categories. If brand trust, product innovation, and distribution efficiency remain strong, this platform can reduce dependence on any single category. Therefore, Create receives 5.

Key Takeaway
Nongfu Spring shows that the real value of a powerful distribution network is not simply selling more of the original product. It is the ability to help a second category scale when the core category comes under pressure. Group revenue reached approximately RMB52.6 billion in 2025, up roughly 22.5%. In 1H 2026, Group revenue reached approximately RMB29.7 billion, up around 16%, while packaged-water growth was only about 2.1%. These figures show that the source of growth changed. Packaged water remained important, but Oriental Leaf and other tea beverages were carrying meaningful responsibility as a second growth engine. The first transferable rule is: **A core category does not have to carry the entire recovery after a shock.** If a company already owns strong brand, manufacturing, and distribution capabilities, adjacent categories can use the same infrastructure to create new growth. The second rule is: **Distribution is a reusable asset across products.** The same distributors, logistics routes, and retail outlets can reduce the difficulty of scaling a new category. The third rule is to avoid replacing one concentration risk with another. Strong tea growth does not mean the company should make its future entirely dependent on tea. A more durable system allows multiple categories to share brand, manufacturing, and distribution. As of September 12, 2026, Nongfu Spring had demonstrated that after pressure on packaged water, the Group could still maintain strong growth through tea and adjacent beverages. The Outcome is therefore Success.

Evidence / Sources

Public Evidence 1: Source / Author: Nongfu Spring Co., Ltd. Material: 2025 annual results and annual report Facts supported: 2025 Group revenue was approximately RMB52.6 billion, up roughly 22.5%. This supports the conclusion that the Group achieved a strong recovery after the earlier pressure on its core category. Public Evidence 2: Source / Author: Nongfu Spring Co., Ltd. Material: 2026 interim results, August 25, 2026 Facts supported: 1H 2026 Group revenue was approximately RMB29.7 billion, up around 16%, while packaged-water growth was approximately 2.1%. These figures support the conclusion that total Group growth was materially stronger than packaged-water growth and that other beverage categories were carrying a larger share of growth. Public Evidence 3: Source / Author: Nongfu Spring Co., Ltd. Material: 2025 annual report, 2026 interim report, and investor disclosures available through September 12, 2026 Facts supported: The company continued operating its packaged-water business while expanding tea and other beverage categories through its established manufacturing, distributor, and national retail network. These materials support the analysis of "repair water while developing a second growth engine." Internal Verification Notes: Research cutoff date: September 12, 2026. 2025 Group revenue: approximately RMB52.6 billion, up roughly 22.5%. 1H 2026 Group revenue: approximately RMB29.7 billion, up around 16%. 1H 2026 packaged-water growth: approximately 2.1%. Do not describe approximately 16% Group revenue growth as packaged-water growth. Packaged water grew only about 2.1%. Do not describe the Group as having stopped growing because packaged-water growth was relatively low. Total Group growth was materially stronger than water growth. Do not state that Oriental Leaf or tea has completely replaced packaged water. The correct interpretation is that tea became a more important second growth engine. Do not claim that the 2024 brand and trust shock has been permanently resolved. Brand trust and core water performance still require monitoring. Do not assume that strong tea growth can continue indefinitely at the same rate. Do not ignore channel-inventory risk. Beverage manufacturing and distribution require attention to distributor inventory, retail sell-through, and production discipline. Success in this case means that after significant pressure on the core packaged-water category, Nongfu Spring used its brand, manufacturing, and national distribution capabilities to make tea and adjacent beverages larger contributors to growth and restore strong Group-level performance. Statements such as "distribution is reusable across products," "the core category does not have to carry the entire recovery," and "a second growth engine reduces category-concentration risk" are GoGoUp educational analysis. The Discover, Analyze, Execute, Decide, and Create scores and commentary are GoGoUp educational assessments, not official Nongfu Spring ratings. This case is intended for business and entrepreneurship education and does not constitute investment advice.