Zhong Shanshan: The water tycoon who just became China’s second richest man

Chinese bottled water giant Nongfu Spring’s shares soared as much as 85 percent on its debut on Tuesday after the company’s $1.1 billion initial public offering (IPO) in Hong Kong attracted a record level of retail orders and boosted the fortunes of its low profile founder Zhong Shanshan.

Nongfu’s IPO price started at $2.77 and surged to $5.14, and as much as $387 million changed hands on the company’s first day of trading.

At the end of trading, its market value was estimated at nearly $48 billion - more than Danone SA, the French food company behind Evian and Volvic water and Danone yogurt.

The warm reception for Nongfu Spring, with individuals placing nearly $87 billion of orders, shows Hong Kong investors remain eager for ways to bet on China’s increasingly affluent consumers.

Tap water in China isn’t considered safe for drinking, and Nongfu Spring has tapped into a growing demand for bottled water as mistrust over water safety and Chinese consumers' increased purchasing power has boosted the market’s growth.

Based in the eastern province of Zhejiang, Nongfu Spring was founded in 1996 by Zhong and uses the slogan “Nongfu Spring tastes a bit sweet.”

The company ranked at the top of China’s packaged drinking-water market last year, with nearly a 21 percent market share, according to Frost & Sullivan. Its red-capped bottles are sold across China, from snack stalls to high-end hotels.

Tuesday’s stock jump pushed Zhong’s net worth to $51 billion, making him the second richest person in China, after Alibaba’s Jack Ma’s $51.3 billion and the third richest in Asia. Zhong owns 84 percent of Nongfu Spring.

Zhong is notable in that he is the only individual among China’s top five richest people who does not hail from the real estate or tech sector.

Zhong’s wealth was already boosted by the response to April’s IPO of Beijing Wantai Biological Pharmacy Enterprise Company, which he controls a 75 percent stake of, catapulting his wealth to as much as $20 billion in early August as the stock surged by almost 3,200 percent.

The 65-year-old, known as a “lone wolf” in Chinese business circles, has kept a low profile and made few public appearances. He is not part of China’s legislative body nor any political consultation groups, which many successful mainland businessmen are.

Zhong’s rise

Zhong’s early life was marked by dramatic ups and downs.

Born in 1954 into a wealthy family in eastern China’s Hangzhou city, Zhong dropped out of school in fifth grade when Mao Zedong’s Cultural Revolution was sweeping the country and his parents were purged.

While in his teens, he worked as an apprentice to masons and carpenters.

At 23 he got into the Zhejiang Radio and Television University, after which he became a reporter at a local newspaper. Following a spell of five years reporting on entrepreneurs, Zhong realised there was huge potential for business opportunities in the country.

Zhong quit his job and relocated to Hainan, an island in southern China favourable to market reforms and started several business projects in the 1990s.

They included running a newspaper, planting mushrooms and distributing bottled water, all of which failed, until he tapped into a growing demand for health supplements. In 1993, he developed a nutritious pill which became widely popular across China.

He also sold pills used to treat erectile dysfunction that were derived from turtle parts, which eventually came under regulatory scrutiny.

Zhong then shifted to bottled water and founded Nongfu Spring’s predecessor at Qiandao Lake, also known as the Thousand Islands Lake, in Zhejiang province in 1996.

Nongfu Spring, which translates into “Farmer’s Spring”, became famous through its ad campaigns that promoted its water as natural water containing natural minerals as opposed to regular purified water sold by other producers at the time.

Since 2000, the company diversified into selling flavoured water, teas, juices and energy drinks. Last year it started selling coffee under its Tanbing brand.

China’s IPO bonanza

China and Hong Kong’s IPO market has remained strong despite the Covid-19 pandemic, with companies raising close to $60 billion in 2020 so far - double the amount recorded in the same period last year.

The turbocharged IPO market saw at least 24 people become billionaires from new listings on Chinese exchanges in the first six months of 2020. Last week saw another three enter the club after Shenzhen’s ChiNext started trading with no limits.

Overall China has added 158,000 millionaires in just the past year, taking the number to more than 4.4 million - the most after the US.

Nongfu’s listing alone created 68 new millionaires after Zhong and his holding company transferred 0.79 percent of the company as part of a staff incentive programme.