“Elon Musk is doing something earth-shattering; I'm not that great. But I've maintained a normal income for farmers, which is my contribution, and I am proud of it.”
On the evening of August 10th, during the CCTV program “Dialogue,” Zhong Shanshan addressed issues such as being China's richest man, online attacks, internet traffic, slowness, competition, and succession for the first time in a systematic manner. This statement perhaps best represents Zhong Shanshan's mindset.
Moving from selling Water downstream to farming upstream, whether it's Gan'nan navel oranges or Yili apples, Nongfu Spring's investments have been unprofitable so far, but Zhong Shanshan remains content. Even though Oriental Leaf has become a super hit, he is still committed to entering the tea industry.
Zhong Shanshan sees all this as “strategic losses,” but after more than a decade of such losses, it is difficult to explain them solely through commercial logic. The true reason lies within Zhong Shanshan's heart, where there resides an “idealistic madman.”
The Seven-Year Loss of Oriental Leaf
“Our tea has been around since 2012, 2013, and for over a decade, we didn't make any profit for the first six years, but by 2021, our growth curve started to rise.”
In his interview on the CCTV program “Dialogue,” Zhong Shanshan revealed that the now wildly popular Oriental Leaf was once ignored by consumers. In fact, Oriental Leaf had cumulative losses for the first seven years after its launch. It wasn't until the eighth year that it finally saw a slight cumulative profit, and only recently, with the boom in the sugar-free tea market, did Oriental Leaf truly “see the light at the end of the tunnel.”
Many attribute Oriental Leaf's success to good timing, but often overlooked is the question: Why, in such a competitive sugar-free tea market, has Oriental Leaf always remained the most popular?
During the seven years of continuous losses, Oriental Leaf didn't just wait for the wind to change; it put significant effort into improving its production techniques and equipment.
Before Oriental Leaf, even the most popular green teas and oolongs in Japan used dark bottles that were almost entirely covered with plastic labels. This design choice was primarily due to the fact that tea extracts are prone to oxidation upon exposure to light, causing the tea to change color, which consumers might perceive as spoilage.
To create the first ready-to-drink tea with a semi-transparent bottle design that intentionally left the sides of the bottle clear to showcase the transparent tea, Nongfu Spring developed a new method for producing tea beverages. This method allowed for a fresh tea aroma while reducing the quality degradation that typically occurs during hot water extraction and high-temperature Sterilization. It also significantly reduced the browning of the tea during storage. This production method was patented in 2011.
|Oriental Leaf created the first semi-transparent bottle
That same year, Zhong Shanshan visited Japan to inspect production equipment and introduced the first Log6-level sterile cold-fill production line in China to produce Oriental Leaf, ensuring pharmaceutical-grade standards in production. Such a Log6 production line costs 200 million yuan, while a regular juice beverage production line costs only one-tenth of that.
At first, this expensive sterile production line operated for no more than two days a week, leaving the team largely idle. However, years later, this costly production line helped Nongfu Spring innovate and iterate many more products, including Tea π and NFC juices. According to official information from Nongfu Spring, out of their 31 beverage production lines nationwide, 14 meet the Log6 sterility standard.
Two years later, to make the tea taste as close as possible to freshly brewed tea, Nongfu Spring applied for a patent in 2013 to further improve the tea extraction process, making it closer to the sugar-free ready-to-drink tea that Chinese consumers could accept.
Zhong Shanshan's response to the “seven-year loss” has a strong technological flavor:
“The growth curve must go through a slow and healthy accumulation process. High-tech companies are like this, not to mention traditional enterprises. Traditional enterprises must be grounded.”
More interestingly, compared to Oriental Leaf's turnaround after seven years, Nongfu Spring's investment in agriculture upstream has been incurring losses for over a decade.
The Strategy Behind the Losses
“You can make money selling water, yet you chose to enter the agricultural sector, an environment dependent on the weather. What was your initial consideration?”
In response to this question from the host, Zhong Shanshan did not provide a direct answer but instead told the story of how Nongfu Spring began growing oranges in Gan'nan.
In 2007, Anyuan in Ganzhou had a bumper orange harvest, but prices were only 5 jiao per catty. The locals hoped that Nongfu Spring would build a juice factory to improve the income levels of farmers. After tasting the local oranges, Zhong Shanshan decided to establish a presence in southern Jiangxi and began researching how to grow better oranges.
However, Nongfu Spring encountered a series of setbacks, including incorrect factory locations, wrong choices of orange varieties, and mistakes in production line introductions. “Life's richness comes from stepping into one pitfall after another.” These valuable experiences of “stepping into pitfalls” became the driving force behind Zhong Shanshan's continued development of the orange industry in southern Jiangxi.
Eight years later, Nongfu Spring finally solved the industry-wide problem of industrializing the juicing of oranges, launching its first 17.5° NFC (Not From Concentrate) orange juice, setting a new standard for freshness in industrialized orange juice.
What Zhong Shanshan is most proud of and remembers vividly is witnessing the improvement in the incomes of these farmers. Nongfu Spring became their support. “Farmers are willing to share hardships with you… In fact, farmers are a group of people who keep contracts.” According to statistics, in southern Jiangxi, over ten thousand households have achieved shared prosperity under the leadership of Nongfu Spring.
A similar story unfolded in Xinjiang's Yili region. Just as in southern Jiangxi, Nongfu Spring signed procurement contracts with local farmers for many years, purchasing apples at prices above the market average, transforming farmers from relying on the weather to relying on contracts. At the program site, a Xinjiang fruit farmer named Yue Haijun mentioned that thanks to Nongfu Spring, he earned nearly 200,000 yuan last year from managing his orchard.
When faced with the question of “continuous losses,” Zhong Shanshan's response is, “Not everything needs to make a profit; some are strategic losses. We need strategic losses to cultivate projects.”
This kind of “strategic loss” is similar to the “seven-year loss” of Oriental Leaf, but also different. The losses incurred by Oriental Leaf were in pursuit of high product standards, fitting the logic of the business world. On the other hand, Nongfu Spring's losses in agriculture are not only about improving product standards but also about promoting the development of the upstream industry and improving the lives of farmers. This is more akin to a grand “idealism.”
Back in 2016, when the Nongfu Spring Xinfeng factory was completed and put into operation, Zhong Shanshan delivered a keynote speech titled “Wealthy Farmers Mean a Wealthy China” at a press conference, which may be the true pursuit underlying his strategic losses.
|Zhong Shanshan personally inspects water sources, which has greatly boosted the local economy
“If farmers don't earn money, everything else is meaningless.” This can certainly be understood as the perspective of someone in the downstream water-selling business, but enduring strategic losses for many years is something not everyone is willing to bear, and this is truly admirable.
Tea Also Needs Idealism
After Gan'nan navel oranges and Yili apples, Zhong Shanshan