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On the evening of August 27, Nongfu Spring (09633.HK) announced its interim financial results for 2024. In the first half of 2024, the company's total revenue reached 22.173 billion yuan, a year-on-year increase of 8.4%. Affected by online rumors, the revenue from packaged drinking water products decreased by 18.3% compared to the same period last year, while the revenue from beverage products increased by 36.7% year-on-year. Among them, tea beverages saw a year-on-year growth of 59.5%. According to Nielsen data, the star product "Oriental Leaf" grew by more than 90%, leading the development of the sugar-free tea market.

It is noteworthy that Nongfu Spring's interim performance report highlights the correlation between online rumors and actual sales. Before the public sentiment in January and February 2024, the sales revenue of Nongfu Spring bottled water increased by 19.0% compared to the same period last year, while the revenue from packaged drinking water products in the first half of the year decreased by 18.3% compared to the same period last year. Some industry insiders estimate that this prolonged public sentiment storm has caused Nongfu Spring to lose more than 7 billion yuan in revenue in the first half of the year.

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Online rumors continue to this day, and the packaged drinking water sector sees a decline for the first time.

Nongfu Spring pointed out in its semi-annual report that since the end of February, there has been a large amount of public opinion attacks and malicious denigration against Nongfu Spring and its founder on the internet, which has had a serious negative impact on the brand and sales, leading to the first significant decline in the revenue of Nongfu Spring's packaged drinking water products, down 18.3% compared to the same period in 2023.

In response to the rumors and malicious remarks, Nongfu Spring has issued statements through official channels multiple times and on May 20th, it published "The Rumors and Truths Targeting Nongfu Spring and Founder Zhong Shanshan Since February 25th | What Matters More Than Traffic Is the Truth, Which Is Based on the Judgment of Good and Evil, Right and Wrong Based on Facts," refuting the 20 main rumors one by one.

At the same time, the semi-annual report also shows that Nongfu Spring has taken action to pursue the legal responsibility of malicious rumor-makers. Relevant administrative enforcement departments have dealt with some rumor-spreading online accounts according to law, and law enforcement and judicial authorities have also initiated legal responsibility pursuit procedures for some of the more serious cases.

Public information shows that in June this year, the Central Cyberspace Affairs Office's "Qinglang" action exposed typical cases, and a batch of self-media accounts involved in rumors about Nongfu Spring were closed according to law and agreement.

It is worth mentioning that although the company has refuted the rumors many times, and the Cyberspace Affairs Office has taken strong measures, the rumors targeting Nongfu Spring have not been completely curbed, and there are still rumors about the company spreading on the internet from time to time.

Tea beverages grow against the trend, and Oriental Leaf continues to drive the rapid development of the sugar-free tea market.

The interim performance announcement shows that Nongfu Spring's beverage product revenue increased by 36.7% compared to the same period last year. Among them, the revenue from tea beverage products increased by 59.5% compared to the same period last year, continuing to maintain rapid growth.According to Nielsen retail data, from January to June 2024, the sales of Eastern Leaf Tea increased by more than 90% year-on-year, almost doubling compared to the same period last year. The data shows that, as of now, Eastern Leaf Tea holds a market share of over 70% in the sugar-free tea market, occupying an absolute advantageous position and becoming a benchmark for the entire industry to emulate.

It is reported that Eastern Leaf Tea was launched in 2011, with investments in research and development, equipment, and other areas exceeding 1 billion yuan before its market debut. It took eight years after the product launch for the company to finally achieve a slight surplus, and it was only in recent years that it has seen an explosive growth, leading the expansion of the sugar-free tea market. On August 10th of this year, Zhong Shanshan, Chairman of Nongfu Spring, said in the CCTV program "Dialogue": "Our tea has been around for more than a decade since 2012 and 2013. We didn't make a profit for the first six years, but by 2021, the growth curve started to rise."

Under the demonstration effect of Eastern Leaf Tea, more and more brands have begun to imitate its products and strategies, and the sugar-free tea market continues to expand. In the first half of 2024 alone, over 50 new tea beverage products were introduced.

Industry insiders commented that the success of Eastern Leaf Tea is not based on the redistribution of the existing market but on the creation of entirely new demand. Eastern Leaf Tea has single-handedly opened up a new area of growth for China's beverage industry. It is expected that in the future, with the improvement of tea raw material quality, Eastern Leaf Tea will further play a guiding role in the sugar-free tea market.

It is worth noting that during his appearance on the CCTV program "Dialogue," Nongfu Spring Chairman Zhong Shanshan also responded to many public opinion topics. He mentioned: "Tea is actually very, very Chinese, a product with a Chinese soul. I want to use industrial methods to organize the intensive farming of farmers, to popularize tea in thousands of households, and (as) a very elegant civilization on the land of China, to spread to the world again!"

Additionally, Nongfu Spring stated that in the first half of this year, online public opinion has impacted the company's brand image and the sales of packaged drinking water products. However, with strong comprehensive strength and adherence to the right path, they have full confidence and capability to meet and tackle various opportunities and challenges.