Core Viewpoint - The company reported a strong performance in H1 2025, with a significant recovery in overall business driven by increased promotion of its red bottle water and reduced subsidies for green bottle water, exceeding market expectations [1][9][10]. Packaging Water Business - The packaging water segment achieved revenue of 9.44 billion yuan, a year-on-year increase of 10.7%, marking a return to positive growth after two consecutive declines [2][12]. - The proportion of red bottle water in packaging water revenue increased from approximately 75% in H2 2024 to over 78% in H1 2025, as the company reduced green bottle water subsidies [2][12]. - The operating profit margin for the packaging water business rose to 35%, returning to pre-controversy levels [3][13]. Tea Beverage Business - The tea beverage segment generated revenue of 10.09 billion yuan, a year-on-year growth of 19.7%, benefiting from promotional activities and new product launches [3][17]. - The market share of the sugar-free tea product "Oriental Leaf" increased from 70% to 75% due to effective marketing strategies [3][17]. - The operating profit margin for the tea beverage segment reached a record high of 48% [3][17]. Functional Beverages & Juice - Functional beverages and juice segments showed strong performance, with functional beverages achieving revenue of 2.9 billion yuan, a year-on-year increase of 13.6% [4][19]. - The juice segment generated revenue of 2.56 billion yuan, growing by 21.3%, with the 17.5° NFC orange juice becoming a hot-selling item after entering Sam's Club [4][19]. Gross Margin Improvement - The company's gross margin slightly increased by 1.5 percentage points to 60.3%, driven by lower prices of key raw materials and an increased proportion of high-margin products [4][23]. Decrease in Expense Ratio - The sales expense ratio decreased by 2.8 percentage points to 19.6%, attributed to reduced subsidies for green bottle water and a focus on higher-margin products [4][25]. - The net profit margin reached 29.8%, exceeding market expectations [4][25].

Group 1: Company Overview - Nongfu Spring, once a symbol of bottled water in China, is facing stagnation in growth, with a slight revenue increase of 0.5% and a net profit increase that is negligible for 2024 [1] - The bottled water business, previously a stronghold for Nongfu Spring, has seen a decline, with a 6.7% drop in revenue and a 3.8% drop in net profit in the second half of the previous year [1] - The tea beverage segment, represented by Dongfang Shuye, has surpassed bottled water in revenue for the first time, achieving a remarkable 32.3% year-on-year growth [2] Group 2: Market Competition - The tea beverage market has become highly competitive, with numerous established and emerging brands vying for market share, leading to increased pressure on Nongfu Spring's tea business [3][4] - New brands are employing aggressive distribution strategies, such as credit sales, to quickly gain shelf space, which poses a challenge to Nongfu Spring's market position [4] - Despite maintaining a leading position in the tea market, Nongfu Spring's growth rate has slowed from 59.5% in the first half of the previous year to 32.3% [4] Group 3: Strategic Responses - In response to market pressures, Nongfu Spring has launched a 1.5L version of Dongfang Shuye to capture the "water substitute" demand, which has seen immediate success [6] - The company is investing in tea production facilities, with a commitment of 100 million yuan to build five initial tea factories, aiming to enhance its overall system capabilities [8] - Nongfu Spring is also exploring international markets, particularly in developed countries, to expand its tea beverage business [9] Group 4: Financial Performance - The bottled water segment's revenue for 2024 is reported at 16 billion yuan, reflecting a significant decline of 21.3% year-on-year, with operating profit margins dropping from 36% to 31% [25] - The aggressive pricing strategy for green bottle water has not yielded the expected market growth, leading to issues of low profit margins and high inventory [25] Group 5: Brand Management - Nongfu Spring's sales strategy has been characterized by a strong presence in retail channels, with sales personnel actively engaging with store owners to secure shelf space [12][16] - However, the company's aggressive tactics have led to some negative perceptions among retailers, with reports of pressure to prioritize Nongfu Spring products over competitors [14][22] - The contrasting attitudes within the company regarding the value of green bottle water have created confusion among retailers, impacting overall brand perception [22]