China’s non-alcoholic beverages industry is more than just a simple volume story. The National Bureau of Statistics (NBS) data shows that China produced about 179 million tonnes of soft drinks in 2025, down roughly 4.7% y/y, confirming that the category has moved past its high-growth phase. Until there’s another “next best thing” on the horizon.
NBS production data also shows that traditional carbonated drinks are losing marginal volume, while bottled water, tea-based beverages, and higher-value functional drinks are taking share.
The market reaching maturity explains Nongfu Spring's strategic repositioning. The beverage company is attempting to escape this domestic gravity through scale and aggression.
By investing CNY 10bn into new production bases, including a CNY 5bn Zhejiang plant, the firm is doubling down on supply chain dominance. Can you blame them?
While "Tangerine Peel White Tea" and carbonated "Iced Tea" chase fickle Gen Z palates, the real story is Nongfu Spring’s pivot abroad. Its debut in Hong Kong and Singapore, coupled with a strategic property grab in New Hampshire, US, suggests domestic saturation and a desperate search for fresh, global revenue streams. FWIW, these overseas transitions are being financed by exceptionally strong domestic results.
Flowing in the green
Nongfu Spring just posted a FY 25 result that looks almost too clean to be true, reaching CNY 52.6bn, up 22.5% from CNY 42.9bn in FY 24. The real story isn't just that they’re selling more water.
The company’s gross profit grew 27.7% y/y to CNY 31.8bn in FY 25, up from CNY 24.9bn the year before. Falling procurement prices for PET raw materials and reduced costs for packaging materials and sugar significantly improved profitability. This wasn’t always the case.
Nongfu Spring spent most of 2024 fighting off a nationalist boycott sparked by "pro-Japan" conspiracy theories about their bottle caps and labels. For context, FY 24 saw a 1.9% decrease in gross profit due to public outcry and fierce competition that temporarily weighed on water sales. The core water business is up 17.3% y/y. The rebound in water sales proves they’ve successfully moved past the controversy.
Meanwhile, there are other segments that need their attention. Nongfu Spring’s Ready-To-Drink segment, which skyrocketed over 100% in 2023 to a still-robust 29% in 2025, is now moderating as the market matures and competition intensifies.
The question is whether they can keep finding "new" water sources and tea flavors fast enough to justify a valuation that historical trends suggest might be reaching its ceiling.
Still waters run deep
Nongfu Spring’s stock is staging a disciplined recovery, up 24.4% over the last year. At CNY 40.8, the shares are still trading at a significant 16% discount to their 52-week peak (CNY 49), suggesting that the market hasn't entirely forgiven the volatility of the past 12 months.
While the 25.6x forward P/E based on estimated FY 26 earnings looks cheap compared to its historical 29.7x average, the figure is still a premium valuation that demands flawless execution.
Analysts are suspiciously unified, with 19 'Buy' ratings and 4 ‘Hold’ ratings and a target price of CNY 48.0 implying nearly 20% upside potential. However, the gap between the current price and that target suggests that investors are waiting to see if the company can actually hit those FY 26 earnings targets before re-rating the stock back to its former highs.
With a CNY 455bn ($66.6bn) market cap, Nongfu Spring has very little margin for error.
A bitter aftertaste
Nongfu Spring’s risks in FY 26 are less about survival and more about execution discipline. Beyond the PR minefield, Nongfu Spring is hoarding tea leaves by buying up its own supply chain, a move that secures quality but risks massive losses if they get stuck with a mountain of inventory that nobody wants to drink. Relying on a lucky break in PET plastic and sugar prices to mask these structural headwinds is a gamble. If oil prices spike or the tea hype cools, that near perfect 60.5% gross margin will evaporate faster.
Regulation is tightening fast, and that raises the cost of getting even small things wrong at scale.
