On August 25, NONGFU SPRING (09633.HK) released its interim results for the six months ended June 30, 2026. During the reporting period, the group's total revenue reached RMB 29.718 billion, a year-on-year increase of 16.0%; profit attributable to owners of the parent company was approximately RMB 8.887 billion, up 16.6% year-on-year; the gross margin remained at a high level of approximately 60.9%, an improvement of 0.6 percentage points year-on-year; and basic earnings per share were RMB 0.79, an increase of 16.7% year-on-year, with profitability steadily rising.

With price wars raging in the beverage sector, profits generally thinning across the real economy, and major brands mired in the quagmire of platform-driven low-price competition, NONGFU SPRING has managed to defend an industry-rare high-profit foundation amid this environment. As 2026 marks the 30th anniversary of the company's founding, these figures also provide a verifiable footnote to its "consistent over three decades" long-termism. A very practical question follows: where exactly does its high profit come from? The answer is not squeezing channel profits or suppressing the living space of downstream small and medium-sized merchants, but rather relying on a completely different underlying business logic.

Not Chasing Traffic but Channels: Why NONGFU SPRING Goes Deep on Offline

Over the past few years, "low price" has almost become the only theme in the consumer industry. Platforms use subsidies and algorithms to gather traffic, then use low-price rules to coerce brands and merchants in reverse, with price wars spreading from online to offline, thinning the profits of countless small and medium-sized merchants caught in the gap of "no traffic without price cuts." The small shops lining the streets that depend on making a living feel the chill first—customer flow is siphoned off online, profits are divided by platforms, and even pricing must defer to algorithmic whims. As "involution" becomes the collective anxiety of the real economy, a question is repeatedly raised: in an era dominated by algorithms and traffic, is there another path for doing real business? NONGFU SPRING's interim report happens to provide an answer.

A notable contrast worth pondering: the overall gross margin of the bottled water industry is only around 25%, yet NONGFU SPRING has been able to stay at around 60% for a long time. At a time when packaged drinking water sales are under overall pressure, why can it still maintain rapid growth? The answer may be surprising—not by squeezing small merchants or pressuring the supply chain, but rather stemming from a business approach completely different from platform logic: while many brands are busy chasing online traffic, NONGFU SPRING does the opposite, focusing on deep cultivation of offline channels. Where others see abandoning incremental growth, NONGFU SPRING sees it as the prerequisite for protecting the profit bottom line of millions of offline small shops across the country.

On a deeper level, there is a shift in consumption habits—NONGFU SPRING founder Zhong Shanshan, in an August 8, 2026 appearance on CCTV Finance's "Dialogue," specifically discussed the fading of "emotional consumption": when buying water shifts from an impulsive act during store visits to planned bulk stocking, the spontaneous and genuine connection between brand and consumer also fades along with it. Offline terminals are the last carrier of emotional consumption. And NONGFU SPRING, with its long-term offline focus, is not just maintaining its own sales channels, but also nurturing the commercial bedrock of the marketplace that gives rise to "emotional consumption"—a long-term defense of the consumption scene, channel ecosystem, and foundational brand relationships.

Samples emerging from different models each have their own logic. Many new consumer brands have reached the 10-billion scale relying on platforms; NONGFU SPRING has reached the 50-billion scale through offline channels—both paths have their own suitable scenarios, with no inherent superiority or inferiority; the key lies in the enterprise's own genes and judgment. For real-economy enterprises, what matters is knowing what suits them and what they want, rather than being swept along in platform-driven involution. NONGFU SPRING's development model provides an observable sample for the breakthrough of some real-economy enterprises and even the real economy as a whole.

One 2-Yuan Bottle of Water: 64.5% of Gross Margin Left for Offline Small Shops

An ordinary bottle of red-label natural water contains the code to this logic. With a terminal retail price of 2 yuan, NONGFU SPRING's ex-factory price is approximately 0.7 yuan per bottle; after deducting taxes, fees, and logistics, the net gain that actually stays with NONGFU SPRING as the manufacturer is only about 0.55 yuan. From the 0.7-yuan ex-factory price to the 2-yuan retail price, a channel gross margin space of 1.29 yuan is reserved, accounting for 64.5% of the terminal retail price. This 1.29 yuan does not stay in NONGFU SPRING's accounts but is distributed across the entire offline channel chain—from distributors at all levels and regional agents to convenience stores and mom-and-pop shops across the country's streets and villages, with terminal stores taking roughly 1 yuan and distributors about 0.29 yuan. In other words, NONGFU SPRING leaves over 60% of the industrial chain's gross margin from a bottle of water to the offline sales channel in real terms.

This is not a "meaningless intermediate cost," but the core interest foundation on which NONGFU SPRING's offline commercial system can operate long-term. Giving the lion's share of profits to the mid-to-lower stream earns the best shelf positions at terminal stores, the highest selling enthusiasm, and a physical moat against competitor encroachment. The power of this "symbiotic ecosystem" is especially striking in the industry's red ocean: in the fiercely competitive sugar-free tea segment amid fluctuating price wars, Oriental Leaf has still been able to expand against the trend, precisely because of the wholehearted cooperation of channel partners. Distributing profits to channels in exchange for a stable terminal pricing system and long-term channel cooperation—this is NONGFU SPRING's foresight in holding the offline line.

The interim report data confirms the vitality of this "channel symbiosis" model. In the first half of 2026, tea beverage product revenue reached RMB 13.122 billion, up 30.1% year-on-year, rising to 44.2% of total revenue, surpassing packaged drinking water (RMB 9.641 billion, 32.4% share) for the first time to become the group's largest category; functional beverages brought in RMB 3.348 billion (+15.5%), fruit juices RMB 2.922 billion (+14.0%), with overall beverage product revenue up 24.1% year-on-year, accounting for 67.1% of total group revenue. In consolidating physical barriers, NONGFU SPRING has established seventeen major high-quality natural water source sites nationwide, from Qiandao Lake and Wanlv Lake to Changbai Mountain and Nyenchen Tanglha, embedding the philosophy of "building plants at water sources, bottling at water sources" and "every drop of NONGFU SPRING has a source" into the foundations of its competitiveness. The source determines water quality; building factories at the source determines cost and quality barriers that others find hard to replicate.

From Fields to Shelves: Distributing Profits to Everyone in the Industrial Chain

NONGFU SPRING distributes profits not only to downstream distributors and small shops, but also to the farmers at the very front of the industrial chain. In the "Dialogue" program, Zhong Shanshan repeatedly emphasized a judgment: a truly healthy industry should "use institutions to safeguard the interests of every link in the industrial chain," opposing the downward involution of "only competing on price, not on quality." This philosophy, applied to the fields, translates into "quality gets premium prices." NONGFU SPRING insists on purchasing navel oranges, tea leaves, jasmine flowers, and other agricultural products from tea growers, fruit farmers, and flower farmers at prices higher than market rates, retaining industrial dividends in rural areas. In southern Jiangxi, the company purchases navel oranges year-round at protective prices above market levels, driving the local industry from "difficulty selling fruit" toward standardization and branding; in tea-producing regions, the company purchases pre-Qingming spring tea under unified standards, firmly holding the raw material quality of "Oriental Leaf" in its own hands. In Hengzhou, Guangxi, the company sets tiered subsidies for jasmine flower purchases: a 1.5-yuan subsidy per jin when flower prices are within 5 yuan per jin, a 0.5-yuan subsidy when prices exceed 10 yuan, and full market pricing above 15 yuan—the worse the market conditions, the stronger the support; when conditions improve, it automatically withdraws.

Zhong Shanshan put it bluntly on the program: "We are absolutely a price raiser, not a price suppressor." In his view, helping farmers is not a one-off purchasing gesture but an industrial methodology. In the "Dialogue," he defined agriculture as "a traditional industry that needs to be transformed with industrial standards": the weakness of farmers often stems from a lack of unified quality control and standard guidance, not a reluctance to do things well. A bottle of water, a pack of tea, a flower—behind each lies the livelihoods of countless families; building standards in the fields is harder and more valuable than shouting slogans on screens. NONGFU SPRING's approach is to invest upfront in rural infrastructure such as processing, testing, and cold-chain logistics, using an enterprise-grade industrial system to underpin agricultural products, including an investment of approximately RMB 300 million in a full jasmine flower industrial chain base, self-built processing plants, and unified biosafety standards. The tea business, in particular, sustained investment for the first 15 years without rushing short-term profits, only seeing its growth curve after long-term cultivation. This "invest first, reap later" long-termism is precisely the fundamental divergence from traffic-driven farmer assistance—the former retains industrial dividends in rural areas, while the latter only briefly illuminates with traffic when market conditions are good.

This long-termism of "keeping industrial dividends in the countryside" faced its most direct test this summer. In July 2026, Hengzhou, Guangxi, experienced sustained heavy rainfall and a reservoir dam breach emergency. NONGFU SPRING fully opened all drinking water inventory in the Nanning region with no cap on transfer limits, and opened its newly completed Hengzhou jasmine production facility as a temporary resettlement site; beyond continuously supplying emergency drinking water, it additionally donated RMB 10 million specifically for post-disaster home reconstruction and agricultural production recovery. An industrial chain reaching deep into county areas became critical infrastructure for underpinning people's livelihoods at a key moment.

In 2026, NONGFU SPRING marks its 30th anniversary. The company wrote six characters in its interim report: "Steadier, slower, farther." This is the most concise footnote to its business philosophy—not chasing trends, not competing on low prices, using time to refine quality, using institutions to distribute profits fairly, and using offline channels to sustain symbiotic relationships with millions of operators and farmers. Over three decades, it has refused countless opportunities to make quick money, yet has turned the slowest and heaviest work—water sources, channel networks, industrial chains—into barriers others cannot copy. NONGFU SPRING's half-year report is essentially a business answer sheet of "not competing on price, but on value." It confirms that the true moat is never the lowest price, but the steadiest channels, the most solid quality, and an industrial chain where producers, operators, and farmers all share in the benefits. In a business environment dominated by algorithms and traffic, NONGFU SPRING proves one thing: honestly making products, earnestly sharing profits, and steadfastly guarding channels remains a viable path. For long-term investors, it demonstrates a "reference answer" for how a real-economy enterprise can use institutions to protect the interests of every link in the industrial chain.