Chinese bottled-water company Nongfu Spring captivated investors this month with its wildly successful stock offering and debut. A Chinese unicorn, meanwhile, is quietly going about building its own brands and ambitions in the same industry.
Genki Forest, which produces an eponymous brand of sugar-free and low-calorie drinks, completed a July series of funding that pegged its valuation at US$2 billion, according to local media reports, treble its worth from a previous financing barely nine months earlier.
The appreciation suggests the business could be the next big thing for founder Tang Binsen, who built his early fortunes from the success of Elex-Tech, a mobile games developer he founded in his 20s. Among his current backers are venture capitalists Sequoia Capital and Genesis Capital, according to reports.
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The Beijing-based company plans to use the fresh capital to build two new facilities to cater for markets in northern and southern provinces, said Gu Ya, its production and commerce director. Its first plant in Chuzhou city in eastern Anhui province, was completed this year and will be further expanded.
“Our goal is not to simply create a product that can earn profit, but a product that people want and like to drink,” he added. “Everyone, including capital market participants, recognises this and cares about this business philosophy the most.”
Company officials are tight-lipped about its finances. Genki Forest was said to have made 660 million yuan (US$96.6 million) of sales for the first five months of this year. In comparison, Nongfu Spring chalked up 8.7 billion yuan sales in the same period, and 24 billion yuan in 2019.
Nongfu Spring, based in Hangzhou in eastern Zhejiang province, raised HK$8.4 billion in its initial public offering, which attracted the highest subscription in Hong Kong’s stock exchange history. The stock rose as much as 85 per cent on its September 8 debut, minting multiple billionaires along the rise.
The frenzy has also fuelled a 138 per cent surge in the price of Baolingbao Biology on the Shenzhen stock exchange this year. The Shandong-based firm which makes Erythritol, a sugar substitute found in natural foods, is one of the biggest suppliers to Genki Forest.
Before the July fundraising, Genki Forest has drawn on outside capital from a host of angel investors and private equity firms. The list includes Longfor Capital, Gaorong Capital, Qianxian Times, Fengshion Capital, and Everbright-Zhongying Capital, according to 36kr reports.
Genki Forest has been relying on third-party contractors, such as Jianlibao Group and Ton Yi Industrial Corporation, to process and package its drinks, company officials said.
The current plan, Gu added, is to build a factory in Zhaoqing in southern Guangdong province, and one in Tianjin to cater for demand in the northern parts of the country. The former will start running in spring, while the latter sometime next year.
The factories are capable of producing its flagship sparkling water, as well as teas, energy drinks and newly launched milk-based products.
Building self-owned factories will give Genki Forest better control over its production and enable it to respond quicker to market trends. China’s drinks market is expected to be worth 1.3 trillion yuan by 2024, according to China Commercial Industrial Research Institute. Zhiyan, an industry consultancy, estimates the current market size at about 230 billion yuan.
“The trend in major developed countries, where sparkling water began replacing carbonated beverages, has reached China,” said George Ren, senior partner in Shanghai at Roland Berger consultancy. “Stiffer competition will ensue in this market.”
For now, Genki Forest is keeping a low-key profile in the market. Officials, who shy away from media interviews, declined to discuss much about the business itself, preferring instead to focus on its products and marketing.
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Tang, who has previously funded a bike-sharing venture in Australia, has adopted the so-called wanghong, or internet-based marketing campaigns, to push its brands. They included employing popular online channels, celebrities, trendy television shows, and key opinion leaders or influencers.
As a measure of its popularity, Genki Forest’s drinks outsold Coca-Cola and Pepsi in the most recent “618” shopping gala organised by Tmall on June 18, an online business-to-consumer platform operated by this newspaper’s owner Alibaba Group Holding.
Genki Forest’s drinks are currently sold in more than 100 countries across the Americas, Europe and Asia. Overseas sales via Tmall’s foreign portal were up 69 per cent year over year in the three months ended in July.
Genki Forest does not confine itself to any specific style or positioning in the market, company officials said in an interview. “What we are seeking is the simpleness and directness of the products.”
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This article Chinese unicorn Genki Forest plots own beverage hits amid Nongfu Spring’s IPO frenzy first appeared on South China Morning Post