Nationalism in China: A business strategy over political discourse

In January 2024, a billboard in a Nanning metro station was criticized by online nationalists for a design that allegedly resembled the Japanese military flag. Nanning Metro clarified that the design was entirely Chinese-themed, and the disputed element was actually a traditional Chinese folding fan. Nevertheless, Nanning Metro removed the billboard in response to the complaints. Whether the criticism was warranted or not, this incident sparked a series of subsequent actions by online nationalists. It's undeniable that nationalist sentiment has been intensifying on Chinese social media in recent months.

Online nationalists criticized the "folding fan" design, claiming it resembles the Japanese military flag.

Rise of nationalist sentiments in China

In recent months, nationalist sentiments online in China have risen and created many sensational and controversial events. In February, Nobel Prize laureate Mo Yan was sued by an online influencer named The Truth-Teller Mao Xinghuo (说真话的毛星火), who has 219,000 followers and accused Mo Yan of insulting the martyrs and glorifying the invading Japanese army.

In our March newsletter, we explained that to understand such nationalist sentiments, one must recognize that "traditionalist" Chinese, characterized by lower incomes, less education, and more traditional lifestyles, constitute the majority. Nationalist content caters significantly to "traditionalist" Chinese and can generate substantial traffic for influencers.

Hu Xijin, a Chinese opinion leader and former editor-in-chief of Global Times, stated, "Behind the farce of suing Mo Yan, the danger of populism is heating up."

However, the untold other half of the truth is that nationalism is also becoming a "business." Influencers like The Truth-Teller Mao have discovered a secret to monetizing internet traffic by creating such sensations. Not long after Truth-Teller Mao Xinghuo sued Mo Yan, he attracted a huge number of followers and began his own commercial activities, such as opening paid columns and running online stores.

Nationalism as a business

The recent crisis faced by Nongfu Spring (9633. HK) shows that the nationalist campaign is certainly not limited to a small group of online influencers who monetize for their own sake.

In March, online nationalists accused the packaging of "Oriental Leaves," a green tea beverage by Nongfu Spring, of containing Japanese elements and being "unpatriotic" and pro-Japanese. The controversy extends to accusations against Nongfu Spring's founder, Zhong Shanshan, for perceived ingratitude, and concerns over his son's U.S. citizenship.

Nongfu Spring responded by stating that the architectural design on the packaging is inspired by Chinese temple architecture, not Japanese. Moreover, the packaging mentions the historical origin of Japanese matcha green tea from China, aiming to showcase the global influence of Chinese tea culture.

Nevertheless, calls for boycotts against Nongfu Spring are widespread online, with videos showing stores replacing its products with those of competitors. Zhong attempted to refute claims of rivalry with a deceased competitor but failed to quell online anger. Nongfu Spring's shares dropped nearly 5% since February, resulting in a $3 billion loss in market capitalization.

According to the social media sentiments we track at BigOne Lab, the controversy continued to intensify and public interest remained high for about a month. Wahaha, promoted by netizens as a more patriotic alternative to Nongfu Spring, became the biggest "beneficiary" of the event. According to data tracked by BigOne Lab from a sample of small and medium-sized supermarkets, Nongfu Spring's market share dropped from 39% before the incident to 24%, while Wahaha's market share increased from 5% to nearly 20%. The impact has been more sustained in lower-tier cities.

This is how impactful nationalism can be, causing billions in market capitalization of a publicly traded company to evaporate.

Knowing the impact, other brands and businesses are intentionally leveraging nationalist sentiments as a tool to boost sales.

On May 4th, the Chinese milk tea brand Xiang Piaopiao (603711.SS) suddenly topped the trending searches. MECO fruit tea, a brand under Xiang Piaopiao, was found in a Japanese supermarket. The cup sleeve of MECO displayed bilingual text in Chinese and Japanese that read "Japanese politicians should drink the nuclear wastewater," mocking Japan's decision to discharge nuclear wastewater into the ocean.

The incident led to discussions on whether it was an individual employee's action or a marketing strategy by the company. Either way, Xiang Piaopiao responded positively, praising the employee's actions on social media and rewarding her. Xiang Piaopiao's CEO welcomed back the employee involved in the incident at the airport and announced rewards.

The incident led to a surge in Xiang Piaopiao's sales during the live streaming, and its stock price rose more than 21% in the two days following the incident.

Although nationalism can be leveraged as a powerful marketing tool, it is not a foolproof strategy for creating sustainable success without the right product-market fit. Xiang Piaopiao is an established Chinese milk tea brand that holds fond memories for many Chinese born in the 80s and 90s. The brand made its mark in the 2000s with its "instant milk tea," which involves pouring milk tea powder into a cup and adding hot water to drink. When Xiang Piaopiao was founded in 2005, there were very few milk tea and beverage options in China, and the innovative "instant milk tea" quickly gained significant popularity among young consumers. By 2008, Xiang Piaopiao’s annual sales reached a whopping 300 million cups, and they introduced the famous marketing slogan, "300 million cups a year, enough to circle the earth"—a slogan deeply rooted in the childhood memories of those born in the 90s and 80s. In 2017, the company was listed on the Shanghai Stock Exchange, becoming the "first publicly traded Chinese milk tea company".

However, in recent years, Xiang Piaopiao’s core business has been under tremendous pressure. As freshly made tea drinks become popular, young Chinese consumers are increasingly leaning towards offline consumption, and new-era winners like HeyTea, Naixue, and the recently Hong Kong-listed ChaPanda have emerged as leaders in the freshly made tea drink market. More importantly, with the rise of healthier beverage options (zero sugar, zero fat), Xiang Piaopiao's core product, which contains more sugar and additives, has not kept up with the new trend. The revenue from their "instant milk tea" was 2.9 billion yuan in 2019 and dropped to just under 2.7 billion yuan in 2023, not yet recovering post-pandemic. In Q1 2024, the company’s revenue was only 700 million yuan, with a profit of just 25 million yuan.

According to the social media sentiments we tracked, the buzz surrounding the Xiang Piaopiao incident didn't last long. From May 4 to May 7, sales at the MECO juice product's official Douyin flagship store exceeded 2 million yuan, with weekly sales increasing more than a hundredfold. However, the buzz significantly declined on May 7, indicating that the duration of interest may be relatively short.

The "国货之光" (Glory of national products)