Recently (on the evening of March 8), Uni-President China Holdings Ltd. (hereinafter "Uni-President China") released its 2022 results. During the reporting period, revenue was RMB 28.257 billion, up 12.0% year-on-year; profit attributable to equity holders (i.e., net profit) was RMB 1.222 billion, down 18.6% year-on-year. This revenue was its best performance in 30 years in the mainland market. Regarding the profit decline, the financial report disclosed that it was mainly affected by rising bulk raw material prices and freight costs. Although raw material prices still face significant uncertainty in 2023, Uni-President China's 2022 performance has exceeded expectations. Looking at the full-year data, the food segment, where instant noodles account for over 90% of revenue, showed a net loss in the first half but turned to profit in the second half thanks to strong growth. For the full year, the food segment's revenue exceeded RMB 10 billion for the first time. From this perspective, growth indeed resolves many worries. If this momentum can be maintained, the recovery of profit growth is within reach. In my view, the key factors enabling its growth against the trend are: first, the stability of its core business, with its major products still being the main contributors; second, its exploration and innovation in new categories, flavors, and scenarios, laying the foundation for long-term predictable growth; third, in 2022, which was greatly affected by the external environment, its strategic focus enhanced its resilience and solidified its competitive barriers. Next, we will analyze Uni-President China's specific performance. Star Products Stabilize the Core Business: They Contribute 40% of Revenue In 2022, Uni-President China's food business achieved revenue of RMB 11.009 billion, up 15.6% year-on-year; the beverage business achieved revenue of RMB 16.4054 billion, up 11.3% year-on-year. This dual growth is inseparable from the contribution of some "old" products. The two star products, "Tang Daren" in the food segment and "Assam" in the beverage segment, are estimated to contribute 40% of the company's revenue. "Tang Daren," launched in 2008, has achieved revenue growth for 14 consecutive years, firmly holding the No. 1 position in the premium soup noodle market, with estimated sales of RMB 4 billion in 2022. Similarly stable is "Assam." "Assam" entered the mainland market in 2009. In the annual report, Uni-President mentioned that Uni-President Assam Milk Tea firmly holds a leading market position, with a compound annual growth rate of double digits over the past five years. In 2022, Uni-President's milk tea category revenue reached RMB 6.005 billion, with the main product being Uni-President Assam Milk Tea. Under the industry trend of declining instant noodle profits, the success of "Tang Daren" is a classic product innovation case for Uni-President. It must be acknowledged that the emergence of Tang Daren has greatly promoted the development of the instant noodle industry. Similarly, the success of Assam Milk Tea is more forward-looking, as it is a model of category innovation. In 2009, Uni-President introduced bottled milk tea "Assam," quickly creating a milk tea craze, cultivating consumers' earliest awareness of milk tea products, and becoming the undisputed leader in the milk tea category. Despite the aggressive entry of later competitors, with freshly made tea drinks now ubiquitous, no other brand of milk tea has been able to shake "Assam's" position. Image source: Uni-President Assam Original Milk Tea official Weibo. According to the Boston product matrix, so-called star products are those with high growth rate and high market share. For such products, companies need to increase investment to support their rapid development. For star products, Uni-President China's strategy is to actively expand market scale and opportunities, aiming for long-term interests, increasing market share, and strengthening competitive position. In 2022, "Tang Daren" launched a larger size "Big Cup" and extended with a new product "Tang Daren Rice Noodles" to meet more consumer needs. In terms of communication, it focused on building a national brand image; in 2022, "Tang Daren" became the official partner of the Chinese Women's National Football Team. "Assam" delved into new drinking scenarios, using different sizes to meet different scenario needs, while strengthening scenario construction and reinforcing consumer associations in multiple scenarios, such as Chinese New Year, home leisure, outdoor sharing, and hot drinks in winter. For "Tang Daren" and "Assam," I believe these products are still in their growth phase and have a long runway for continued development. Continuous Innovation: New Categories, New Flavors, New Scenarios While focusing on star products, another important lever is innovation. Products have life cycles, and long-term strategy is underpinned by continuous innovation. From the financial report, we can see that the new flavor "Uni-President Qie Huang" in the food segment performed well, and the new category "Kai Xiao Zao" series was well received; the "Na Jie Na Xiang" series product "Leshan Hongyou Bobo Chicken" sold on e-commerce won the 2022 China Convenience Food Industry Outstanding Innovative Product Award. In the beverage segment, "Cha Li Wang" followed the health trend, developing the "sugar-free tea" category. In 2022, it partnered with Wuyi Mountain Dahongpao to focus on building product strength, using traditional tea-making techniques and naturally scarce tea origins to enhance the brand tone and professional image of Cha Li Wang. Image source: Uni-President Cha Li Wang official Weibo. The juice business shone brightly, with sales exceeding RMB 3 billion in 2022, up 35.4%, accounting for 18.3% of beverage segment revenue, a six-year high. Among them, the new product "Uni-President Guoyang Kumquat Lemon" was specifically mentioned; it has achieved triple-digit growth for three consecutive years and shows strong development potential. The old product "Uni-President Fresh Orange Duo" also received positive market feedback after product iteration and multi-scenario development, with a compound annual growth rate of double digits over the past three years. In addition, the beverage segment innovatively added a screw-cap aluminum can premium beverage series, developing the "Sweet Time" dessert series, currently available in "Mango Pomelo Sago" and "Red Bean Coconut Milk" flavors, which received unanimous praise from consumers during launch. We can see that in recent years, Uni-President China's innovation has mainly focused on new categories, new flavors, and new scenarios. For example, "Uni-President Qie Huang" and "Uni-President Guoyang Kumquat Lemon" are flavor innovations; "Kai Xiao Zao" and "Na Jie Na Xiang" are innovations in sub-categories within convenience food; "Cha Li Wang" is an innovation in the sugar-free tea category. At the same time, for traditional ready-to-drink tea and juice, Uni-President China actively expands home, dining, and gift box scenarios, seizing the certainty growth opportunities of "traditional major flavors" and continuing to rapidly expand the juice market base. The cultivation and investment in new products is something the company must continue, as they have the potential to transform into the aforementioned "star products," continuously injecting vitality and momentum into the company. In this regard, Uni-President's innovation capability is outstanding in the industry. Balance Between Old and New Building Competitive Barriers 2022 was a very difficult year for Uni-President China. It admitted that in 2022, the group faced the most difficult situation in raw material procurement in many years. However, when facing challenges, Uni-President China was very firm in its direction: insisting on value innovation for consumers, continuously empowering through existing livelihood products and new product layouts, to meet consumers' diverse needs to the greatest extent. At the same time, it refined seasoning technology to make flavors more differentiated and personalized, building moats in product strength. That is, through different product strategies to address new and old products at different life cycle stages; through continuous innovation to build product moats. In addition, facing cost pressure from raw materials, Uni-President China stated that the group is actively promoting the localization of core raw materials and the development of second suppliers. During the pandemic, it urgently activated reserve formulas and quickly developed related second supplier raw materials. Among them, the small-scale substitution of domestic tea leaves in "Uni-President Assam Milk Tea" progressed steadily, ensuring supply security while establishing technical barriers in tea blending. From the overall performance of Uni-President China in 2022, I think it can be summarized in one sentence: stability first, with outstanding product innovation performance. This also confirms the corporate planning approach publicly expressed by Luo Zhixian, Chairman of Uni-President Group. Regarding products, Luo Zhixian believes, "If we want to see a tree in the future, we should start planting it now." "Just put effort into making products to the extreme, and the market will naturally come to your side." Therefore, Uni-President's new products are not included in KPI assessments, do not pursue speed, and do not want to pile up false performance with new products. Regarding the market, Luo Zhixian believes, "Price wars are the industry's nightmare; Uni-President chooses not to follow." "We will pay attention to what industry competitors are doing, but that does not mean we will change our existing steps and pace." Therefore, Uni-President proposed a "price freeze" strategy. When facing raw material cost pressure, it did not choose to raise prices, absorbing the increased raw material costs on its own. Now, it seems Uni-President has indeed achieved this. In 2022, it delivered a decent report card.