Source丨Zebra Consumer Over the past year, Vitasoy International's biggest achievement has been the return to growth in mainland China after three consecutive years of decline. This was partly due to new product combinations, and also through improved operational efficiency and cost control, which greatly enhanced profitability. However, in terms of revenue scale, there is still a significant gap from the peak of HK$5 billion. Vitasoy's soy milk products are no longer as popular in mainland China, partly due to the shadow of a public opinion crisis four years ago, and also because of numerous competitors in the segment, changing tastes, and consumer demand for value for money, all testing the company's business acumen. Meanwhile, the company has reached a critical period for the third-generation family succession. However, 84-year-old Lo Yau Lai is not yet ready to step down and retire. Mainland ends three years of negative growth After enduring three fiscal years, Vitasoy International (00345.HK) has finally reversed the negative growth in mainland China. Recently, the company disclosed its 2024/2025 fiscal year results (ending March 2025), with revenue of approximately HK$6.274 billion and profit attributable to equity holders of approximately HK$235 million, up 1% and 102% year-on-year respectively. The stable performance of mainland China and Hong Kong, the two core markets, which together contribute 90% of revenue, was a key factor in these results. During the period, mainland China achieved revenue of HK$3.536 billion, up 0.798% year-on-year; profit was HK$311 million, up 40.72% year-on-year. Although mainland revenue growth was less than 1%, it was a shift from darkness to dawn. After the public opinion crisis in July 2021, Vitasoy's soy milk products faced delisting and other issues, severely damaging the brand image, akin to a major earthquake. To revive the market, in late 2021, the company hired Su Qiang, a former executive of Hsu Fu Chi, as CEO for mainland China. As a veteran in FMCG with 20 years of industry experience, Su Qiang immediately set about revitalizing the brand image, innovating products, and reforming channels. Within six months of his tenure, he turned around the loss-making mainland market, but the decline in revenue continued. In fiscal 2021/2022 and 2022/2023, mainland revenue was HK$3.913 billion and HK$3.647 billion, down 22.77% and 6.80% year-on-year respectively. After Su Qiang left in April 2023, mainland revenue continued to decline, with fiscal 2023/2024 revenue down 3.81% to HK$3.508 billion. In April 2024, Wang Dong, former president of Tupperware China, became CEO of the mainland market. By launching new product combinations such as banana and strawberry flavored soy milk and zero-sugar lemon tea, he brought additional revenue growth. At the same time, improving operational efficiency, reducing raw material costs, and implementing strict cost control to improve profitability became key, including the closure of the Shanghai factory during the period, finally seeing the light of day. In fiscal 2024/2025, the company's mainland operating profit rose 40%, with an operating profit margin of 9% for the year. However, mainland revenue has not yet returned to its peak. In fiscal 2020/2021, mainland revenue was HK$5.067 billion, accounting for 67.38% of total revenue, the highest in recent years. Market faces comprehensive pressure Vitasoy was born in Hong Kong in the 1940s and focused on the local market for years, only moving north to mainland China in the 1990s for greater development. At that time, Weiwei Soy Milk under Weiwei Group (600300.SH) dominated the mainland soy milk market, but its soy milk powder required hot water to drink. Vitasoy's ready-to-drink products, with their convenience, captured many Weiwei users and enjoyed market dividends. As more players entered the ready-to-drink soy milk segment, pressure increased. Around 2017, Dali's Doubenben, Yili's Zhi Xuan, and Uni-President's Chengshi Dou appeared on shelves, with battles in the ready-to-drink soy milk market raging. In the fierce competition, Vitasoy fell into a public opinion storm in 2021, with products delisted in mainland China, adding insult to injury. Doubenben seized the opportunity, achieving sales revenue of over RMB 2.245 billion that year, up 16.8% year-on-year, approaching Vitasoy's mainland revenue scale. According to Euromonitor data, based on 2021 retail channels, Doubenben held a 23% share of the ready-to-drink soy milk market, ranking first in the industry. After several years of boom, the plant-based protein beverage market has cooled in recent years, with slowing growth. Vitasoy's other ace product, lemon tea, faces a more complex tea beverage market in mainland China. Nongfu Spring (09633.HK) has opened up the sugar-free tea segment with Oriental Leaf, and new-style tea brands offer freshly made tea drinks, impacting the company's lemon tea products in terms of both taste and product form. In the current economic environment, consumers are more price-sensitive. To gain market share, Chairman Lo Yau Lai revealed at the results briefing that in the second half of last year, lemon tea prices in the mainland market were cut by 10%-15%. Moreover, the company has increased price promotions over the past year or two. However, Vitasoy International said it will not continue to cut prices in the mainland market, believing its current pricing is already competitive. An e-commerce platform shows that a 24-pack (250ml each) of Vitasoy classic lemon tea, with 5 million units sold, costs RMB 46.01, or about RMB 1.9 per pack. To respond to market changes, the company has recently focused on sugar-free tea and new soy milk flavors, launching many new products. Lo Yau Lai has stated plans to increase the proportion of low-sugar or sugar-free products to 80% by fiscal 2030/2031. 84-year-old leader reluctant to let go With complex market and operational pressures, Lo Yau Lai cannot completely let go, especially regarding the long-planned power transition. In 2023, 48-year-old Lo Chi Mei was appointed vice chairman of the company, entering the decision-making center. Since 2017, she had served as a non-executive director. Her entry into the decision-making layer was widely interpreted as preparation for succession. Lo Chi Mei is Lo Yau Lai's daughter. She studied overseas, attending Cornell University for business and MIT, and after graduation worked as an executive at an investment bank and an asset management company. With her international perspective and investment banking/asset management background, it is widely believed she will smoothly take over and is the natural choice for the company's leader. However, for Lo Yau Lai, it is still too early. Two years ago, he stated that he would continue as chairman, succession would be gradual, and he would pass on his insights and views to his daughter over the next two to three years. The succession process for Hong Kong tycoon families is traditionally lengthy and rigorous. The Lee Kum Kee family, which has passed down three generations, used a "Family Constitution" to solve succession challenges, with the primary requirement being that family members must work outside for 3 to 5 years, pass assessments before joining the company, and then face further rigorous evaluations. Lo Yau Lai is no different. He was appointed a director as early as 1972, and only formally took over from his father, Dr. Lo Kwee Seong, in 1995. Vitasoy International is a typical governance model combining family members and professional managers, with advantages in decision-making efficiency but also risks due to concentrated power. Within the company, there are many family members. Besides Lo Yau Lai and Lo Chi Mei, there are Lo Yau Lai's sister Lo Mo Ling as a non-executive director; and Lo Tak Shing, son of Lo Yau Lai's cousin Lo Hoi Muk, as a non-executive director. Additionally, executive director Lai Chung Shan and shareholder Lai Tung Shan are Lo Yau Lai's nephews; shareholders Chan Lo Mo Lin (Lo Yau Lai's sister), Lo On, and Chan Ling Shan are also relatives of Lo Yau Lai's family. Streamlining external operations and improving internal governance, Lo Yau Lai, now 84, remains a key figure who cannot step away. Therefore, his handover and retirement will not be completed within two to three years. 🔺