A disclosure that Singapore's richest family increased its stake has brought the former 'Soy Milk King' back into the spotlight. According to information disclosed by the Hong Kong Stock Exchange, on October 7, Huang Zhida, younger brother of Huang Zhixiang, chairman of Sino Group, reported for the first time that he and his family office held over 5% of Vitasoy's shares through Yeo Hiap Seng. In response, listed company Yeo Hiap Seng announced that 'the increase aligns with our policy of investing in leading enterprises in Asia, and increases our investment in the plant-based beverage industry in mainland China and Hong Kong.' It also stated that the company may consider further investment. Public data shows that Yeo Hiap Seng is a Singapore-listed food and beverage company, founded by the Huang family, led by Singapore's richest man, Huang Tingfang. To date, Yeo Hiap Seng's main products include soy milk and water chestnut drinks, with its primary market in Southeast Asia. Revenue from the Chinese market is not significant, accounting for less than 10%, with South China and East China being its main markets. Previously, Yeo Hiap Seng held 0.4% of Vitasoy's shares. In the eyes of outsiders, this continued increase may be a bet on Vitasoy's market in mainland China. Vitasoy was once called the 'Soy Milk King' and was the pioneer of the soy milk market in China. Public data shows that Vitasoy was founded by Dr. Lo Kwee-seong in 1940 in Hong Kong, and its main markets now include mainland China, Hong Kong, Australia, New Zealand, and Singapore. Among these, mainland China is its largest market. According to Vitasoy's fiscal year 2023/2024 report (ending March 31, 2024), of its HK$6.217 billion in revenue, mainland China accounted for 54%. At its peak, Vitasoy's mainland China revenue exceeded 60%. However, in recent years, the mainland China market that Vitasoy relies on has also fallen into growth difficulties. Besides intense competition in the categories of its two main products, soy milk and lemon tea, the company also faces internal issues. For example, Vitasoy's mainland China senior management has changed frequently in recent years. In 2017, Yuan Jie, who had been China managing director for 13 years, left; in 2018, Zhong Tingyi from Danone became the new CEO for mainland China, but he left after the 2021 public opinion crisis; at the end of 2021, Chairman Lo Yau Lai, then in his eighties, recruited Su Qiang as CEO for mainland China, but Su resigned for personal reasons in April this year. Especially after the 2021 public opinion crisis, Vitasoy is still 'recovering.' Zhu Danpeng, a Chinese food industry analyst, told the author that Vitasoy's development in recent years has not been impressive. 'On one hand, Vitasoy's main sales are concentrated south of the Yangtze River, and it has not built factories in the north, which has caused it to miss out on the benefits of brand expansion and is a key reason for its failure to achieve breakthroughs in performance; on the other hand, Vitasoy faces issues of category and brand aging, and consumer fatigue is also a factor.' Regarding Vitasoy's market plans in mainland China, the author contacted Vitasoy but had not received a reply as of press time. Clearly, this over-80-year-old brand still faces significant challenges. It is also worth noting that Vitasoy's current leader, Lo Yau Lai, is 83 years old, and he remains executive chairman of Vitasoy International. In the eyes of outsiders, Lo Mei, who may become the third-generation successor, was only promoted to vice chairman of the board last November, but she has not yet taken over her father's baton.

'Soy Milk King' Struggles to Adapt

In 1940, after three to four years of exploration, Dr. Lo Kwee-seong finally launched Vitasoy soy milk. Subsequently, with Hong Kong as its headquarters, it began exporting to Australia, New Zealand, Southeast Asia, and other countries, and its soy milk products were once all the rage. It was not until the 1990s that Vitasoy entered the mainland China market. In 1994, Vitasoy was listed on the Hong Kong Stock Exchange. The same year, Vitasoy's Shenzhen factory was completed and put into operation, and then Vitasoy gradually expanded nationwide, mainly focusing on the South China market. However, in the early years of entering the mainland China market, Vitasoy did not develop well. In the soy milk category, there was no leading brand in mainland China at that time. The background was that per capita consumption of packaged soy milk in countries like Singapore and Australia was about 10 times or more than that in mainland China. In 2008, the melamine incident in the milk industry severely damaged the milk industry, giving the domestic soy milk market an unprecedented growth opportunity. Starting from 2008, Vitasoy's revenue increased year by year. According to financial reports, from fiscal year 2008 to 2019, Vitasoy's sales in mainland China had a compound annual growth rate of 26%, far exceeding the growth rates of its other markets. By fiscal year 2016, Vitasoy's sales in mainland China had surpassed those in Hong Kong. According to data from China Business Industry Research Institute, in 2016, Vitasoy ranked first in the mainland China soy milk market with a 41% share, becoming the veritable 'Soy Milk King.' To date, mainland China remains Vitasoy's largest market. But the good times did not last. Seeing the rapid growth of the soy milk market, dairy giants and other FMCG brands entered the soy milk market one after another. In April 2017, Dali launched Doubendou soy milk, which sold over 200 million yuan in the first two months and nearly 1 billion yuan in 2017; at the end of the same year, Yili launched its ready-to-drink soy milk product Zhi Xuan Nong Xiang Dou Ru, officially entering the soy milk market... As competition intensified, Vitasoy's days of 'easy money' were gone. From fiscal year 2017/2018 to 2020/2021, Vitasoy's revenue growth in the mainland market fell from 39% to 10.68%, and its net profit margin fell from 12.08% to 7.8% during the same period. After its soy milk market share declined, another product, Vitasoy lemon tea, took over the growth baton. In 2016, Vitasoy lemon tea began to go viral on social platforms. It is understood that Vitasoy increased its brand marketing efforts in mainland China, which made Vitasoy lemon tea popular. In 2017, Vitasoy lemon tea sold 46.3 million equivalent cases, with sales of nearly 2 billion yuan. However, the popularity of lemon tea could not hide Vitasoy's weak performance in recent years. In fiscal year 2019/2020, the company achieved revenue of 6.608 billion yuan and net profit attributable to shareholders of 490 million yuan, with year-on-year growth of 2.36% and -17.98%, respectively; in fiscal year 2020/2021, revenue and net profit attributable to shareholders grew by -3.83% and -5.35% year-on-year. The public opinion crisis in 2021 made the decline even more pronounced. On July 1, 2021, Vitasoy's brand was severely damaged due to inappropriate remarks at the company level, and many supermarkets and stores removed Vitasoy products. According to the fiscal year 2021/2022 report, Vitasoy experienced its first loss in nearly 20 years, with mainland revenue plummeting by 28%. Although in fiscal year 2023/2024, Vitasoy improved on the basis of turning losses around, it still lags behind previous levels.

Urgent Need for New Growth Points

Since its founding over 80 years ago, Vitasoy soy milk and Vitasoy lemon tea have always been the company's main products. It is understood that both products were launched during the tenure of founder Lo Kwee-seong and have decades of history. However, both main products now face challenges. The author recently visited several offline supermarkets in Beijing and found that compared to Vitasoy soy milk, Vitasoy lemon tea has more extensive distribution, with almost all large supermarkets and community stores selling it. But Vitasoy soy milk is only available in large supermarkets. In the view of one supermarket owner, Vitasoy lemon tea can be considered a 'commodity' product in the industry, meaning it has high circulation. In contrast, Vitasoy soy milk and new products have lower circulation. In fact, in recent years, Vitasoy lemon tea has surpassed Vitasoy soy milk to become the main revenue driver in the mainland China market. According to market research and distributor interviews by the self-media 'Food Board,' in Vitasoy's mainland market, the ratio of its two star products, tea drinks and soy milk, is approximately 7:3. The growth rate of the plant-based beverage market in which Vitasoy operates has slowed. According to Alibaba platform data, in 2023, the overall year-on-year growth rate of China's plant-based beverage market was only 2%. Moreover, the lemon tea market, another major product, has also faced pressure from sugar-free tea drinks and freshly made lemon tea in recent years. Vitasoy has not been idle. In fact, Vitasoy has been laying out new products for a long time. For example, in 2018, Vitasoy entered the sugar-free tea market, but to date, its market share is not significant. The author's visits found that the distribution rate of Vitasoy sugar-free tea products is not high. Offline, the author only found Vitasoy sugar-free tea products on sale at Beijing Wumart supermarkets; online, Meituan's Xiaoxiang Supermarket has Vitasoy sugar-free tea, but all are marked as 'near-expiry special offers.' This also shows that the sales of Vitasoy sugar-free tea are not very good. The aforementioned supermarket owner said she had never heard of Vitasoy sugar-free tea products. But for Vitasoy, sugar-free tea has been regarded as a new growth driver. At the financial results meeting in June this year, Vitasoy CEO Lu Botao admitted, 'The sugar-free tea market is very important to us.' But he also acknowledged that Vitasoy entered the sugar-free tea market relatively late in mainland China, so to succeed there, it cannot simply replicate the experience from Hong Kong or Japan and South Korea. However, the challenges in the sugar-free tea market are not small, especially since competition has become 'white-hot' this year. Not only are there leading products like Nongfu Spring's Oriental Leaf and Suntory's sugar-free teas, but many emerging brands such as Guozishule and Rangcha are also fiercely competing. In addition to product efforts, the more core issue lies in channels. The aforementioned supermarket owner told the author that although Vitasoy lemon tea has salespeople visiting stores, the fees given to terminals can only be described as 'average.' In the industry, beverage brands that perform well in the market basically invest a lot in terminals. Vitasoy may still be making up for mistakes made years ago. According to reports from Food Insider, starting in 2019, because Vitasoy overemphasized e-commerce channels and pursued more profits, it led to serious cross-regional selling by distributors. Some online e-commerce platforms sold products at only 0.5 yuan more than the distributor's purchase price, which damaged the offline distributor system. The layout of production lines also limits its entry into more markets. After more than 20 years in the mainland China market, Vitasoy's advantageous regions are still mainly concentrated in South China. According to Vitasoy's mainland China official website, Vitasoy has five production and operation centers in mainland China, located in Shenzhen, Shanghai, Foshan, Wuhan, and Dongguan. For Vitasoy, if it wants to reverse the decline and find new growth points, there may be many issues to resolve. References:

  1. 'Soy Milk and Tea Sold Over HK$6 Billion a Year, Vitasoy CEO Lu Botao: Will Continue to Expand Share, Focus on Sugar-Free Tea Market', National Business Daily
  2. 'Vitasoy Loses Mainland Market', Zebra Consumption
  3. 'Addiction and High Valuation: The Lemon Tea Story of Vitasoy', Yuanqi Capital
  4. 'Vitasoy Recruits FMCG Veteran as New Head of Mainland Business', Interface News