Uni-President 1. Financial Report Highlights: For the first half of 2016, Uni-President's revenue was RMB 11.713 billion, a year-on-year decline of 2.4%; gross profit fell 4.6% to RMB 4.325 billion, with gross margin down 0.9 percentage points to 36.9% from 37.8% in the same period last year. 2. Industry Analysis:
- Noodle business revenue reached RMB 4.01 billion, up 9.8% year-on-year; Tang Daren (Tom Yam) saw double-digit growth. In the first half of 2016, Uni-President's instant noodle business revenue was RMB 4.01 billion, up 9.8% year-on-year, with market share reaching 20.8%, an increase of 2.8 percentage points from the same period last year. Among established brands, "Uni-President Old Tan Sauerkraut Beef Noodles" maintained its leading position in the sauerkraut category, while "Tang Daren" also maintained double-digit growth. For new products, Uni-President actively expanded into the mid-to-high-end noodle market priced above RMB 5, launching three new brands: Duhui Xiaoguan, Xiangban Yicheng, and Manhan Yan. Through different brands and price points, the company aims to complete its product layout and clarify its positioning.
- Beverage revenue declined 8.2% due to rainy summer; tea beverages contributed RMB 3.737 billion. Due to the still-unrecovered macro economy in China and abnormal weather in the second quarter (lower temperatures and higher rainfall), the beverage market growth slowed in the first half of 2016. Uni-President's beverage business revenue was RMB 7.448 billion, down 8.2% from the same period last year. Tea Beverages In the first half of 2016, Uni-President's tea beverage revenue was RMB 3.737 billion, up 13.6% year-on-year. Uni-President actively seized new opportunities from consumer transformation. In 2015, it launched the brand "Xiaoming Tongxue" priced above RMB 5, targeting post-95s consumers. Since its launch, it has been widely loved by consumers, driving the rapid development of the ready-to-drink tea market above RMB 5. According to Nielsen data, in the first half of 2016, the overall tea beverage market (excluding milk tea) sales increased 10.9% year-on-year, and Uni-President's market share significantly increased to 28.6%, up 5.3 percentage points from the same period last year. In the second half of 2016, Uni-President's tea beverage business will continue to adhere to a value marketing strategy. Facing the changing market environment and consumer demands, it will strengthen brand building. Existing products "Uni-President Iced Black Tea" and "Uni-President Green Tea" will stabilize the mainstream market at the RMB 3 price point, optimizing marketing activities and revitalizing the brand. In the consumption upgrade market above RMB 5, the focus will be on "Xiaoming Tongxue," while also targeting first-tier cities with the "Tilatu" Western-style fruit and flower tea category to expand its reach. Juice In the first half of 2016, Uni-President's juice product revenue was RMB 1.67 billion. According to Nielsen data, Uni-President's juice market share by sales value was 13.4%, maintaining its position as the second-largest in the juice market. Regarding the star product "Hai Zhi Yan," the annual report stated that in response to the mismatch between actual retail consumption growth and shipment pace, and to pursue long-term brand value and profit maximization, "Hai Zhi Yan" adjusted its sales pace in the first half of 2016, making phased shipment adjustments. Others Nielsen data shows that in the first half of 2016, the overall milk tea market declined 12.8% in volume. Uni-President's milk tea products outperformed the overall market, with a market share of 71.1%, firmly holding the leading position. Additionally, Uni-President's coffee business revenue grew 13.5% compared to the same period last year.
Mengniu 1. Financial Report Highlights: In the first half of 2016, revenue was RMB 27.2572 billion, with products contributing significantly to revenue growth including Telunsu, Purezen, and Mengniu Pure Milk. 2. Performance: Revenue: RMB 27.2572 billion, up 6.6% from RMB 25.564 billion in the first half of 2015. Excluding Yashili, the Group's revenue increased 7.0% to RMB 26.1047 billion. Gross Profit: Due to further declines in raw milk prices and continued product structure optimization, gross profit rose to RMB 9.1814 billion in the first half of 2016. Gross margin also increased 1.8 percentage points year-on-year to 33.7%. Excluding Yashili, the Group's gross profit was RMB 8.5896 billion, with a gross margin of 32.9%, up 1.9 percentage points. Net Profit: Profit attributable to owners of the Company decreased 19.5% year-on-year to RMB 1.0773 billion. Excluding Yashili, profit attributable to owners of the Company was RMB 1.0877 billion, down 16.1% year-on-year. 3. Product Performance: Mengniu's revenue mainly comes from three segments: liquid milk products, ice cream products, and milk powder products. In the first half of 2016, these contributed RMB 23.762 billion, RMB 1.703 billion, and RMB 1.66 billion respectively, plus other businesses of RMB 132 million, totaling exactly RMB 27.257 billion. Liquid milk contributed 87.2% of Mengniu's total revenue, with Telunsu, Purezen, and Mengniu Pure Milk contributing significantly to revenue growth. Telunsu continues to lead the high-end market, and Mengniu's liquid milk and low-temperature dairy products ranked first in market share. Below is a table showing the revenue and product information for each category in the first half of the year.
| Product Category | Financial Performance | Key Products |
|---|---|---|
| Liquid Milk | Revenue RMB 23.7615 billion, 87.2% of total revenue | |
| UHT Milk | Revenue RMB 11.5138 billion, 48.4% of liquid milk revenue | Telunsu, Mengniu Pure Milk, Selected Pasture Pure Milk, Future Star Children's Growth Milk, Arla Organic Pure Milk |
| Milk Beverages | Revenue RMB 4.9159 billion, 20.7% of liquid milk revenue | Zhen Guoli, Suan Suan Ru, You Yi C, Future Star Miao Miao Children's Milk Beverage, Go Chang |
| Yogurt | Revenue RMB 7.3318 billion, 30.9% of liquid milk revenue | Guan Yi Ru, Bi You, Purezen Ambient Yogurt, Future Star Children's Growth Yogurt, Xiao Jian, Aikelin Yogurt |
| Ice Cream | Revenue RMB 1.7034 billion, 6.2% of total revenue | Di Lan Sheng Xue, Green Mood, Ice+, Sui Bian |
| Milk Powder | Revenue RMB 1.6600 billion, 6.1% of total revenue. Yashili's first-half revenue decreased 21.7% to RMB 1.1465 billion, and gross profit decreased 19.6% to approximately RMB 721.8 million. | Yashili Super a-Gold, Arla Baby & Me, Ausmengniu Ruibuen, Dumex Zhizui, Yashili Gold, Anbeihui |
| Other Products | Revenue RMB 132.3 million, 0.5% of total revenue | Future Star Children's Growth Cheese, Gold European-style Cheese, European-style Fermented Milk, Zhi Po Mo Fang |
Want Want Let's first look at three highlights from Want Want's interim report: Highlight 1: The big single product, Want Want Milk, declined. Want Want Milk, a RMB 10 billion single product for the Want Want Group, saw a decline in the first half of 2016. One reason was the impact of ambient yogurt that has risen in recent years. Guangming (Mosilian), Yili (Anmuxi), and Mengniu (Purezen) – what do these three industry giants think? Highlight 2: Gross margin hit a record high since listing. China Want Want's gross margin in the first half reached 47.8%, up 5.3 percentage points year-on-year, a new high since its listing in Hong Kong. Compared to Dali's gross margin released yesterday, Want Want's is far higher than Dali's, and also higher than another giant, Uni-President. Highlight 3: Want Want will expand new products in the second half. Want Want will extend the product range of the Heipi brand, selectively expand some existing star leisure products, and differentiate customers and business strategies between Want Want and Heipi. Total revenue in the first half of 2016 was RMB 9.7095 billion, down 12.8% from the same period in 2015. Rice crackers and leisure foods accounted for 51.6%, and dairy and beverages accounted for 48.2%. Gross margin in the first half of 2016 increased 5.3 percentage points from the same period in 2015 to 47.8%, nearly 50%, the highest since Want Want's listing. Rice Crackers Revenue RMB 2.0716 billion, up 0.8% year-on-year. In the first half of 2016, rice cracker revenue was RMB 2.0716 billion, up 0.8% from the same period in 2015, with sales volume also growing by a low single-digit percentage. This was attributed to channel sinking (encouraging distributors to actively develop cooperative secondary distributors and expand the number of terminal outlets with special displays) and effective terminal display strategies. Among them, the main rice cracker brand's revenue grew 1.2% year-on-year in the first half of 2016; the sub-brand's revenue grew 31.0% due to product strategy adjustments; and gift pack revenue declined 9.6% from the first half of 2015. Dairy and Beverages Affected by ambient yogurt, Want Want Milk declined 17.4% year-on-year. In the first half of 2016, dairy and beverage revenue was RMB 4.6763 billion, down 18.5% from the first half of 2015. The main reason was that Want Want Milk, which accounts for about 90% of dairy and beverage revenue, declined 17.4% from the same period in 2015. As a best-selling RMB 10 billion single product for many years, why did Want Want Milk's performance decline? The report indicated the following reasons:
- Affected by the weak overall environment, the dairy industry in China experienced weak growth overall, and distributors' inventory pressure increased, accelerating promotional competition to destock.
- Although Want Want Milk did not lose market share in the children's flavored milk segment, consumers' attention partially shifted to new segments like ambient yogurt, causing a significant decline in the overall children's flavored milk category in China. In recent years, the explosive growth of ambient yogurt brands such as Guangming Mosilian, Yili Anmuxi, and Mengniu Purezen has indeed had an impact.
- Additionally, promotional activities in the second quarter of 2015 led to a high sales base in the same period last year, making the second quarter performance weaker compared to the same period. Furthermore, the report stated that Want Want will leverage the existing brand and channel advantages of Want Want Milk to launch new products such as lactic acid bacteria beverages and children's yogurt in the third quarter, aiming to meet new consumer demands and balance the diversified development of dairy and beverage products. Leisure Foods Revenue RMB 2.941 billion, down 11.1% year-on-year. In the first half of 2016, leisure food revenue was RMB 2.9419 billion, down 11.1% from the first half of 2015. In the second half, leisure foods will also launch new products such as annual ring cake and lozenges, leveraging the Want Want brand advantage to expand consumer groups. At the same time, it plans to launch new products in some blank markets using the Heipi brand and the Group's remaining production capacity.
Dali Foods The report shows that in the first half of 2016, revenue increased 6.1% to RMB 9.021 billion, and gross profit reached RMB 3.533 billion. The gross margin was as high as 39.2%, surpassing Uni-President's 36.9%. (Note: The higher the gross margin, the higher the profitability and the stronger the cost control ability.) Performance Both revenue and net profit achieved double growth. Revenue: RMB 9.021 billion, up 6.1% year-on-year. Food and beverage segments grew 3.0% and 5.5% respectively. Net Profit: RMB 1.642 billion, up 8.2% year-on-year. Gross Profit: RMB 3.533 billion. Food and beverage segments' gross profit were RMB 1.651 billion and RMB 1.876 billion, up 22.3% and 25.6% year-on-year respectively. Gross Margin: 39.2% in the first half of 2016, up 5.8 percentage points from the same period last year. Food Business Revenue reached RMB 4.71 billion, with all three categories growing. In the first half of 2016, food product sales were RMB 4.771 billion, up 3.0% from RMB 4.634 billion in the same period of 2015. Dali's food product business mainly includes three categories: pastry, potato-based puffed food, and biscuits. Its core brands include Daliyuan, Kebike, and Haochidian, all well-known to consumers. Let's look at their sales performance in the first half. Pastry: Sales reached RMB 3.028 billion, up 0.8% year-on-year. In the first half of 2016, pastry product sales reached RMB 3.028 billion, up 0.8% year-on-year. This is Dali's most advantageous product category, maintaining a leading market share. Traditional advantageous products such as chocolate pies, soft bread, and small bread showed steady growth in the first half. Potato-based Puffed Food: Sales reached RMB 981 million, up 5.4% year-on-year. In the first half of 2016, potato-based puffed food sales reached RMB 981 million, up 5.4% year-on-year. Kebike potato chips target young consumers in the mass market, with a fashion-oriented product image. Flavors are continuously improved and enriched, and quality and taste are enhanced with production process improvements. Packaging specifications and pricing are flexibly adjusted to meet young consumers' needs. Biscuits: Sales reached RMB 726 million, up 8.9% year-on-year. Biscuits are one of the categories with better growth in the first half. In the first half of 2016, biscuit product sales reached RMB 762 million, up 8.9% year-on-year, with cookie sales up 39.3%. The Landberg Danish Butter Cookies launched in 2014 are one of the few domestic high-end biscuit products. We introduced production equipment and processes from Europe, achieving quality comparable to international brands. Since launch, they have become a top choice for many families during festivals and as gifts. In 2016, building on the good reputation of Landberg, we successfully launched Zhenhao Cookies, which, through precise market positioning and pricing strategies, filled the daily needs of mid-to-high-end biscuit consumers. Beverage Business Revenue increased 5.5% to RMB 4.082 billion, with Lehu performing well. For the six months ended May 30, 2016, beverage product sales were RMB 4.082 billion, up 5.5% from RMB 3.871 billion in the same period of 2015. Dali's beverage product business mainly includes: functional drinks, herbal tea, plant protein and milk-containing beverages, and other beverages. Its core brands include Lehu and Heqizheng. Let's look at their sales performance in the first half. Lehu grew significantly by 71.4% to RMB 1.092 billion. In 2013, Dali started its functional drink journey with "Lehu." According to Dali's 2015 annual results, Lehu's revenue in 2015 was RMB 1.419 billion, up 78.7% from 2014, far higher than other beverage categories. It captured a large market share in third- and fourth-tier cities and townships with low prices. In the first half of this year, Lehu's revenue was RMB 1.092 billion, up 71.4% from RMB 637 million in the same period of 2015. This significant growth was mainly due to Lehu's successful market positioning and strengthened marketing efforts. Since entering the market in 2013, Lehu has maintained high growth due to differentiated positioning and unique marketing strategies. Herbal Tea increased 4.4% to RMB 1.511 billion. The increase in beverage product sales was also due to increased sales of herbal tea, driven by growth in PET bottled herbal tea sales. In the first half of 2016, herbal tea (Heqizheng) revenue reached RMB 1.511 billion. Plant Protein Beverages to Increase New Product Development. Affected by overall market decline and intense competition, sales of plant protein and milk-containing beverages declined compared to the same period last year. However, plant protein beverages align with healthy consumption concepts, and we remain optimistic about their overall prospects, increasing efforts in new product development in the future. Vertical Comparison: Since listing less than a year ago, Dali's performance has been improving. Dali listed in October last year. In February this year, Dali delivered its first report card after listing. Despite the sluggish industry environment last year, Dali's 2015 revenue grew 13.2% to RMB 16.865 billion, and net profit increased significantly by 42.5% to RMB 2.959 billion. Comparing with the first half of 2016, Dali also achieved double growth in revenue and net profit, showing that Dali's performance has been improving since listing. Horizontal Comparison: Dali's gross margin reached 39.2%, surpassing Uni-President. In the first half of 2016, under the new normal economy, China's economy continued to undergo stable growth and structural adjustment, with economic growth slowing slightly below expectations. Comparing with Uni-President's annual report released earlier, we can see that Dali's profitability is steadily rising, which has become a focus of industry attention.
Nestlé On August 19, Nestlé released its first-half 2016 results, with the most noteworthy point being that its sales growth slowed to the lowest level since 2009. Nestlé's First-Half 2016 Results Nestlé's results showed first-half revenue of CHF 43.2 billion (approximately RMB 296.4 billion), with internal organic sales growth of 3.5%, below the expected 3.7%. Net profit was CHF 4.1 billion (approximately RMB 28.1 billion), also lower than the CHF 4.5 billion (approximately RMB 30.9 billion) in the same period of 2015. At the same time, Nestlé pointed out that in China, its second-largest market, business growth was weak. The decline in performance growth began in 2014, with year-on-year growth of only 0.3% that year, far below the 28% in 2013, with a slight recovery in 2015.
1. Yinlu business dragged down performance; high-end new products to be launched.
Nestlé attributed part of the slowdown to the significant slowdown in China's food and beverage market growth, and stated that the Yinlu business continued to drag down overall performance. Nestlé said it is upgrading products and accelerating new product launches. Earlier, a Nestlé executive said: "For Yinlu, the most important thing is to upgrade existing products to ensure they keep up with trends, as people want healthier drinks and more high-end products."
2. Dairy business declined, but Wyeth Illuma and S-26 Platinum outperformed the high-end milk powder market.
According to the financial report, Nestlé's nutrition segment recorded sales of CHF 5.2 billion in the first half, with organic growth of 1.3%, and operating margin increased 20 basis points to 23.2%. Due to low raw milk prices and slowing growth of high-end and mainstream brands, the US and Chinese markets faced challenges. It was reported that in the past two quarters, sales of Wyeth S-26 Gold and Wyeth Gold series declined significantly, but in the ultra-high-end market, Wyeth Illuma and S-26 Platinum performed well. Industry insiders pointed out that intensified competition in China's milk powder industry is a consensus. Domestic brands have significantly reduced prices, with the highest reduction exceeding 50%, and imported brands have followed suit. Wyeth, Abbott, Danone, and Mead Johnson have all joined the price reduction, with "main brands cutting prices by over 30%." Rapidly changing consumer attitudes pose huge challenges in the Chinese market. Nestlé's performance growth in China began to decline in 2014. In 2014, Nestlé's sales in China were CHF 6.6 billion, up only 0.3% year-on-year, far below the 28% in 2013, with some growth momentum only appearing by the end of 2015. China is Nestlé's second-largest global market. CEO Paul Bulcke said the company faces huge challenges in this market. In previous interviews, Bulcke revealed two major changes in the Chinese market: rapid shifts in consumer attitudes and rapid changes in the trade environment.
Haitian On August 15, Haitian Flavoring & Food Company released its first-half 2016 results. The report stated that in the first half of 2016, Haitian's revenue was RMB 6.169 billion, up 9.26% year-on-year; net profit was RMB 1.486 billion, up 11.29%. Both revenue and net profit increased, with significant growth in central and western regions. In the first half, Haitian achieved steady growth in core indicators such as sales volume, revenue, and net profit. During the reporting period, Haitian achieved revenue of RMB 6.169 billion, up 9.26% year-on-year; net profit attributable to shareholders of the listed company was RMB 1.485 billion, up 11.29%; return on net assets was 17.02%, and overall gross margin was 44.08%, maintaining a high level. According to previous financial reports, Haitian's first-half results for the past four years were RMB 4.403 billion (2013), RMB 5.027 billion (2014), RMB 5.646 billion (2015), and RMB 6.169 billion (2016). By product, Haitian's soy sauce revenue was RMB 3.692 billion, with a gross margin of 46.51%; oyster sauce was RMB 858 million, with a gross margin of 39.62%; and sauce was RMB 1.06 billion, with a gross margin of 45.29%. By region, eastern region revenue was RMB 1.269 billion, up 3.82% year-on-year; southern region revenue was RMB 1.306 billion, up 3.53%; central region revenue was RMB 1.185 billion, up 15.1%; northern region revenue was RMB 1.69 billion, up 5.91%; and western region revenue was RMB 582 million, up 16.17%. Currently, Haitian has established over 3,000 distributors, with network coverage of over 320 prefecture-level cities and over 1,500 counties. The network has been further refined and deepened, building a strong competitive advantage and effectively supporting Haitian's sustainable development. Vinegar beverages are booming; Haitian launched "Zhang Xiaozhu Ben Niang Yin." In last year's annual report, Haitian stated that small-category products would be emphasized in 2016, with cooking wine and vinegar beverages planned for launch. Vinegar products grew rapidly, maintaining 20% growth in 2015, while cooking wine and fermented bean curd contributed RMB 100 million in sales. With the extension of Haitian's product line and the launch of new products, Haitian's product portfolio is expanding. To achieve the goal of doubling revenue compared to 2013 in the coming years, the vinegar beverage "Zhang Xiaozhu Ben Niang Yin," launched at the end of April, is an important strategic move for Haitian to "grab a share of the cake and expand its base." "Zhang Xiaozhu" is positioned as a pure fermented fruit juice vinegar beverage, brewed from 100% fruit juice, with zero fat, zero coloring, no added vinegar essence, and no added saccharin. Currently, the product is available on Haitian's official flagship store, with a retail price of RMB 19.9 for 4 cans (about RMB 5 per can). It has also been launched for trial sales in key markets such as Guangzhou and Shanghai. The reason for launching an apple cider vinegar beverage, Haitian explained, is that their first apple cider vinegar condiment was launched in 1999, and it has become one of their best-selling products. After checking, Haitian does have a product called "Guo Zhen Hao Cu Apple Cider Vinegar," and the new product "Zhang Xiaozhu" targets younger consumers, further leaning toward the beverage category. The most fundamental technical aspect of vinegar is fermentation. Haitian has advantages in fermentation technology. Using fermentation technology for vinegar beverages can achieve product diversification. In fact, this is a safe approach, as it avoids developing new formulas, uses existing technology, and saves costs. Facing "Tiandi No.1" directly, competition may start in Guangdong. Statistics show that China's vinegar beverage industry has a capacity of about RMB 25-30 billion, with huge market potential. Since 2010, vinegar beverages have grown rapidly with distinctive regional distribution. Besides Tiandi No.1, which entered the vinegar beverage market early, Hengshun Vinegar and Baijia Sanbaole have also entered the industry. Recently, Tiandi No.1, a major fruit vinegar player, also released its 2016 interim report, with revenue of RMB 451 million, down 29.49% year-on-year; net profit of RMB 40.8974 million, down 72.4% year-on-year. Tiandi No.1 attributed the decline to the significant impact of last year's price increase policy, widespread wait-and-see sentiment among distributors in the first half, sharp reduction in purchase intentions, the North Expansion Plan diverting talent from Guangdong, new product promotion not meeting expectations, and macroeconomic and industry slowdown. As a leading domestic vinegar beverage company, Tiandi No.1's main market is still limited to Guangdong. According to Tiandi No.1's public transfer prospectus, its revenue from the Guangdong market accounted for 95.50%, 92.64%, and 98.05% of total revenue in the past three years, facing the risk of over-concentration in target markets and inconsistent with its strategy of building a national brand. Thus, Tiandi No.1 formulated the North Expansion Plan to expand into Hubei, Anhui, and other middle and lower Yangtze regions, aiming to transform into a national brand. However, the plan did not achieve the expected results. To support the North Expansion Plan, Tiandi No.1 transferred over 100 core staff from the Guangdong market, impacting sales in Guangdong. Guangdong has a long history of consumer cultivation, and acceptance of fruit vinegar is widespread. Haitian, also rooted in Guangdong, is leveraging its geographical advantage to launch fruit vinegar new products, inevitably competing head-on with Tiandi No.1.
Qinqin On July 8, Qinqin Food listed in Hong Kong. On August 5, Qinqin Food announced its first-half results forecast. However, the data shows that Qinqin's first report card after listing was bleak, with net profit nearly halved. For the six months ended June 30, 2016, the Group expects to record profit attributable to shareholders of approximately RMB 19 million, a decrease of about RMB 16 million from the same period last year, representing a year-on-year decrease of about 45.7%. Qinqin Food explained that the company listed on the Main Board of the Hong Kong Stock Exchange on July 8, incurring one-time listing expenses of about RMB 21 million, which lowered profits. Additionally, the Group expects revenue and gross profit for the first half to decrease by about 10% and about 7% compared to the same period last year. The Group stated that it did not conduct sales and marketing activities of similar scale as the same period last year, which had a short-term positive impact on revenue and gross profit. Besides unsatisfactory net profit, Qinqin Food's stock price has been sluggish. Since its independent IPO from Hengan International on July 8, the stock fell sharply by 65% and 28% in the first two trading days. After opening at HKD 9.19, the stock price has hovered between HKD 2 and 3, with the latest closing price at HKD 2.85. The market generally interprets this as due to "revenue declining for three consecutive years." Qinqin Food is famous for its jelly products. According to Euromonitor statistics, Qinqin Food's jelly products rank third in the Chinese market with a 9.2% share; shrimp and seafood puffed food ranks second with a 12.9% share. Although still an industry leader, after the 2014 "jelly toxic gelatin" crisis, Qinqin's jelly revenue and net profit have never recovered. Qinqin's revenue declined from RMB 1.28 billion in 2013 to RMB 1.02 billion in 2015, and operating profit declined from RMB 117 million in 2014 to RMB 76.16 million in 2015. Industry insiders say that Qinqin's performance decline is due to multiple factors, such as lower industry position, small scale, overly single main products, insufficient sales network, and the need to improve marketing models and personnel quality. These issues determine the limitations of Qinqin's development.
Wanglaoji Today, Guangzhou Baiyunshan Pharmaceutical Group Co., Ltd. (hereinafter referred to as Guangyao) released its 2016 interim report, disclosing the first-half performance of Wanglaoji Great Health (mainly herbal tea) – total revenue of RMB 4.701 billion, up 7.62% year-on-year; gross margin of 48.86%, up 4.90% year-on-year. Given the beverage environment affected by weather, consumption, and other factors, it is commendable that Wanglaoji Great Health's herbal tea products maintained growth, with a gross margin of nearly 49%. These figures look impressive. However, another figure disclosed in the interim report is thought-provoking: Wanglaoji Great Health's net profit in the first half was RMB 305 million, up 15% year-on-year, but converted to a sales profit margin of only 6%. Compared to the 12% sales profit margin of Uni-President's beverage segment in its interim report this month, this indicates that Wanglaoji's marketing costs and sales expenses are significantly higher than peers, and also shows the intensity of the battle between Wanglaoji and JDB.
Bairun Co., Ltd. In China's premixed cocktail market, Rio holds an undisputed leading position, and its corporate actions directly indicate the industry's direction. Today (August 2), Bairun Co., Ltd. released its interim report. In the first half of 2016, revenue was RMB 420 million, down 75.14% year-on-year; net profit attributable to shareholders of the listed company was -RMB 145 million, down 123.46% year-on-year. Among them, Rio cocktail revenue was RMB 348 million, down 78.34% year-on-year. Rio's first-half performance plummeted, falling back to 2014 revenue levels. During the reporting period, Bairun achieved revenue of RMB 420 million, down 75.14% from the same period last year, mainly due to the continued digestion of channel inventory in the premixed cocktail business in the first half of 2016, leading to reduced shipments. According to the financial report, the premixed cocktail business revenue in the first half was RMB 348 million, down 78.34% year-on-year; gross margin was 74.47%, down 4.44 percentage points from the same period last year. Since its revenue exceeded RMB 1.6 billion in the first half of last year, Bairun, as the parent company of Rio, began to appear frequently in the industry spotlight. But soon after, growth slowed and inventory pressure surged, and Rio began to face criticism, eventually fading into obscurity. Bairun (including cocktail business) financial data table:
| Period | 2015 H1 | 2015 Q3 | 2015 FY | 2016 Q1 | 2016 H1 |
|---|---|---|---|---|---|
| Revenue | 1.688 billion | 2.198 billion | 2.351 billion | 216 million | 420 million |
| YoY Change | 278.43% | 193.12% | 107.28% | -73.3% | -75.14% |
| Net Profit | 613 million | 700 million | 500 million | -64 million | -145 million |
| YoY Change | 329.5% | 213.36% | 74.36% | -120.18% | -123.46% |
| Specifically for the cocktail business, reviewing Bairun's past financial reports, Rio cocktail revenue in the first half of 2014 was RMB 365 million, surged 342.8% to RMB 1.617 billion in the first half of 2015, and now declined to RMB 348 million, returning to 2014 sales levels. | |||||
| Destocking became the main theme; third quarter still expected to lose money. | |||||
| The financial report stated that the main reason for Rio's performance shrinkage was the "destocking" that began at the end of last year. In the first quarter of last year, due to the peak season and product placement in hit TV dramas, Rio's market demand was hot, and sales volume increased significantly, leading to a large amount of irrational channel stocking. In the second and third quarters, as advertising promotion heat declined and consumers returned to regular purchases, terminal demand showed a downward trend compared to the first quarter. | |||||
| Against the backdrop of high distributor inventory, the company began adjusting its marketing strategy in the fourth quarter, actively destocking, leading to a significant decline in performance. It is reported that in 2015, Bairun shipped over 18 million boxes of Rio, with terminal sales of about 15 million boxes, leaving channel inventory of over 4 million boxes at year-end. | |||||
| According to research reports from Essence Securities, Rio has consistently good monitoring of channel inventory and terminal sell-out. From Q3 2015 to Q2 2016, destocking continued for four consecutive quarters. By the end of June, channel inventory was expected to be less than 1.5 million boxes, and June shipments increased month-on-month. | |||||
| For the second half of the year, Bairun stated that it will strengthen the distribution of three products: "Benwei," "Qiangshuang," and "Weixun"; expand and optimize production capacity layout, accelerating the construction of Bacchus' Chengdu and Foshan production bases; and build an e-commerce platform to create a comprehensive sales system. At the same time, it adjusted its net profit forecast for January to September to a range of -RMB 50 million to -RMB 150 million. | |||||
| Performance decline exposes many drawbacks; category may still maintain growth above 10%. | |||||
| So, how do industry experts view Rio's "report card"? | |||||
| "The positioning of the cocktail category has always been unclear," said Ding Shian, general manager of Shanghai Yixian Marketing Planning Co., Ltd. He believes that category opportunities lie more in "discovery," while Rio "invented" a product between alcohol and beverages. It was eye-catching at first, but over time, various problems emerged. | |||||
| After problems were exposed, the performance decline was the most superficial and direct manifestation, and Rio went from an industry star to a "troubled company." Chen Wei, a food and beverage brand planning expert, analyzed that Rio's poor performance in the first half was foreseeable. Besides the well-known inventory reasons, there are three other points: |
- Strong competitors. In November last year, AB InBev launched the cocktail brand "Meiye" in China. According to his observation, Meiye's terminal performance was impressive, and AB InBev has obvious advantages in the nightlife channel, so Rio's share was partially taken by Meiye.
- Packaging needs upgrading. Bottled Rio requires a bottle opener, which is laborious, and it is inconvenient to store after opening. These are areas where Rio can improve the consumer experience.
- It has not become the absolute leader. In the cocktail market, Rio's previous success was due to capturing young consumers' psychology, but it did not form a "dominant" category advantage. Its selling points lack functionality, and consumer stickiness is poor. "Rio failed to become an unshakable leader in the cocktail market, mainly due to its emphasis on marketing over products," added Chen Xuan, a well-known marketing expert and founder and general manager of Yan Xiaomai. He said that Rio lacks research and investment in products, product differentiation is not significant, there is no core product that consumers remember deeply, and it has not established a unique product position in consumers' minds. Therefore, facing many similar cocktail products with newer dates and higher cost-performance ratios, market decline became inevitable. However, despite the significant decline and growth slowdown in the first half, Xu Wei, chairman of Heige Consulting, still expressed confidence in Rio. After this round of bubble baptism, cocktails represented by Rio will stabilize at a certain number. This category will still maintain a healthy growth trend of 10% to 15%, no longer bearing the heavy pressure of "saving the industry and saving enterprises," and returning to a normal category growth track.
Master Kong On May 26, Master Kong Holdings Co., Ltd. released its first-quarter 2016 results. Total revenue was approximately USD 2.1 billion, down 9.54% year-on-year; net profit was approximately USD 73.5 million, down 45.02% year-on-year. In the first quarter, Master Kong's instant noodle business sales were USD 842 million, down 15.82% year-on-year, with net profit of USD 48.661 million, down 48.34% year-on-year. The beverage business net profit also declined by 40.16%.
Shuanghui Shuanghui's first-half revenue increased 25% to RMB 25.5 billion, with net profit of RMB 2.151 billion. On August 16, Shuanghui Development released its first-half 2016 results. The financial report showed that in the first half of 2016, Shuanghui achieved revenue of RMB 25.527 billion, up 25.41% year-on-year; total profit of RMB 2.888 billion, up 9.48%; and net profit of RMB 2.151 billion, up 8.51%.
Three Squirrels Exceeded RMB 2.5 billion in 7 months; 2016 full year may exceed RMB 5 billion. On August 6, Three Squirrels, the most mature e-commerce company, announced its latest sales data. The data shows that as of the morning of August 6, Three Squirrels' 2016 sales exceeded RMB 2.5 billion, reaching the total sales of 2015. According to budget estimates, during the off-season for nuts, exceeding RMB 2.5 billion 50 days ahead of schedule means that Three Squirrels is highly likely to exceed the expected RMB 5 billion sales target in 2016.
Baicaowei Baicaowei's annual revenue is expected to exceed RMB 2.2 billion. On August 18, Haoxiangni officially acquired Baicaowei, and Baicaowei's first-half results were also announced. Baicaowei's first-half revenue was RMB 1.097 billion, up 91.17% year-on-year, with expected annual revenue of about RMB 2.2 billion; first-half net profit was over RMB 50 million, with expected annual net profit of RMB 80-100 million, highlighting Baicaowei's growth.
Haoxiangni Haoxiangni's revenue and net profit both declined. Recently, Haoxiangni released its first-half results. During the reporting period, the company achieved revenue of RMB 439 million, down 24.23% year-on-year; net profit of RMB 14.5608 million, down 58.84%. Gross margin in the first half was 41.76%, down 2.81 percentage points from the same period last year. Net margin in the first half was 3.31%, down 2.80 percentage points from the same period last year. Net profit mainly came from gains on disposal of fixed assets of RMB 33.597 million and government subsidies of RMB 19.3982 million.
Youyou Foods Youyou Foods' first-half revenue was RMB 393 million, up 0.2%. On August 16, Youyou Foods released its first-half 2016 results. During the reporting period, revenue was RMB 393 million, up 0.20% year-on-year; net profit attributable to shareholders of the listed company was RMB 69.9714 million, down 1.45% year-on-year. Youyou Foods' main business is the R&D, production, and sales of pickled and braised leisure foods, with pickled pepper chicken feet as its leading product. During the reporting period, pickled pepper chicken feet revenue was RMB 296 million, accounting for 75.32% of main business revenue. The company stated that in the face of downward macroeconomic pressure, it actively promoted refined management and achieved stable development.
Knight Dairy Knight Dairy's first-half yogurt sales increased 67.21%. Recently, Knight Dairy announced its 2016 interim report. From January to June, the company achieved revenue of RMB 181 million, up 46.63% year-on-year; net profit of RMB 38.0684 million, up 57.29% year-on-year. According to the interim report, Knight Dairy's yogurt sales increased 67.21% year-on-year, and increased market development efforts brought strong terminal sales growth, significantly boosting overall performance.
PepsiCo PepsiCo's second-quarter results exceeded market expectations in both revenue and profit. On July 7, PepsiCo released its financial report showing second-quarter revenue of USD 15.39 billion, down 3.3% quarter-on-quarter, USD 20 million higher than market expectations; net profit of USD 2.01 billion, or USD 1.38 per share, with adjusted EPS of USD 1.35, 5 cents higher than market expectations. PepsiCo's second-quarter organic revenue grew 3.3% year-on-year, with North American beverage revenue of USD 5.15 billion and Asia, Middle East, and North Africa revenue of USD 1.75 billion.
Heiniu Food Heiniu Food: First-half revenue of RMB 112 million, down 55.06% year-on-year. During the reporting period, Heiniu Food achieved revenue of RMB 112 million, down 55.06% year-on-year; net profit of -RMB 37.7143 million, up 49.71% year-on-year. Regarding the revenue decline, the announcement stated: "Mainly due to the economic and market downturn, the company proactively reduced scale and production. Additionally, the disposal of subsidiaries and machinery at the end of last year also led to reduced production scale and lower revenue."
Chengde Lolo Chengde Lolo: First-half revenue of RMB 1.462 billion, down 7.05% year-on-year. During the reporting period, Chengde Lolo's revenue was RMB 1.462 billion, down 7.05% year-on-year; net profit was RMB 273 million, up 6.13% year-on-year; gross margin was 45.92%, up 2.63 percentage points from the same period last year.
Shuangta Food Shuangta Food: First-half net profit of RMB 66 million, down 39.21% year-on-year. During the reporting period, Shuangta Food's revenue was RMB 846 million, up 56.53% year-on-year; net profit was RMB 66 million, down 39.21% year-on-year. In the first half of 2016, Shuangta Food's operating costs were RMB 687 million, up 79.64% year-on-year. Shuangta explained: "Mainly due to steady market development, good sales of pea protein, and the establishment of new subsidiaries engaged in import and export trade of bulk raw materials such as peas, leading to increased sales of materials. Operating costs increased accordingly." In the first half of 2016, Shuangta Food's selling expenses were RMB 38 million, up 89.33% year-on-year. Shuangta explained: "Mainly due to increased transportation costs, increased sales personnel compensation, and increased promotional activities to expand sales, leading to higher selling expenses."
Jinhua Ham Jinhua Ham: First-half revenue decreased 20.05% year-on-year, ham revenue shrank by over 20%. During the reporting period, the company achieved revenue of RMB 90.8047 million, down 20.05% from the same period last year; net profit attributable to shareholders of the listed company was RMB 17.4684 million, down 19.36% year-on-year. The announcement showed that the company's ham industry revenue decreased 23.88% year-on-year, while cold chain industry revenue increased 42.05%. Specifically, traditional ham sales were 612.52 tons, with sales revenue of RMB 46.6599 million; Bama fermented ham sales were 95.19 tons, with sales revenue of RMB 13.6941 million; e-commerce channel sales during the reporting period were RMB 20.7306 million.
Modern Farming Modern Farming lost RMB 560 million in the first half. Modern Farming's interim report showed that as of the end of June, the company turned from profit to loss, with a loss of RMB 565.66 million, mainly due to fair value losses on financial liabilities. In the first half, Modern Farming's revenue was RMB 2.5704 billion, down 8.8% year-on-year, mainly due to lower raw milk prices. Additionally, the gross margin of the dairy farming business slightly declined from 32.8% to 32.62%. Despite this, Modern Farming's herd remains large. At the end of June, the company's herd size was 224,930 head, up about 2% from the end of last year. In addition, the average annual milk yield per cow was 9.4 tons, up 3% year-on-year.
Hengshun Vinegar Hengshun Vinegar achieved revenue of RMB 694 million in the first half. Hengshun Vinegar disclosed its 2016 interim report on the evening of August 22. During the reporting period, the company achieved revenue of RMB 694 million, up 7.08% year-on-year; among which condiment revenue was RMB 646 million, up 10.23%; color vinegar increased 14.27% year-on-year; net profit attributable to shareholders of the listed company was RMB 76 million; net profit attributable to shareholders after deducting non-recurring gains and losses was RMB 73 million, up 27.37% year-on-year; gross margin of sauce and vinegar condiments was 41.98%, up 0.28 percentage points year-on-year. In the second half, Hengshun will make every effort to strengthen and optimize the condiment segment with vinegar as the core, promoting enterprise development to a new level through five transformation and upgrading measures. At the same time, the company will focus on optimizing product structure and enhancing brand influence, expanding brand awareness in the market, further improving profitability, and striving to achieve annual business goals.
Anji Food Anji Food's first-half net profit decreased 21.22% year-on-year. Anji Food released its 2016 interim report on Monday evening. From January to June 2016, the company achieved revenue of RMB 128 million, up 2.52% year-on-year; net profit attributable to shareholders of the listed company was RMB 19.17 million, down 21.22% year-on-year; basic earnings per share were RMB 0.16, down 40.74% from the same period last year. The announcement stated that the decline in net profit was due to increased investment in supermarket channels and new product promotion during the reporting period, and the ongoing marketing network construction project will exert certain pressure on performance in the short term.
COFCO Tunhe COFCO Tunhe achieved revenue of RMB 4.4 billion in the first half. On August 23, COFCO Tunhe Co., Ltd. released its interim report. The announcement showed that the company's semi-annual revenue was RMB 4.4045729 billion, down 22.55% year-on-year, and net profit attributable to shareholders of the listed company was RMB 94.5933 million, up 497.59% year-on-year. The report showed that the main reason for the revenue decline was a reduction in trading sugar volume compared to the same period last year; the increase in net profit was mainly due to higher sugar prices compared to the same period last year, resulting in higher profits from the sugar business; and reduced investment losses from the associated company Tunhe Cement. COFCO Tunhe stated in the report that in the first half of 2016, domestic and international sugar prices gradually rose, and the company's sugar business seized market opportunities and achieved good results; the tomato business faced a new round of market downturn, with greater operational pressure.
Biostime Biostime's first-half revenue exceeded RMB 3 billion. On the evening of August 23, Biostime released its first-half 2016 results: revenue exceeded RMB 3 billion, up 53.3% from RMB 1.963 billion in the same period of 2015. Biostime's revenue comes from two segments: infant nutrition and care products, and adult nutrition and care products. In the first half of 2016, they contributed RMB 1.724 billion and RMB 1.284 billion respectively, accounting for 57.3% and 42.7%. Among them, infant formula business belongs to the infant nutrition and care segment, with revenue decreasing 14% to RMB 1.4605 billion compared to the first half of 2015.
Kemen Noodle Kemen Noodle's revenue reached RMB 947 million, up 17.89% year-on-year. On August 24, Kemen Noodle released its 2016 interim report. During the reporting period, the company achieved revenue of RMB 947 million, up 17.89% year-on-year; net profit of RMB 62 million, up 21.75% year-on-year; of which the second quarter achieved revenue of RMB 484 million, up 20.22% year-on-year, and net profit of RMB 29 million, up 5.62% year-on-year. The company also expects net profit for Q1-Q3 2016 to increase 0%-40% year-on-year.
Kedi Dairy Kedi Dairy: First-half revenue reached RMB 351 million. On August 24, Henan Kedi Dairy Co., Ltd. released its 2016 interim report. During the reporting period, revenue was RMB 351 million, up 15.34% from RMB 304 million in the same period last year. Net profit attributable to shareholders of the listed company was RMB 41 million, up 1.19% year-on-year.
Tianrun Dairy Tianrun Dairy: First-half net profit of RMB 51.05 million, exceeding operating targets. Tianrun Dairy disclosed its 2016 interim report on the evening of August 23. During the reporting period, revenue was RMB 433.7156 million, up 70.59% year-on-year, and net profit attributable to shareholders of the listed company was RMB 51.0535 million, up 157.48% year-on-year. Regarding the company's 2016 operating targets: dairy product production and sales of 78,000 tons; revenue of RMB 650 million. As of June 30, 2016, the company achieved dairy product production and sales of 51,400 tons and revenue of RMB 434 million in the first half, completing 65.90% and 66.77% of the plans respectively, successfully completing the company's first-half production and operation targets.
Mondelēz International Mondelēz International's financial report showed that in the first half of this year, the company achieved revenue of USD 12.76 billion, down 17.3% year-on-year; gross profit of USD 5.05 billion, down 15.9% year-on-year. Among them, second-quarter revenue was USD 6.34 billion, down 17.7% year-on-year; gross profit was USD 2.516 billion, down 17.9% year-on-year. Mondelēz's five major segments – biscuits, chocolate, candy, beverages, and cheese – declined 6.8%, 2.56%, 7.69%, 70.12%, and 12.2% year-on-year respectively. The beverage category declined significantly, indicating that the beverage decline also dragged down Mondelēz's performance to some extent.
Fuling Zhacai Fuling Zhacai achieved revenue of RMB 607 million from January to June, up 27.60% year-on-year; net profit attributable to shareholders of the listed company was RMB 116 million, up 27.38% year-on-year, continuing steady and healthy growth. Starting from the "Wujiang" brand pickled mustard, and now with a dual-drive of pickled mustard and pickled vegetables, Fuling Zhacai hopes to continuously expand and extend its product line, aiming to become the absolute leader in the domestic appetizer industry. With the "Wujiang" brand and sales resources, distributors, and sales team, the company's pickled vegetable sales have exceeded RMB 33 million, exceeding 150% of the company's total sales in 2015. Fuling Zhacai Chairman Zhou Binquan stated that next steps will focus on facility and equipment renovation, capacity expansion, R&D of high-value-added products, and product quality. In terms of sales channels, it will further improve the diversified channel structure, fully covering traditional channels such as A/B/C supermarkets, chain convenience stores, and farmers' markets, while gradually exploring hidden channels such as aviation, schools, prisons, catering, and e-commerce.
Coca-Cola Coca-Cola recently released its first-half 2016 financial report, with global profit up 5.7%, but revenue down 4.57%. The Chinese market was a major factor dragging down Coca-Cola's revenue growth. According to Coca-Cola's latest financial data, in the first half of 2016, total revenue was USD 21.821 billion, down 4.6% year-on-year. The decline in sales was mainly due to the Asia-Pacific region, especially China.
Danone On July 28, Danone released its second-quarter and first-half 2016 results. In the first half, Danone's sales grew steadily, up 3.8% year-on-year; recurring operating margin improved significantly, and recurring EPS increased substantially by 13.5%. Danone also stated that its full-year 2016 financial targets remain unchanged. Danone's consolidated report showed that second-quarter sales increased 4.1% year-on-year to EUR 5.746 billion. Volume contributed 1.0% growth, and price contributed 3.1% growth; early life nutrition sales increased 7.2% year-on-year.
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