One company rejoices, another worries. On March 22, Master Kong Holdings (hereinafter referred to as Master Kong) released its 2015 annual results. According to the financial report, Master Kong's revenue in 2015 was approximately US$9.1 billion (about RMB 59.15 billion), a year-on-year decrease of 11.09%; profit attributable to shareholders was US$256 million (about RMB 1.664 billion), a year-on-year decrease of 36%. While Master Kong showed a declining performance, its old rival Uni-President China Holdings (hereinafter referred to as Uni-President) presented a picture of bountiful harvest. Just one day before Master Kong's announcement, Uni-President also released its 2015 annual results. Uni-President's financial report showed that its revenue in 2015 was approximately RMB 22.1 billion, a slight year-on-year decrease of 1.7%; profit attributable to shareholders was RMB 835 million, a substantial year-on-year increase of 192.3%. "Comparing the performance of Master Kong and Uni-President, Master Kong can be said to have lost a round in 2015," Zhu Danpeng, a researcher at the China Brand Research Institute, told reporters. Master Kong's Defeat, Uni-President's Harvest Master Kong's three main business segments all experienced declines in 2015. Master Kong's 2015 financial report shows that its instant noodle business sales were US$3,613 million (about RMB 23.485 billion), a year-on-year decrease of 12.69%. Among this, container noodle sales were US$1,707 million (about RMB 11.096 billion), down 12.93% year-on-year; premium bagged noodle sales were US$1,391 million (about RMB 9.042 billion), down 13.1% year-on-year; mid-priced bagged noodle sales were US$424 million (about RMB 2.756 billion), down 7.61% year-on-year. In addition, Master Kong's beverage business also saw an overall decline. Master Kong's 2015 financial report shows that its beverage business segment sales were US$5,244 million (about RMB 34.086 billion), a year-on-year decrease of 9.6%. Among this, tea beverage sales were US$2,189 million (about RMB 14.229 billion), down 6.06% year-on-year; water beverage sales were US$963 million (about RMB 6.26 billion), down 15.06% year-on-year; juice category sales were US$772 million (about RMB 5.018 billion), down 19.83% year-on-year; carbonated beverages and other categories sales were US$1,320 million (about RMB 8.58 billion), down 3.89% year-on-year. Meanwhile, Master Kong's convenience food business segment sales were US$137 million (about RMB 891 million), a year-on-year decrease of 23.43%. However, in contrast to Master Kong's overall decline in all business segments in 2015, Uni-President, which has almost the same business segments, staged a comeback and reaped a rich harvest. Uni-President's 2015 financial report shows that its instant noodle business revenue was RMB 7.567 billion, a slight year-on-year decrease of 4.9%; beverage business revenue was RMB 14.051 billion, a year-on-year increase of 0.3%. "Against the general trend of declining instant noodle sales, Uni-President managed to maintain a slight decrease; and in the midst of the winter for the entire beverage industry, the beverage business managed to maintain a slight increase, which is remarkable. Moreover, with overall revenue declining by 1.7%, the net profit surged by 192.3%, a stark contrast to Master Kong's 36% decline in net profit, highlighting the gap," Xu Xiongjun, a strategic positioning expert in the food and beverage industry, told reporters. Master Kong Loses on New Product Innovation "As a traditional instant noodle and tea beverage company, Master Kong's performance has actually been declining continuously over the years. Coupled with the frequent food safety issues over the years, it can be said to be adding insult to injury. Uni-President has been suppressed by Master Kong for many years and has never had a chance to shine in the mainland market, but in the past two years, it has been keeping pace with the times and innovating new products. For example, in the instant noodle business, it developed the Laotan Sauerkraut Beef Noodles and Uni-President Gemian in previous years; in beverages, it also launched new products such as Xiao Ming Tong Xue cold-brewed tea and Hai Zhi Yan. It can be said that the new products developed by Uni-President in the past two years have achieved remarkable results and gained good performance," Xu Xiongjun introduced. In March 2015, Uni-President strongly launched Xiao Ming Tong Xue cold-brewed tea, with innovative cold-brewing technology and a fresh, fashionable packaging. The product was welcomed by the market as soon as it was launched, and sales surged significantly. In addition, public information shows that in 2015, Uni-President also launched products such as Assam milk tea, Yaha hey series coffee, and Wei Shike 100% fruit and vegetable juice, all of which received good market responses. "Compared to Uni-President's active launch of new products to cater to the market in 2015, Master Kong showed a completely different side, being somewhat conservative and unenterprising. In fact, Master Kong has rarely launched new products in the past two years, and has been more stuck in its old products," Xu Xiongjun said. "We can see that Uni-President is moving towards the middle and upper tiers of the pyramid in terms of product positioning, channels, and consumer groups, and this strategy is undoubtedly correct," Zhu Danpeng commented. At the same time, in Zhu Danpeng's view, the frequent food safety quality issues since 2014 have also had a significant impact on Master Kong's performance. "Master Kong has repeatedly fallen into quality scandals, causing the entire brand to experience a cliff-like decline, leading to a brand crisis and causing the entire consumer base, whether for instant noodles or beverages, to be very resistant. Among them, the sensitivity and resistance in first- and second-tier cities are higher, and Master Kong's main sales battlefield has become third- and fourth-tier cities. But the third-, fourth-, and fifth-tier markets are also the main battlefield for domestic companies like Baixiang. When Master Kong competes with domestic brands in third- and fourth-tier cities, it consumes a lot of 'energy' and can only rely on promotions to drive sales, which is reflected in its revenue decline of 11.09% but profit decline as high as 36%," Zhu Danpeng explained. "In addition, Master Kong's blind price increase for the instant noodle business last year also had a significant impact on its performance," Zhu Danpeng said. In October 2015, Master Kong raised the price of instant noodles by 10% to 20%, with the retail price of bagged noodles adjusted from RMB 2.5 to RMB 3, and the retail price of cup noodles adjusted from RMB 4 to RMB 4.5, but competitor Uni-President did not follow suit. "Master Kong's price increase undoubtedly had a significant impact on its performance. The third- and fourth-tier markets are Master Kong's main battlefield. On one hand, the third- and fourth-tier markets are already besieged by some miscellaneous instant noodle companies. After Master Kong's price increase, instant noodle sales in third- and fourth-tier cities will shrink. At the same time, in first- and second-tier markets, Master Kong's brand recognition is slightly inferior to Uni-President, and its high-end advantages cannot be leveraged. Thus, Master Kong's loss to Uni-President becomes inevitable," Zhu Danpeng said. Uni-President May Overtake Master Kong What will the future of competition between Master Kong and Uni-President look like? "If Master Kong continues to be complacent and unenterprising, then it is very dangerous, and being overtaken by Uni-President will be inevitable," Xu Xiongjun said. In Xu Xiongjun's view, Master Kong and Uni-President have long been in a state of duopolistic competition, with Master Kong leading in mainland China for many years, but now the gap between the two is continuously narrowing. "In the long run, duopolistic competition will continue to exist for a long time. If Uni-President wants to overtake Master Kong, it is feasible at the current development speed, but it is also difficult to predict whether Master Kong will make some strategic adjustments. However, at present, Master Kong's corporate culture, management, and product innovation are far inferior to Uni-President. In the current winter of the food and beverage industry, Uni-President has developed so many new products, which is a remarkable achievement in the industry." "In 2016, Uni-President and Master Kong may return from the original market competition to product competition. Master Kong's upgrade, such as the coffee business in cooperation with Starbucks, shows that Master Kong has also seen the fundamental changes and is following Uni-President, paying more attention to the high-end market in channels," Zhu Danpeng judged. So, how can Master Kong turn the tables in 2016? "First, when making food and beverages, one must conform to the way of heaven; products must be safe and healthy, and we must make our products healthier. Instant noodles have already been labeled as unhealthy, and Master Kong frequently falls into food safety issues. This is something Master Kong must change. Second, Master Kong must keep pace with the times and innovate. Although there is still a gap in business volume between the two, Master Kong now has a gap with Uni-President. Master Kong must connect with trends and the new generation of consumer groups," Xu Xiongjun said. Zhu Danpeng also believes that a key to Master Kong's self-rescue is to upgrade its product positioning. "At present, Uni-President's instant noodle business has shifted to the high-end market, but Master Kong is somewhat behind. Therefore, Master Kong must undergo generational upgrades, including upgrading brand positioning, product positioning, and consumer group positioning," Zhu Danpeng said. "Consumption upgrading is a major trend in China's economic development. Nutrition and deliciousness are the vitality of the food and beverage industry in which Master Kong operates. Therefore, Master Kong's performance self-rescue is to increase investment in high-end product R&D, not only high-end instant noodles, but also high-end beverages, high-end biscuits, etc. The high-end development of each product line should be coordinated to jointly achieve Master Kong's brand upgrade," Liang Mingxuan, a food industry researcher at China Investment Consulting, previously expressed the same view in an interview with reporters. -END- The best learning platform for FMCG distributors in China Focusing on providing professional, practical, and applicable tutorials for enterprises and distributors Committed to helping Chinese FMCG distributors grow rapidly The most professional and practical knowledge base in the FMCG industry Reply with the red number below to get the corresponding content Reply with number 1 to view the complete knowledge base | 001 Excellent Article Selection | 002 Distributor Market Operations | 003 Terminal Visit Management | 004 Sales Supervisor Skills | 005 Sales Improvement Techniques | 006 Channel Expansion | 007 Managing Distributors | 008 Distributor Development | 009 Distributor Internal Operations Management | 010 Team Management | 011 Efficient Distribution Techniques | 012 Sales Manager's Skills | 013 KA Operation Methods and Strategies | 014 First Lesson for New Salespeople | 015 Internet, Brands | [Long press QR code to follow] To join QQ/WeChat groups, please click: Read Original