Convenience store freezers and supermarket shelves are the arena for beverage products. Through the glass doors, one can see the evolution of products in the beverage track from the colorful bottles. Among them, dairy drinks seem to always hold a place. The dairy drink category, once glorious as a 'milk substitute' for many years, can be called a 'national-level' product in the hearts of many post-80s and post-90s generations. Why say 'once'? Because after a period of brilliance, they have inevitably fallen into silence, such as Li Zi Yuan, which dominated for 30 years with a sweet milk drink.
The Once Glorious 'Dairy Drinks' 'Is Li Zi Yuan sweet milk real milk? Is AD calcium milk real milk? Is You Suan Ru real yogurt?' These are the three great mysteries of childhood for post-80s and post-90s generations.
When it comes to 'dairy drinks', people might find it unfamiliar, but if we mention AD calcium milk, Nutrition Express, You Suan Ru, Li Zi Yuan sweet milk, etc., I think few people don't know them.
These dairy drinks occupied the childhood of many post-80s and post-90s generations, each being a favorite in childhood. The taste of childhood, some classics haven't changed their packaging to this day.
In the 1990s, China's milk industry lagged behind. Due to limitations in milk production, processing technology, and logistics, milk was a precious nutritional product, so most families could hardly afford liquid pure milk.
Therefore, at that time, many parents sought milk substitutes, giving many manufacturers room to play.
Manufacturers would package their limited milk raw materials into nutritious beverage products. Wahaha and Robust's AD calcium milk and Robust milk precisely hit consumer needs at this time, and 'dairy drinks' began to appear in consumers' sight.
As a 'milk substitute', dairy drinks carried a 'nutritional halo' due to containing 'milk', and because consumers' awareness was not clear, many dairy drinks enjoyed category dividends in that era.
Take AD calcium milk as an example. According to public data, in 1997, its revenue exceeded 685 million yuan, with production reaching 1.07 billion bottles.
However, the gifts of fate were already priced in secret.
After 2000, China's milk industry developed rapidly, pure milk became widespread, and drinking milk was no longer a rarity.
Consumers also began to generally understand the nutritional value of dairy drinks. Those calcium milk and fruit milk returned to their beverage nature. Dairy drinks no longer had their former glory, becoming carriers of childhood memories for adults.
For example, Nutrition Express fell from its peak sales of over 20 billion yuan to within 10 billion yuan.
Those who once drank dairy drinks have grown up, and overwhelming and flashy advertisements can hardly pry open their wallets anymore.
In addition, dairy drinks often add sucrose and flavors for taste. In an era of health consciousness, they gradually no longer conform to current consumption trends.
After a period of rapid growth, the growth rate of dairy drinks gradually stabilized and has been declining in recent years.
From Jule's prospectus, it can also be known that the sales output value of the domestic dairy and plant protein beverage manufacturing industry declined from 116.47 billion yuan in 2017 to 86.02 billion yuan in 2020, with a compound annual growth rate of -9.61%.
Jule's prospectus
Those dairy drinks that once rode on the 'milk' concept urgently need to find new paths and growth points.
Li Zi Yuan Can't Be 'Sweet' Anymore
With the slogan 'Youth sweet or not? Drink a bottle of Li Zi Yuan', early Li Zi Yuan relied on this cloyingly sweet taste to win the hearts of elementary school students.
In 1994, the Li Zi Yuan brand was established. At that time, Bright Dairy and Mengniu had not yet appeared. Seizing the blank market, Li Zi Yuan's sweet milk drink became a hit at that time.
A milky white bottle with a green cap quickly occupied various shops in East China.
Whether it was a large breakfast shop or a small cart stall, Li Zi Yuan could be seen.
It can be said that Li Zi Yuan was everywhere, and no one in East China didn't know it.
But now this old enterprise is facing its own mid-life crisis, and its performance can't be 'sweet' anymore.
In 2023, Li Zi Yuan achieved revenue of approximately 1.412 billion yuan, a slight year-on-year increase of 0.60%; net profit attributable to the parent was approximately 237 million yuan, a year-on-year increase of 7.20%; deducted non-recurring net profit was approximately 219 million yuan, a year-on-year increase of 16.65%.
Although Li Zi Yuan's revenue and net profit both increased in 2023, its revenue has been hovering around the 1.4 billion yuan level for three consecutive years, without further upward breakthroughs.
Moreover, from the latest financial report for the first quarter of 2024, Li Zi Yuan's pressure still exists.
On the evening of April 29, Li Zi Yuan released its first-quarter 2024 financial report, showing operating revenue of 334.4 million yuan, a year-on-year decrease of 3.17%; net profit attributable to the parent was 56.96 million yuan, a year-on-year decrease of 3.79%.
According to the 2023 annual report, Li Zi Yuan's overall sales volume decreased by 3.14% year-on-year. Even its main dairy drink sales volume decreased by 1.67% year-on-year, with the most severe decline in milk-flavored beverages, down 60.38% year-on-year.
From the financial report, it can be found that the vast majority of Li Zi Yuan's revenue is contributed by 'sweet milk'. Since its establishment, Li Zi Yuan has adhered to a big single-product strategy, with its sweet milk drink accounting for over 90% of total revenue for years.
Although it shows that Li Zi Yuan has a leading advantage in the 'sweet milk' category, its single product line is also the biggest stumbling block to its development.
The stagnant revenue is the best proof. If Li Zi Yuan wants to maintain sustained growth, relying solely on sweet milk is not enough.
Li Zi Yuan also knows the market risks it faces. In last year's annual report, it stated that if it relies on this long-term, it may have a significant impact on performance.
To make matters worse, Li Zi Yuan's e-commerce business share has been continuously declining in the past three years. Data shows that in 2023, Li Zi Yuan's revenue from e-commerce was 40.16 million yuan, accounting for 2.86% of operating revenue, showing a downward trend compared to 50.93 million yuan in 2021 and 40.73 million yuan in 2022.
On platforms popular with young people like Douyin and Xiaohongshu, Li Zi Yuan's shortcomings are also obvious.
The official flagship store on Douyin has only over 100,000 followers, while its competitor Wang Zai Milk's parent company, Want Want Foods, has over 2 million followers. Xiaohongshu was only entered in mid-August 2022.
In the era of traffic supremacy, brands are striving to build a self-media matrix to bring traffic and exposure to the brand from multiple angles, thereby using traffic to drive conversion rates.
In the iteration of marketing methods, Li Zi Yuan failed to keep up with this wave, was slow to respond to online channels, and missed the dividend period to expand its momentum.
Moreover, in the internet era, people have more convenient access to information, and most consumers have realized that 'dairy drinks ≠ milk'. The post-80s and post-90s generations have grown up and become sensitive to overly sweet tastes. The post-00s, growing up in the era of appearance, even sneer at it. Li Zi Yuan, still relying on 'one trick to eat everywhere', seems to have entered an 'awkward period'.
'Milk Candy Water' Can't Please Young People
Actually, Li Zi Yuan has tried.
As early as 2005, Li Zi Yuan launched a corn juice, a product developed in cooperation with the College of Biological Engineering of Zhejiang University of Technology, even increasing the corn juice content to 25%, while domestic enterprises generally could only reach 10% at that time.
Later, Li Zi Yuan developed 'milk boiled coffee', 'milk boiled coconut' and other 'boiled' series drinks.
At the distributor conference at the end of 2018, Li Zi Yuan even released 18 new products in 4 series at once.
Including coffee drinks, room-temperature yogurt, 'stinky milk', etc., but they didn't make a big splash in the market, and many products were never even heard of.
In last year's annual report, Li Zi Yuan also stated that in 2024 it would launch aseptically filled cup juice drinks, sparkling milk-flavored drinks, and fruit pulp juice drinks.
Despite efforts to launch new products and cater to young people's tastes to find a second growth point, the status of 'sweet milk' remains difficult to shake, and the company's non-dairy beverage business is not optimistic in terms of revenue scale and profitability.
In 2023, revenue from milk-flavored beverages, compound protein beverages, and other products were 8.4919 million yuan, 5.4049 million yuan, and 9.8637 million yuan respectively, together accounting for about 1.69% of total revenue, with negligible contribution. In addition, their gross margins were 7.44%, -2.55%, and 14.81% respectively. Not only did they not add to Li Zi Yuan's strength, but they also became a drag.
From the pace of Li Zi Yuan's new product launches, coupled with the recent hiring of new-generation actor Cheng Yi as the new spokesperson, it can be seen that Li Zi Yuan has been trying to please young people and get rid of its dependence on a single product.
However, young people are becoming more and more 'picky', especially in the current consumption downgrade. Consumers increasingly pursue 'quality-price ratio', that is, good products at reasonable prices, requiring both cost-effectiveness and product quality.
As for Li Zi Yuan's overly sweet taste, many consumers say it has a cheap flavoring taste, like a product mixed with water.
'The taste is too bad. I bought it once and never again. It feels like a flavored beverage.'
Whether in the room-temperature milk or beverage market, health-conscious consumers have better choices. Mengniu and Yili's pure milk, Genki Forest's zero-sugar sparkling water, are much better than Li Zi Yuan in both price and taste.
Li Zi Yuan, which started with dairy drinks, seems unwilling to give up this path and has been locked in the dairy beverage track, continuously launching new products around 'dairy drinks'.
However, Li Zi Yuan's new products don't have many highlights, neither meeting the needs of young consumers nor following the current consumption trends.
Besides that, it can only rely on nostalgia to harvest consumers.
At this moment, Li Zi Yuan urgently needs to launch a differentiated new product that can deeply resonate with people, rather than living in past stories.
Do you still buy Li Zi Yuan? What flavor do you like best? Let's reminisce about the past in the comments section. Welcome to leave a message to discuss, express your opinions or views. Thank you.
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