Click image for details Flash: On March 14, at noon, China Want Want (00151.HK) announced its annual results for the year ended December 31, 2016. The report showed that group revenue was RMB 19.710 billion, a year-on-year decrease of 7.9%; gross profit was RMB 9.424 billion, an increase of 0.4% from the same period last year; operating profit rose 5.8% to RMB 4.811 billion; profit attributable to shareholders was RMB 3.519 billion, a year-on-year increase of 4.0%. Revenue from rice crackers grew 4.6% compared to 2015, reaching RMB 5.4494 billion; revenue from dairy and beverages declined 13.4% compared to 2015; revenue from snack foods declined 8.6% compared to 2015, mainly due to weather impacts on the ice cream subcategory. The proportion of total revenue from the three major product categories was: rice crackers and snack foods combined accounted for 52.5%, while dairy and beverages accounted for 47.2%. Want Want Milk Revenue Declines, Rice Crackers Only Segment with Positive Growth In 2016, rice cracker revenue was RMB 5.4494 billion, up 4.6% from 2015, with the second half of 2016 growing high single digits compared to the second half of 2015. In 2016, the rice cracker category achieved double-digit growth in modern trade channels compared to 2015. Dairy and beverage revenue was RMB 9.298 billion, down 13.4% from 2015. Among this, "Want Want Milk," which accounts for about 90% of dairy and beverage revenue, brought in RMB 8.4779 billion, down 12.0% from 2015. However, the decline in "Want Want Milk" narrowed to mid-single digits in the second half of 2016 compared to the same period in 2015, and in 2016, "Want Want Milk" achieved high single-digit growth in modern trade channels compared to 2015. Want Want stated that in 2016, due to consumer demand shifting to new segments such as ambient yogurt, the overall revenue of children's flavored milk in China declined. Although "Want Want Milk" still holds the number one market share in this segment, it was deeply affected by the shift in consumption categories. It is worth noting that Want Want introduced new specifications suitable for periodic household purchases in modern trade channels, based on research into consumer shopping habits, and matched them with appropriate marketing strategies. This effectively broke through the long-standing predicament of "Want Want Milk" being surrounded by price promotions from competitors in modern trade channels, achieving high single-digit growth. At the same time, Want Want stated that it plans to launch a new product, "Extra Rich Want Want Milk," in early 2017, to meet current consumer needs and effectively supplement its dairy and beverage products. Affected by Counterfeit Products, Want Want Mini Buns Saw Double-Digit Decline in First Half In 2016, Want Want's snack food revenue declined 8.6%, from RMB 5.3746 billion in 2015 to RMB 4.9141 billion in 2016. The high-margin Mini Buns product was disrupted by low-priced counterfeit products, showing a double-digit decline in the first half of the year. With the implementation of Want Want's anti-counterfeiting actions, sales of Mini Buns gradually stabilized in the second half of 2016. Meanwhile, the promotion of brands such as "Aiyo," "Heipi," and "Naduoli" effectively enriched the snack food category and boosted sales momentum in the second half of the year. For 2017, Want Want stated that it will continue to implement its multi-brand strategy and diversify its dairy and beverage products. It will also deepen its "Send Wang to the Countryside" channel refinement plan, and plan to increase terminal manpower and resource investment for "key items" to strengthen Want Want brand service at terminal outlets. Industry and Weather Impact Revenue Decline, Effective Expense Control Keeps Gross Profit Slightly Up The report pointed out that in 2016, some of the group's products were affected by industry and weather factors, with revenue declining 7.9% year-on-year to RMB 19.710 billion. However, the gross margin benefited from lower prices of some raw materials, rising 3.9 percentage points to 47.8% compared to 2015. Operating expenses were well controlled, with total expenses down 4.4% to RMB 5.129 billion. In 2016, the usage price of major bulk raw materials such as whole milk powder decreased by about 33% compared to 2015. The decrease in raw material costs and revenue led to a reduction in cost of goods sold from RMB 12.0026 billion in 2015 to RMB 10.286 billion in 2016, a decrease of 14.3%. In 2016, China Want Want's average number of employees was approximately 47,115; in 2015, the average number was approximately 52,100. Based on this, the average number of employees decreased by 4,985. The reduction in raw material costs, coupled with control of labor costs, helped significantly. Although China Want Want's overall revenue decreased by more than one billion yuan, profits increased rather than decreased. Increasingly Complex Business Environment, Two Strategies Become Want Want's Secret Weapons In the management discussion and analysis, the report mentioned that in 2016, China's GDP grew 6.7%, with growth further slowing; at the same time, consumer demand is showing differentiation and personalization, and companies face an increasingly complex and changing business environment. To this end, Want Want Group placed "multi-brand strategy" and "channel differentiation management" at the top of its business strategies. Targeting customers of different regions, ages, and consumption habits, Want Want Group strengthened its multi-brand operations. New brands such as "Heipi," "Aiyo," "Naduoli," and "Laren" have specific target customer groups and product appeal points. This strategy not only meets consumer needs more broadly but also improves the group's capacity utilization efficiency and provides consumers with more diversified product choices. In channel differentiation management, Want Want Group continued to launch customized and personalized products for modern trade, e-commerce, and mother-and-baby channels, such as "Baby Mama" exclusively sold in mother-and-baby channels, and the "Laren" series exclusively sold in e-commerce channels. This strategy was recognized by customers and consumers, driving growth in these three channels while effectively avoiding potential conflicts between channels. Report Focuses on Live Streaming, New Media Gradually Becomes Main Interactive Platform At the beginning of 2017, Want Want Group partnered with the online video live streaming platform Zhanqi TV to launch the "LyingMan - Want Want Kill" Chinese New Year special, taking the "Wang" character marketing to the extreme. The special added Want Want character role definitions and named game rules, and fully incorporated Chinese New Year gift-giving scenes throughout the program... These deep integrations comprehensively enhanced the exposure of the Want Want brand. When the first episode of "Want Want Kill" aired, it attracted 3.7 million online viewers, with 200,000 bullet comments sent by the audience. In Want Want Group's annual report, this new interactive method was also mentioned. In 2016, the group actively used new interactive methods such as media live streaming to interact with consumers, and also tried cooperation with well-known IPs in product design and marketing. Moreover, the Want Want Club has accumulated about 10 million fans, and continues to launch consumer activities on social platforms such as WeChat and Weibo, allowing the Want Want brand and products to effectively reach the younger generation of core consumers. It can be said that online new media is gradually replacing TV screens as one of the main platforms for young consumers to learn about Want Want. This article is compiled and published by -END-