Registration details: Click the image above Introduction: As the saying goes, "thriving in adversity, perishing in comfort," Dongpeng Beverage is also using channel deepening and product innovation to fend off the "ceiling" of relying on a single product model. Compiled by: Gougou | Reviewed by: Gougou | Layout: He Wen

"Tired and sleepy? Drink Dongpeng Special Drink." By imitating Red Bull's slogan and adopting a cost-effective strategy, Dongpeng Beverage (605499.SH) not only secured a strong market position while the leading functional beverage brand was embroiled in trademark disputes, but also went public early to become China's "first functional beverage stock." On May 27, 2021, Dongpeng Beverage successfully listed on the Shanghai Stock Exchange, and within less than two months after listing, its total market value soared from over 26 billion yuan on the first day to 113.08 billion yuan. At the same time, its performance has been rising steadily. On February 20, Dongpeng Beverage announced its 2022 annual performance report, showing a 21.84% increase in revenue to 8.501 billion yuan and a 20.87% increase in net profit attributable to shareholders to 1.442 billion yuan. But as the saying goes, "thriving in adversity, perishing in comfort," Dongpeng Beverage is also using channel deepening and product innovation to fend off the "ceiling" of relying on a single product model.

Business Scale Growth In the 2022 performance report, Dongpeng Beverage mentioned that cash received from sales of goods exceeded 10 billion yuan that year, marking the first time revenue collections surpassed 10 billion yuan. During the reporting period, the company achieved total operating revenue of 8.5 billion yuan, an increase of 21.84% year-on-year; net profit was approximately 1.442 billion yuan, up 20.87% year-on-year; non-GAAP net profit was approximately 1.352 billion yuan, up 24.67% year-on-year. This was mainly due to the growth in business scale. Possibly affected by the performance, on February 21, Dongpeng Beverage (605499.SH) rose 5.23% intraday to 207.3 yuan, with a total market value of 82.9 billion yuan. However, it is worth noting that despite its rapid growth in recent years, Dongpeng Beverage has shown signs of slowing performance growth. Data shows that from 2019 to 2021, Dongpeng Beverage achieved revenues of 4.209 billion yuan, 4.959 billion yuan, and 6.978 billion yuan, with year-on-year growth of 38.56%, 17.81%, and 40.72%, respectively; corresponding net profits attributable to shareholders were 571 million yuan, 812 million yuan, and 1.193 billion yuan, with growth rates of 164.36%, 42.32%, and 46.90%, respectively.

Image source: Announcement of Dongpeng Beverage (Group) Co., Ltd. on main operating data for the first three quarters of 2022

In the first three quarters of 2022, Dongpeng Special Drink remained the main source of the company's total product revenue, with revenue from other beverage products even declining year-on-year. With a single product, how to expand into new markets and maintain high-speed performance growth is a problem Dongpeng Special Drink needs to solve.

Continuous Development of Channels and SKUs Public data shows that Dongpeng Beverage's energy drink sales volume ranked first in China's energy drink industry for two consecutive years in 2020 and 2021; from 2019 to 2021, its energy drink sales value ranked second in market share in China, with 2021 market share being twice that of the third-place company; additionally, among the top five global energy drink companies, its sales volume and sales value growth rates ranked first, far ahead of other competitors.

Why is Dongpeng Beverage popular in the market? First, the company's brand positioning and strategic positioning are very clear. For blue-collar consumers, they have a strong feeling of "tiredness and sleepiness." A large number of manual laborers, such as truck drivers and frontline workers, repeat a lot of the same work every day, and refreshing beverages meet their purchasing needs.

Second, it stems from the company's deep insight into consumers. Its target audience may be more inclined toward low-to-middle consumption. Compared to Red Bull's high price of 6 yuan per bottle in China, Dongpeng Beverage chose to compete on price differentiation. In terms of category specifications, Dongpeng Beverage also launched a 500mL bottled gold special drink, which has been well received by consumers.

Regarding the reasons for the performance increase in 2022, Dongpeng Beverage mentioned that during the reporting period, it continuously optimized product and customer structures, strengthened national channel network construction, and further improved the overall product distribution rate and coverage breadth; at the same time, it actively built the "Energy+" product line, continuously launching products that meet differentiated needs, catering to different scenarios and consumer groups, and through online and offline multi-dimensional promotion methods, it continued to gain consumer trust and repeat purchases.

In fact, after securing a place in the market, looking at Dongpeng Beverage's development over the years, three obvious actions can be seen:

First, continuous incubation of new products. In recent years, Dongpeng Beverage has formed the "Dongpeng Energy+" product family to optimize product structure and enhance brand youthfulness. The product line has expanded to areas beyond functional beverages, including Yougan Lemon Tea, coffee, packaged drinking water, and freshly squeezed oil gan juice.

Second, continuous strengthening of channel construction. As of the first half of 2022, Dongpeng Beverage had over 2,600 distributors, with a sales network covering approximately 2.6 million terminal stores nationwide. At the same time, leveraging its strong digital marketing capabilities, it reached 150 million consumers.

Third, digital transformation. Relying on the internet, it uses big data analysis, QR codes, and other technologies to manage product production, marketing, and channels; through "five-code correlation (inner and outer box codes, inner and outer bottle codes, and batch codes)" it achieves channel integration and precise management across all channels.

By continuously deepening channels and incubating new products to enrich the functional beverage matrix, although it is uncertain whether Dongpeng Beverage can sustain its performance growth, it has been optimizing through the above methods. Some brokerages predict that under the dual recovery of scenarios and economy this year, the demand recovery of Dongpeng's heavy customer groups, such as factory blue-collar workers and logistics personnel, will be significantly stronger than the industry average, and the high-growth trend is expected to continue.

Recommended Reading