The performance recovery of instant noodle and beverage giant Tingyi (00322.HK) is still slow, as its first-quarter report shows it must continue to combat industry downturn. The trough of the FMCG industry has not yet passed, and most industry giants are still affected by the sluggish industry. On the evening of May 26, Tingyi announced its first-quarter 2016 results. In Q1, Tingyi's sales were $2.0997 billion, down 9.54% year-on-year; net profit was $73.546 million, down 45.02% year-on-year. Regarding the continued decline, Tingyi officially stated: In the first quarter of 2016, the global economy saw a slight recovery, but China's economic growth slowed slightly. According to the National Bureau of Statistics, full-year GDP is estimated to grow 6.7% year-on-year, and Q1 GDP growth also showed 6.7% growth. Meanwhile, under the transmission of loose monetary and credit policies to prices, Q1 CPI rose about 2.1%. Despite poor performance, Tingyi continues to consolidate its foundation through various means and strive for recovery. Tingyi stated that in 2016, in addition to continuing its established transformation and upgrade business strategy, the company will also continue to focus on optimizing free cash flow and reducing capital expenditure, continue to lay the groundwork for generational transition, increase brand investment, establish a channel innovation center to actively seize opportunities from channel diversification, implement healthy channel inventory management, strengthen channel penetration to capture urbanization opportunities, and continue to implement food safety access and traceability management systems, aiming to achieve the goals of "safety, cost saving, efficiency, and innovation." Currently, the three Taiwanese players—Tingyi, Want Want, and Uni-President—have each reported their performance this year. Relatively speaking, Uni-President is on a growth trend. In an industry downturn, performance growth is the best thing for a company. Below, "Consumer Daily Exposure" will analyze Tingyi's performance segments. Instant Noodle Sales Down 15.82%, Market Share 52.4% According to the performance report, in Q1 2016, Tingyi's instant noodle revenue was $842 million, down 15.82% year-on-year. Regarding the decline in the instant noodle business, Tingyi pointed out that although the fourth quarter of 2015 saw poor performance due to distributors' wait-and-see attitude, the decline narrowed quarter-on-quarter in Q1 under continuous communication and strategies to fill price gaps with multiple price points. During the period, due to poor sales and phased product structure adjustments, the gross margin of instant noodles fell 2.22 percentage points year-on-year to 28.59%. Coupled with increased advertising investment for brand building, the overall instant noodle business's profit attributable to shareholders of the company in Q1 2016 fell 48.34% year-on-year to $48.661 million. By product, container noodle revenue was $420 million, down 15.98%; high-priced bagged noodle revenue was $239 million, down 36.91%; and snack noodle revenue was $16 million, down 12.92%. As the leader, no one can shake its position yet. According to Nielsen's latest 2016 market share data, Tingyi's instant noodle sales share in Q1 2016 was 52.4%, and volume share was 43.5%, maintaining market leadership. Q1 sales have recovered to previous levels in direct channels. In the future, the company will actively strengthen consumer brand awareness, expand brand investment, and use a multi-price-point product portfolio strategy to meet consumer demand. In terms of innovation, Tingyi pointed out that after the Spring Festival, it launched a rich-flavored soup product "Black Pepper Steak Noodles / White Pepper Pork Rib Noodles," which uses high-tech concentrated extraction of soup stock. The soup is not only rich in taste but also retains the rich nutrition of the original broth to the greatest extent, beneficial to health. Combined with the spicy pepper concept, the packaging design adopts a novel, fashionable, cool, and personalized product concept to attract consumers. "Consumer Daily Exposure" learned that the pepper-flavored series products received a good response upon launch, with monthly sales quickly exceeding one million boxes. In response to the rise of the middle class and the needs of urban elite white-collar workers for high-end cup noodles, in March, the company upgraded and launched the "Soup Master" cup noodle specification. It emphasizes concentrated soup technology, real ingredients, and no added MSG, enhancing the parent brand image. It aims to be a good instant noodle for busy white-collar workers who need energy replenishment, gradually becoming the preferred high-end cup noodle product, enhancing product strength and expanding nationwide launch. Instant noodle demand is mainly in urban markets. In first- and second-tier markets, white-collar workers need health and fashion; in second- and third-tier markets, taste needs to be satisfied; in fourth-tier markets, affordability is key. If better strategic adjustments are made in these markets, there is still room for instant noodles in the future. Beverage Business Revenue Down 5.41%, Tea Drinks Still Account for Half In Q1 2016, Tingyi's beverage business overall revenue was $1.192 billion, accounting for 56.77% of total group revenue, down 5.41% year-on-year. The decline was mainly due to unsatisfactory performance of packaged water and decline in large-pack sales. To accumulate medium- and long-term brand assets, the company continued to increase advertising spending and brand building. In Q1 2016, beverage business profit attributable to shareholders was $12.822 million, down 35.98% year-on-year. By product, tea beverage revenue was $559 million, down 1.85%; packaged water revenue was $141 million, down 3.16%; juice revenue was $164 million, down 14.89%; carbonated beverage revenue was $328 million, down 6.9%. "Consumer Daily Exposure" noted that according to Nielsen's Q1 2016 survey data, Tingyi's ready-to-drink tea market (including milk tea) volume share reached 52.2%, continuing to firmly hold the No.1 position. In the juice market, with its juice brands and Pepsi's Tropicana brand, the group's overall juice market share in China reached 15.7%, ranking second. Milk-containing ready-to-drink tea market share reached 16.5%; packaged water market share was 14.3%, ranking third. According to Canadean database Q1 2016 data, Pepsi's overall carbonated beverage market share rose 1.4 percentage points year-on-year to 31.4%. In the cola-type carbonated market, Pepsi-Cola's Q1 market share was 49.1%; in the fruit-flavored carbonated market, Mirinda's share was 34.2%. Overall, in Q1, China's beverage industry showed slight growth, with sales volume up 0.8% year-on-year. Tingyi stated that to maintain stable operations, it will manage capital expenditure well; actively lay out a multi-price-point product portfolio for bottled water; increase brand investment and brand penetration; strengthen communication with consumers and channels; continue to improve product innovation, taste, and product upgrades; conduct international strategic cooperation and channel innovation management; and the Pepsi organization optimization in the Tingyi-Pepsi alliance continues as planned. Comparatively, Tingyi's beverage business performed better than its instant noodle business. Compared with Uni-President, it is still at a disadvantage. Currently, Uni-President's revenue and net profit are both growing, which requires Tingyi to speed up. This platform will soon organize distributor friends who intend to transform to B2B platform e-commerce to visit and learn from B2B platforms. Company model introduction: Organization form

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