--- title: "Uni-President Chairman Lo Chih-hsien: China Beverage Market Will Be 'Very Miserable' in H2; Q3 'Temporarily Closed'" description: "At an analyst meeting following Uni-President's interim results, Chairman Lo Chih-hsien discussed the mainland beverage market, predicting a 'very miserable' second half and explaining the company's decision to 'temporarily close' its beverage business in Q3 to manage inventory and prepare for winter products." author: "小食代" publisher: "New Distribution" email: "zhaobo258@gmail.com" telephone: "+8615854817671" published: "2016-09-01" language: "en" canonical: "https://xinjignxiao.com/en/articles/uni-president-chairman-lo-chih-hsien-china-beverage-market-will-be-very-2f17d8b4/" markdown: "https://xinjignxiao.com/en/articles/uni-president-chairman-lo-chih-hsien-china-beverage-market-will-be-very-2f17d8b4.md" original_source: "https://mp.weixin.qq.com/s/dLr2B28wj-9CHPbjWC4gQQ" translation: "https://xinjignxiao.com/zh/articles/%E7%BB%9F%E4%B8%80%E8%91%A3%E4%BA%8B%E9%95%BF%E7%BD%97%E6%99%BA%E5%85%88-%E4%B8%8B%E5%8D%8A%E5%B9%B4%E4%B8%AD%E5%9B%BD%E9%A5%AE%E6%96%99%E5%B8%82%E5%9C%BA%E4%BC%9A%E9%9D%9E%E5%B8%B8%E5%87%84%E6%83%A8-%E4%B8%89%E5%AD%A3%E5%BA%A6%E6%9A%82%E6%97%B6%E6%89%93%E7%83%8A-2f17d8b4.md" attribution: "New Distribution — https://xinjignxiao.com/en/articles/uni-president-chairman-lo-chih-hsien-china-beverage-market-will-be-very-2f17d8b4/" usage_policy: "https://xinjignxiao.com/ai-policy.txt" --- # Uni-President Chairman Lo Chih-hsien: China Beverage Market Will Be 'Very Miserable' in H2; Q3 'Temporarily Closed' > At an analyst meeting following Uni-President's interim results, Chairman Lo Chih-hsien discussed the mainland beverage market, predicting a 'very miserable' second half and explaining the company's decision to 'temporarily close' its beverage business in Q3 to manage inventory and prepare for winter products. After Uni-President Enterprises released its interim results earlier, the company held an analyst meeting in mid-month, during which the mainland China beverage market became the focus of analysts' attention. Uni-President Enterprises Chairman Lo Chih-hsien also "parried each thrust" and talked at length about his views on the beverage industry, still full of "golden quotes." Today evening, Xiaoshidai will first share with you a supplementary record of Lo Chih-hsien's remarks on the mainland beverage market at this analyst meeting. Here is our report. At the beginning of the Q&A session, an analyst asked Lo Chih-hsien how he viewed the life cycle of new products. The background to this question is that those following Uni-President China Holdings would know that its interim results showed beverage revenue fell 8% in H1, and Hai Zhi Yan had undergone shipment adjustments. "Regarding product life cycle, we need to look at two numbers," Lo said. One is company performance, and the other is terminal sell-through. He noted that compared to the former, Uni-President's management is more concerned about market sell-through numbers. Lo said that in the past two years, new products seem to have shorter life cycles, but from terminal consumption, this phenomenon does not actually exist. He explained that once a product is launched, everyone rushes to chase it, creating a "illusory" number for that product. He said that based on sell-through numbers, he does not think it is so alarming; it is just that Uni-President needs to make some control in its pace. "Whether theoretically or practically, there is no reason to support a product with a very short life cycle, because if your product is good enough, it won't have a short cycle; if your product is not good, there is no cycle at all." He pointed out that this year, the mainland beverage market is essentially a market without summer. "In the coming days, beverage manufacturers will likely be in a state of lamentation." He said that from the numbers, people might worry about Uni-President China Holdings' products, but in fact "we are actively adjusting the pace of 'releasing water'." Lo said that if the company still "released water" as before, it would eventually lead to floods everywhere, so Uni-President prefers to do some internal control to restore the mainland market to normal conditions. As for others' markets, they will have to fend for themselves. "I can foresee that the second half of this year will be very, very miserable for the China beverage market," he said. In response to this statement, analysts present hoped he would elaborate further, and Lo explained using the differences between Taiwan and the mainland market. He said that in Taiwan, there is no inventory risk, but there is a risk of bad debts (note: referring to inability to collect debts), because transactions in Taiwan are done on credit. In mainland China, there is no risk of bad debts because payments are made before shipment, but when products cannot be sold, there is inventory risk. "So the problem in the mainland market lies in how manufacturers adjust their structure." He used gambling as a metaphor: if in a gamble, all winnings are yours and losses are covered by someone else, then very few people would be unwilling to bet, because there is no risk at all. He said that the inventory problem in the mainland market is because manufacturers keep playing the role of the banker, and they cannot resist jumping in as players. The risk this creates is that when the company ships goods, it feels excited because money comes in, and it keeps shipping; but when it cannot digest the inventory, the company will suffer—it has to take back the original money, because the brand is its own, and the company cannot tolerate the brand being scattered in the market. "If you ask me how to adjust the structure, I can say I can tolerate this month's revenue being 0. I think that should be low enough," Lo said, making a "0" gesture to the analysts present. He said that the purpose is simple: to ensure the "water pipe" is unobstructed; although there may be some turbulence in the short term, it will return to normal afterwards. Lo continued on this topic, saying that for Uni-President China Holdings' beverage business, there is a new approach this year. "All our beverages will temporarily close in Q3." He explained that the company will then launch winter beverages, so in Q3 this year, Uni-President China Holdings will be very active in restoring the pace to normal, so that Q4 can smoothly transition to winter beverages and ensure smooth operations next year. 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