Recently, Uni-President China Holdings released its Q3 2022 financial report. During the reporting period, Q3 net profit after tax was RMB 531 million, down 17.2% year-on-year, mainly due to rising bulk raw material costs. The instant noodle business turned profitable in Q3, while the beverage business's Q3 net profit decline narrowed sequentially. Overall revenue grew by high single digits year-on-year in Q3. Specifically, beverage revenue grew by double digits year-on-year, accelerating compared to the first half, driven mainly by tea and juice growth. Despite recurring COVID-19 outbreaks, juice revenue achieved double-digit growth for the seventh consecutive quarter. In terms of food revenue, Q3 revenue grew by single digits year-on-year, gradually normalizing from the previous year's growth, reflecting the new normal under the pandemic. Through Uni-President's Q3 report, we also observe the latest achievements and actions across its business segments, which we will interpret one by one.
01 Despite Recurring COVID-19, Juice Growth Remains Strong As is well known, the pandemic continues to erupt in various regions, with frequent regional lockdowns. The pandemic severely restricts people's outings, leading to a near disappearance of "on-the-go" business, directly impacting beverage sales. However, according to Uni-President's Q3 report, juice revenue maintained double-digit growth, with "Uni-President Fresh Orange" and "Uni-President Guoyang Kumquat Lemon" performing most prominently. It is worth mentioning "Uni-President Fresh Orange," a product launched in 1999, which has been on the market for over 20 years and remains a bestseller. Reviewing its many initiatives, it's clear that continuous innovation underpins its success. Targeting the new generation of young consumers, it uses poetry as a medium to convey the "beautiful" proposition. Building online buzz and offline experiences, it engages young consumers through various activities. Beyond brand communication innovation, its grasp of consumption scenarios is also commendable: the small 310ml Fresh Orange has carved a niche in dining, banquet, and gift box markets. It is understood that in the second half of 2022, Uni-President will continue to focus on the health benefits of juice, increasing resource investment in dining, family, and gift box scenarios, thereby creating spillover effects with immediate consumption scenarios and rapidly expanding the juice market base. If past Uni-President juice was about deep cultivation in conventional circulation channels to meet young consumers' immediate consumption needs, now, with rising brand awareness and self-order rates, combined with the pandemic's impact, Uni-President has quickly responded by shifting focus to family, dining, and gift box scenarios. This reflects Uni-President's precise control and matching of scenarios, products, and channels. Continuous brand building creates long-term competitive barriers, which is fundamental to business operations. At the same time, adapting flexibly to rapidly changing market conditions is essential to maintain a foothold in a highly competitive market. This, I believe, is the key to Uni-President juice's sustained high growth.
02 Revitalizing Old Categories, Qie Huang Achieves Impressive Results After reviewing the beverage business, we turn to the food business. Overall, instant noodle market share continued to rise compared to the first half, with "Uni-President Qie Huang" performing most notably. Launched in 2019, the brand emerged against a backdrop of a pressured instant noodle market, disappearing demographic dividends, and continuous consumption upgrades. Compared to the past need for mere satiety, consumers increasingly demand health. Therefore, thinking from the ground up, it's not that consumers don't need immediate "little hunger" satisfaction or instant noodles, but rather that their perception of instant noodles has skewed, viewing them as unhealthy. It's not that they don't need instant noodles, but that they need better, healthier ones. Hence, "Qie Huang" was launched. Why tomato? Uni-President has stated that tomato is a universally accepted flavor and pairs easily with other ingredients. Tomato and egg noodles are one of the most familiar tastes for Chinese consumers.
From an observer's perspective, tomatoes are perceived by consumers as nutritious and healthy fruits and vegetables. Compared to the traditional single sour-spicy flavor of instant noodles, they better convey a healthy and nutritious product perception. At the same time, matching the authentic selling point of a Xinjiang tomato quickly enhances the brand recognition of "A Bowl of Sunny Qie Huang."
A good product is the foundation; the key is how to make more consumers know, understand, and purchase it. According to Uni-President, Qie Huang launched the "Qie Huang's Home" mini-program, creating private domain traffic through an online tomato-growing game. Additionally, in Q2, leveraging HD livestreaming focused on key cities, it achieved a 1.3-fold year-on-year revenue growth in Q3. Of course, besides Qie Huang, other Chinese cuisine products like Kaixiaozao, Najie Naixiang, and Leshan Hongyou Bobo Chicken also flourished, with double-digit growth and top online rankings. Behind the sustained growth of many products, I believe it's inseparable from Uni-President's pursuit of quality. This is evident from its business philosophy: For years, it has adhered to the "Three Goods and One Fairness": good quality, good credit, good service, and fair prices. It adopts "eat with peace of mind, eat with joy" as its food safety policy. It is understood that Uni-President Group has established a Food Quality Committee chaired by the General Manager, serving as the highest authority for food safety and quality system design and optimization. Its members cover R&D, procurement, production management, and food safety management offices, responsible for building the food safety assurance system, formulating and implementing food safety policies, and deepening risk assessment, early warning, and monitoring. A business philosophy, a food safety policy, and a food quality committee led by the General Manager—these suffice to show Uni-President's commitment to product quality, safety, and health.
03 COVID-19 Is Not Scary; the Scary Thing Is a Pandemic Mindset The raging pandemic has significantly impacted many businesses. However, from Uni-President's financial report, we see "optimistic response" and "active response." No lying flat, no winning by lying down, adapting to the times and circumstances. Based on changes in consumer demand, make good products, match channels, and deepen operations. Previously, Uni-President stated that innovation is the necessary path to sustained growth, with firm belief in R&D. For regions at different economic development stages, it leverages new infrastructure construction, including deep use of the internet and big data to support traditional infrastructure upgrades, timely pandemic monitoring, nationwide allocation, and empowering the front line, thereby stimulating organizational capabilities from within to achieve thick accumulation and thin release. Continuous innovation, active response, and shared encouragement with the industry!