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Under the bombardment of the advertising slogan "Use your brain often, drink more Six Walnuts," Yangyuan Drinks, which released its 2018 semi-annual report not long ago, saw a significant surge in performance, with operating revenue of 4.163 billion yuan and net profit exceeding 1.3 billion yuan.

It is indeed surprising that a company whose main product is "Six Walnuts" has far outperformed many large domestic dairy companies. However, Hushu Youli found that compared with domestic dairy companies, Yangyuan Drinks' R&D expenses are pitifully low.

Even more baffling is that "Six Walnuts" has long been criticized by the media for containing less than two walnuts per can. Hushu Youli discovered that apart from a limited amount of walnuts, "Six Walnuts" is essentially water and food additives. Yet, this product is priced higher than well-known pure milk brands on the market. What's even more incredible is that more than half of the cost of a can of "Six Walnuts" comes from the packaging material—the aluminum can. In other words, when consumers purchase this product, most of their money goes toward the packaging.

1. R&D Expenses Are Pitifully Low, Accounting for Only 0.18% of Sales

Yangyuan Drinks' semi-annual report shows that its operating revenue for the first half of this year was 4.163 billion yuan, a year-on-year increase of 13.55%; net profit was 1.308 billion yuan, a substantial year-on-year increase of 30.78%.

Previously, Six Walnuts had faced various criticisms, including that the "Six Walnuts" trademark misled consumers, the advertising slogan "Use your brain often, drink more Six Walnuts" was accused of false advertising, and that it emphasized marketing but had excessively low R&D expenses.

Regarding R&D expenses, Hushu Youli found that in the first half of this year, Yangyuan Drinks' R&D expenses increased by 123.98% year-on-year. However, even so, they amounted to only 7.68 million yuan, accounting for just 0.18% of total revenue.

Meanwhile, Yangyuan Drinks' advertising expenses in the first half of this year were reduced by 100 million yuan, but still reached 132 million yuan; market promotion expenses were 80.455 million yuan, an increase of 9.82 million yuan year-on-year.

Interestingly, Yangyuan Drinks claims in its announcements that it "has always been committed to the R&D, production, and sales of plant-based protein beverages primarily made from walnut kernels." Yangyuan Drinks emphasizes its "R&D," but the actual data completely contradicts this claim.

2. Six Walnuts Accused of Containing Less Than Two Walnuts; Better to Eat Walnuts Directly

Claiming "Use your brain often, drink more Six Walnuts," most consumers seeing such advertisements would assume that Six Walnuts has good nutritional value. But is that really the case?

In fact, regarding this issue, many media outlets have reported in previous years (Note: at that time, the nutrition facts of Six Walnuts showed a fat content of 2.0 grams per 100 milliliters; now it is 2.2 grams, a slight difference, but the following data does not affect the current Six Walnuts product).

At that time, Chen Xiafei, Chief Nutritionist at Shanghai Huadong Hospital, said in an interview with Life Times: Based on the ingredient list of "Six Walnuts," one can roughly calculate its walnut content. A medium-sized walnut kernel weighs about 5.2 grams. According to the 2002 Food Composition Table, 100 grams of walnut kernels contain 14.9% protein and 58.8% fat, meaning one walnut contains approximately 0.77 grams of protein and 3.04 grams of fat.

However, the ingredient list of "Six Walnuts" shows that per 100 milliliters, it contains 0.6 grams of protein and 2.0 grams of fat. Therefore, a 240-milliliter can of "Six Walnuts" contains 1.44 grams of protein and 4.8 grams of fat. Calculated based on protein content, it contains 1.87 walnuts; based on fat content, it is only 1.58 walnuts—both less than two walnuts.

Hushu Youli found that the current ingredient list of Six Walnuts products has changed, with a fat content of 2.2 grams per 100 milliliters. Even so, according to the above media reports, a 240-milliliter can of "Six Walnuts" refined product still contains less than two walnut kernels.

Chen Xiafei also stated that walnuts themselves do have a certain brain-boosting effect. Traditional medicine has the concept of "like nourishes like," and walnuts are considered to nourish the brain because they resemble the brain in shape. Modern medicine believes that walnuts are rich in omega-3 unsaturated fatty acids, which are beneficial to the nervous system. However, during processing, the walnuts in "Six Walnuts" lose some nutrients, such as antioxidants and dietary fiber, and retain some impurities. Therefore, drinking walnut beverages is not as good as eating walnuts directly.

3. Nutritional Content Claimed to Be Inferior to Milk and Soy Milk; Main Ingredient Is Water, Not Walnuts

Chen Xiafei also stated that in terms of protein content, "Six Walnuts" is indeed inferior to milk and soy milk.

If one carefully compares Six Walnuts with some well-known pure milk brands on the market, Hushu Youli found that the protein content of Six Walnuts is not as high as that of milk, or even soy milk.

This is because milk on the market generally has a protein content of over 3 grams per 100 milliliters, while soy milk is about 1.8 grams.

Additionally, as stated in Yangyuan Drinks' semi-annual report, it claims to "have always been committed to the R&D, production, and sales of plant-based protein beverages primarily made from walnut kernels," meaning Yangyuan Drinks claims its products are "primarily made from walnut kernels."

However, Hushu Youli found that the ingredient list of Six Walnuts is: water, walnut kernels, white sugar (<4%), food additives (mono- and diglycerides of fatty acids, sodium caseinate, xanthan gum, sucrose fatty acid esters, sodium carbonate, sucralose), and food flavoring.

Hushu Youli consulted the National Food Safety Standard for Prepackaged Food Labeling (GB 7718), which clearly stipulates: Ingredients in food should be listed in descending order of quantity added during manufacturing or processing; ingredients added at no more than 2% may be listed in any order.

In other words, the main ingredient of "Six Walnuts" is merely "water," not "walnut kernels" as claimed. Is this not fooling the public?

Furthermore, we can see that apart from water and possibly less than two walnut kernels, the remaining ingredients in "Six Walnuts" are sugar and food additives, some for thickening and some for flavor enhancement.

4. Cost Claimed to Be 1 Yuan, Yet Retail Price Higher Than Milk Without Additives

In July this year, well-known media personality Wang Zhian pointed out on Weibo: "The cost of each can of 'Six Walnuts' is 1 yuan." Of course, this does not include marketing expenses. The retail price of this beverage is 4 yuan.

In fact, earlier media reports, based on Yangyuan Drinks' prospectus, indicated that the cost composition of a can of "Six Walnuts" is roughly as follows: 1. Aluminum can (0.57 yuan), 2. Walnut kernels (0.25 yuan), white sugar (0.05 yuan), other raw materials (0.13 yuan).

In other words, when consumers buy a can of Six Walnuts, most of the money goes toward purchasing the aluminum can.

Hushu Youli compared the "Six Walnuts" refined type sold on JD.com with Yili and Mengniu pure milk and found:

The ingredient lists of these two pure milk products are solely "raw milk," without any food additives for thickening or flavoring, yet the protein content of both milk products is far higher than that of Six Walnuts.

In terms of price, each can of Six Walnuts contains 10 milliliters less than milk, but the price is 3.295 yuan per can; Yili pure milk (250 milliliters) averages about 2.7 yuan per box; Mengniu pure milk averages about 2.5 yuan per box.

We also found that Yili's revenue in the first half of this year was nearly 40 billion yuan, with net profit of 3.446 billion yuan; Mengniu's revenue was 34.5 billion yuan, with net profit of 1.562 billion yuan.

As the two dairy giants, their performance is already very high within the industry; however, compared with Six Walnuts' revenue of 4.163 billion yuan and net profit exceeding 1.3 billion yuan, Yili's net profit margin of 8.6% is far lower than that of Yangyuan Drinks, the owner of "Six Walnuts," which is blended from water, walnuts, and food additives, as the latter's net profit margin exceeds 31%.

If Yili is like this, Guangming and Sanyuan's semi-annual reports are even less impressive than Yangyuan Drinks' "Six Walnuts."

At this point, between milk and "Six Walnuts," which is blended from "water, less than two walnuts, and various additives," which product would you choose?

Anyway, Hushu Youli has never bought or drunk "Six Walnuts"! In the future, I will definitely refuse "Six Walnuts"! Isn't it a better choice to eat two raw walnut kernels and drink a glass of milk or yogurt every day?

5. Stock Price Fell Below Issue Price Long Ago; Expert Says Selling Cans Rather Than Walnuts Is Fraud

"Six Walnuts has always been questioned by the industry," Zhu Danpeng, a commentator at China Food Industry, told Hushu Youli. First, what is the actual walnut content? Second, in terms of cost, Six Walnuts is mainly selling cans; the packaging cost of a can accounts for more than half, so it is no longer primarily selling walnut kernels.

"So we believe that Yangyuan Drinks' publicity is actually misleading consumers, or even constitutes fraud against consumers, " Zhu Danpeng believes that "Six Walnuts" is confusing concepts. When the outside world questioned that "Six Walnuts" did not contain six walnuts, it defended itself by saying that its brand is "Six Walnuts," not that there are "six walnuts" in the can; it was the consumers who misunderstood, and it was the consumers' problem.

"Additionally, we can see that the capital market does not recognize Yangyuan Drinks either," Zhu Danpeng told Hushu Youli. This indicates that the overall operation of Six Walnuts has significant problems.

Hushu Youli learned that Yangyuan Drinks, the parent company of Six Walnuts, which has been subject to external criticism, finally went public on the Shanghai Stock Exchange on February 12 this year. However, its stock price plummeted nearly 8% the next day.

On the afternoon of March 15, "Six Walnuts" parent company Yangyuan Drinks "went south," with a sharp drop quickly breaking through the issue price of 78.73 yuan. This was only 19 trading days after its A-share listing, setting a record for the fastest break of issue price since the IPO restart in November 2015; previously, the fastest was Henglin Co., which took 55 trading days.

As of yesterday (September 13), Yangyuan Drinks' stock price had fallen to 47.85 yuan.

Source: Hushu Youli