In the first half of 2023, well-known domestic and international beverage and dairy companies reported frequent good news! Companies such as Dongpeng Beverage, Uni-President Group, Swire Coca-Cola, Liziyuan, Coca-Cola, Nestlé, PepsiCo, Danone, and Huanlejia all achieved performance growth. Besides the gradual improvement in the global economic environment, the main reasons for the performance growth of some beverage companies also include the expansion of new products and new business areas, injecting new vitality into the company's long-term development through diversified development strategies. In addition, some companies raised product prices, which also contributed to performance growth.

Local Enterprises

Yili Co., Ltd.: Revenue Growth Due to Increased Sales Volume. On August 28, Yili Co., Ltd. released its 2023 semi-annual report, showing revenue of 65.982 billion yuan, a year-on-year increase of 4.38%; net profit of 6.305 billion yuan, a year-on-year increase of 2.81%; but non-GAAP net profit of 5.797 billion yuan, a year-on-year decrease of 1.55%. The company stated that the change in operating revenue was mainly due to increased product sales volume and structural changes during the period. By business segment, the liquid milk business achieved operating revenue of 42.423 billion yuan, with overall retail market share continuing to rank first in the industry. The milk powder and dairy products business achieved operating revenue of 13.521 billion yuan, a year-on-year increase of 12.01%; the cold drinks business achieved operating revenue of 9.158 billion yuan, a year-on-year increase of 25.54%, with growth far exceeding the industry level, ranking first in the market. In addition, Yili's sales scale in overseas markets continued to expand, and international business revenue continued to maintain double-digit growth. In recent years, Yili has developed its health business. During the reporting period, it launched functional beverages such as "Jindian" A2β, active lactoferrin organic milk series, "Shuhua" Anganjian lactose-free milk, and "Ambrosial" and "Changqing" 0 sucrose low GI yogurt series to meet consumer health demands. As a leading dairy company, Yili has always been at the forefront of the industry, and its exploration in the health field also represents the industry's direction.

Uni-President Enterprises: Beverage Segment Grows 12%. On August 9, Uni-President China Holdings Co., Ltd. announced its 2023 interim results, with revenue of 14.572 billion yuan in the first half of 2023, a year-on-year increase of 4.5%; net profit of 877 million yuan, a year-on-year increase of 42.7%. In the first half of the year, Uni-President China's beverage segment achieved revenue of 9.258 billion yuan, an increase of 12.3%, with tea drinks and fruit juices continuing strong growth momentum, both achieving double-digit year-on-year revenue growth. In terms of tea drinks, revenue in the first half was 4.157 billion yuan, a year-on-year increase of 13.9%. Both "Uni-President Green Tea" and "Uni-President Iced Black Tea" underwent brand and product upgrades in the first half, and both performed more than 50% better in the second quarter compared to the previous quarter. In terms of fruit juices, revenue in the first half was 1.655 billion yuan, a year-on-year increase of 18.1%, continuing the growth momentum of 2022. Among them, "Sea Whisper" seized the opportunity of electrolyte beverages in the post-epidemic era, with revenue nearly doubling in the first half of this year compared to last year. In terms of milk tea, revenue in the first half was 3.18 billion yuan, a year-on-year increase of 7.1%. With the advantage of the major product "Assam Milk Tea" maintaining the first position in the milk tea category, over the past three years, "Assam Milk Tea" has continued to maintain double-digit compound annual growth rate in revenue. As an authoritative representative and pioneer in the food industry, Uni-President Enterprises fully demonstrated its efforts in product innovation during the reporting period, whether launching the new product "Sugar-Free Jasmine Green Tea" or upgrading "Uni-President Iced Black Tea" and "Sea Whisper".

Master Kong: Beverage Revenue and Gross Margin Improved. On August 22, Master Kong Group's financial report for the first half of 2023 showed that during the reporting period, revenue was approximately 40.907 billion yuan, a year-on-year increase of 7.04%. Net profit attributable to shareholders was 1.638 billion yuan, a year-on-year increase of 30.66%. Among them, the beverage business achieved revenue of approximately 26.606 billion yuan, a year-on-year increase of 9.5%, accounting for 65.04% of the group's total revenue. Due to favorable raw material prices and product mix, the beverage gross margin increased by 0.52 percentage points year-on-year to 32.66%. Master Kong mentioned that during the period, the beverage business established scale advantages, focused on core category operations, continuously launched and cultivated new products, and seized the health trend. It optimized channel product portfolios by combining scenarios such as home, travel, and dining out. It also strengthened youth-oriented marketing methods such as social e-commerce, shortened channel levels, and increased refrigerator investment. Tea beverage revenue was 10.08 billion yuan, a year-on-year increase of 9.34%; water beverage revenue was 2.678 billion yuan, a year-on-year increase of 14.91%; fruit juice revenue was 4.032 billion yuan, a year-on-year increase of 16.36%; carbonated beverages and others revenue was 9.816 billion yuan, a year-on-year increase of 5.74%. As a well-known enterprise established for over 30 years, Master Kong has keen insight into market trends, continuously upgrading products or launching new ones, while also entering the high-end market with products such as high-end mineral water.

Dongpeng Beverage: Profit Growth of Nearly 40%. Dongpeng Beverage's 2023 semi-annual report shows that during the reporting period, operating revenue was 5.46 billion yuan, a year-on-year increase of 27.24%; net profit was 1.108 billion yuan, a year-on-year increase of 46.84%; non-GAAP net profit was 990 million yuan, a year-on-year increase of 38.59%. During the reporting period, Dongpeng Special Drink, as the company's core product, was the main source of revenue, with sales revenue of 5.135 billion yuan, a year-on-year increase of 24.69%, and its revenue share decreased from 96.13% to 94.13%. Other beverage revenue was 320 million yuan, a year-on-year increase of 92.85%, with revenue share increasing from 3.87% to 5.87%. In the first half of 2023, the company's sales revenue and net profit grew steadily. In the second half of the year, the company will continue to improve the national layout of product production and sales networks, strengthen channel sinking, improve per-point output, continuously increase its market share in energy drinks, and actively develop and reserve other health-functional beverages to meet consumer demands. As a major product, Dongpeng Special Drink contributed the main revenue to the company. Currently, Dongpeng Beverage is using coffee beverages and electrolyte beverages as its second growth curve, while using tea beverages and room-temperature oil gan juice as tactical and incubation products, striving to transform from a single-category to a comprehensive beverage enterprise group. With Dongpeng Beverage's strong channel strength, its new business should achieve excellent results in due course.

China Feihe: Net Profit Decreased by 28%. On the evening of August 10, China Feihe disclosed its first-half performance forecast. During the reporting period, the company's revenue was approximately 9.735 billion yuan, a year-on-year increase of 0.6%. Net profit was approximately 1.618 billion yuan, a decrease of about 28.8% compared to the same period last year. China Feihe stated that the expected decrease in comprehensive net profit was mainly due to the decline in China's birth rate, increased industry competitive pressure, and the expected net loss of its subsidiary Raw Ecological Animal Husbandry Co., Ltd. With the gradual disappearance of China's demographic dividend, the growth space for dairy companies in the domestic market has been limited, and future competition will focus more on the existing market. As a well-known domestic dairy company, whether Feihe can further expand its market share in the fierce market competition deserves our continued attention and expectation.

V V Food & Beverage: Increased Profit but Not Revenue. On the evening of August 25, V V Food & Beverage disclosed its 2023 semi-annual report, achieving revenue of 2.008 billion yuan, a year-on-year decrease of 3.86%; net profit of 62 million yuan, a year-on-year increase of 23.78%; non-GAAP net profit of 58 million yuan, an increase of 59.27% compared to the same period last year. In the first half of this year, while consolidating its market share in soybean milk powder, the company actively laid out the plant protein beverage track, focused on liquid soybean milk, and vigorously developed grain purchase, storage, processing, and trade businesses, continuously building a "full industry chain from farmland to dining table" and consolidating the strategic layout of "one body, two wings, dual-core drive". In terms of channels, e-commerce revenue was 48.9 million yuan, a year-on-year increase of 51.10%; distributor revenue was 813 million yuan, a year-on-year increase of 3.26%. It can be seen that the established company V V Food & Beverage has development potential in new channels. After listing, the company focused on coal mines, liquor, real estate, and pharmaceuticals for many years, but due to various reasons, the results were not ideal. In recent years, the prodigal son has returned: V V Food & Beverage divested loss-making assets, returned to its soybean milk main business, and used short videos and live streaming to sell products, leveraging national brand sentiment to gain attention. How will it continue to promote product development in the future? Win the hearts of young people? Let's wait and see.

Liziyuan: Profit Growth of Over 30%. Liziyuan released its 2023 semi-annual performance express report, achieving revenue of approximately 701 million yuan, a year-on-year increase of 0.06%; net profit of approximately 135 million yuan, a year-on-year increase of 30.56%; non-GAAP net profit of approximately 130 million yuan, a year-on-year increase of 55.97%. During the reporting period, the company's performance increased compared to the same period last year, mainly benefiting from the price increase of some Liziyuan products starting July 1, 2022, and the decline in raw material costs during the reporting period, which increased the gross margin of product sales. At the same time, sales expenses decreased year-on-year during the reporting period, leading to profit growth. Liziyuan's main business revenue mainly comes from dairy-containing beverages. In 2022, this product's revenue accounted for more than 90% of total revenue. The early implementation of the major product strategy made the company's operating performance highly dependent on a single product. Nowadays, Liziyuan is also promoting new products and optimizing product structure to reduce the risk of single-product dependence.

Huanlejia: Profit Up Over 50%. In the first half of 2023, the company achieved operating revenue of 912 million yuan, a year-on-year increase of 30.86%; net profit of approximately 130 million yuan, a year-on-year increase of 56.45%; non-GAAP net profit of approximately 128 million yuan, a year-on-year increase of 64.51%. The company stated that the main reasons for revenue growth were: (1) From January to June 2023, revenue from main products coconut juice and fruit canned goods increased; (2) Affected by factors such as price adjustments for some products in 2022 and the decline in some bulk commodity prices in the first half of 2023, the increase in operating revenue was greater than the increase in operating costs, and the gross margin improved compared to the same period last year. Previous financial reports show that from 2020 to 2022, Huanlejia's operating revenue and net profit were in a continuous upward state. The company's products are mainly divided into two categories: one is coconut juice plant protein beverages, fruit juice beverages, lactic acid bacteria beverages, and other beverage products; the other is canned fruit, eight-treasure porridge canned goods, and other canned products. Last year, it also developed new products such as thick coconut milk and electrolyte sports drinks. Although the overall scale is not large, it is clearly a "small but beautiful" company.

Xiangpiaopiao: Ready-to-Drink Segment Becomes Second Growth Curve. In the first half of 2023, Xiangpiaopiao's cumulative operating revenue was 1.171 billion yuan, a year-on-year increase of 36.26%, with net profit of approximately -44.04 million yuan. The two main segments, brewing and ready-to-drink, advanced side by side, achieving revenue of 627 million yuan and 527 million yuan respectively, a year-on-year increase of 38.37% and 35.88%. In the brewing segment, focusing on health upgrades, it launched pearl milk tea series products, continuously optimized products, refined suitable channels, and received good terminal feedback. At the same time, it actively explored opportunities for pan-brewing products. In the first half of the year, it launched "CC Lemon Liquid" (concentrated NFC lemon juice), which was trial-sold through online promotion and offline channels such as RT-Mart M membership stores, to explore new market opportunities and seek new growth points for the brewing business. In the ready-to-drink segment, through years of market cultivation and business exploration, it gradually cultivated two "growth poles": in the first half of the year, frozen lemon tea sales increased by 547.09% year-on-year, online channel sales increased by 235%, Douyin channel accounted for about 30%, and the cumulative repurchase rate remained high, establishing a foothold in the lemon tea market and becoming a new single product in the industry. MECO fruit tea achieved cumulative sales revenue of approximately 400 million yuan, a year-on-year increase of 11.58%. In recent years, with the rapid development of the ready-made tea beverage market, more and more consumers are choosing to buy ready-made milk tea. In addition, people's demand for healthy beverages is increasing, which is also considered a factor affecting Xiangpiaopiao's popularity. However, Xiangpiaopiao's ready-to-drink segment's revenue contribution is gradually increasing. Although it is still in a loss-making state in terms of profit, its performance is expected to gradually improve.

Chengde Lulu: Walnut Kernel Series Grows Fast. In the first half of 2023, Chengde Lulu achieved operating revenue of 1.494 billion yuan, a year-on-year increase of 2.16% (after adjustment, same below); net profit attributable to the parent company was 315 million yuan, a year-on-year increase of 5.77%; non-GAAP net profit was 315 million yuan, a year-on-year increase of 5.55%; basic earnings per share were 0.31 yuan. By product category, there are almond milk series, walnut kernel series, almond milk series, and others. During the reporting period, Chengde Lulu's almond milk series achieved operating revenue of 1.4572 billion yuan, accounting for 97.54% of revenue, with a year-on-year increase of 1.52%. In the first half of 2021 and the first half of 2022, the almond milk series' revenue increased by 35.55% and 7.24% year-on-year respectively, showing a clear slowdown in growth. In the first half of 2023, Chengde Lulu's walnut kernel series achieved operating revenue of 33.9936 million yuan, accounting for only 2.28% of revenue, with a year-on-year increase of 34.36%. This business is the fastest-growing for Chengde Lulu, but its revenue share is still too small and has not yet fully become Chengde Lulu's second growth curve. Chengde Lulu's almond milk series was newly launched in the first half of this year, achieving operating revenue of 1.9522 million yuan, accounting for 0.13% of revenue. From a performance perspective, Chengde Lulu still relies on major products as its main revenue source, and the market for almond milk is no longer what it used to be. In today's world of endless beverage options, Chengde Lulu's competitiveness has undoubtedly declined. Currently, the walnut kernel series accounts for a relatively small share. Whether it can drive Chengde Lulu's growth remains to be seen.

Yantang Dairy: Low-Temperature Milk Sales Increased 12% Year-on-Year. Yantang Dairy released its 2023 semi-annual report. During the reporting period, the company achieved double growth in revenue and net profit: operating revenue of approximately 963 million yuan, a year-on-year increase of 7.14%; net profit attributable to listed company shareholders of approximately 98.3402 million yuan, a year-on-year increase of 70.29%. Yantang Dairy mentioned that in the first half of the year, the company combined consumption trends, accurately analyzed and explored product differentiation innovation paths, continued to promote the fresh strategy, increased efforts to deepen the low-temperature milk business, and strengthened the "differentiation + parity" dual-line promotion strategy, resulting in low-temperature milk sales volume and sales revenue both increasing by more than 12% year-on-year. With the recovery of the consumer market, the dairy industry has also begun to rebound. After abandoning the ice cream and popsicle business that had lost money for two consecutive years, Yantang Dairy clarified its market positioning focused on low-temperature fresh milk. Yantang Dairy's performance this time is gratifying, showing its strength in the fiercely competitive low-temperature milk market.

Foreign Enterprises

Coca-Cola: Asia Pacific Market Unit Case Volume Increased 2%. On July 26, Coca-Cola Company released its second quarter 2023 financial results. Data showed that Coca-Cola's second quarter revenue was $11.972 billion (approximately 85.7 billion yuan), a year-on-year increase of 6%, exceeding market expectations of $11.75 billion; operating profit was $2.401 billion, a year-on-year increase of 3%; net profit was $2.521 billion, a year-on-year increase of 33%. Combined data for the first and second quarters showed that in the first half of 2023, Coca-Cola's revenue was $22.958 billion (approximately 164.3 billion yuan), compared to $21.853 billion in the same period last year; net profit was $5.654 billion (approximately 40 billion yuan), compared to $4.686 billion in the same period last year. In terms of sales volume, global unit case volume was flat year-on-year; Asia Pacific market unit case volume increased 2%, mainly driven by growth in India, China, Thailand, and Vietnam markets. By category, sparkling beverage volume was flat year-on-year, with growth in Asia Pacific and Latin America offsetting declines in Europe, Middle East, and Africa. Flagship brand Coca-Cola volume was flat year-on-year, with growth in Latin America and Asia Pacific offsetting declines in Europe, Middle East, and Africa; Coca-Cola Zero Sugar grew 5% globally. Bottled water, sports drinks, coffee, and tea volume were flat year-on-year. Coffee grew 5% globally, mainly driven by strong growth of Costa Coffee in the UK and China. In the current market environment, with the rise of national trend and health trends, domestic companies are seizing opportunities and rising. Although these companies have achieved certain success in the market, Coca-Cola's position as a beverage industry giant remains difficult to shake.

Swire Coca-Cola: Revenue Growth in China. On August 10, Swire Coca-Cola released its first-half results. During the reporting period, it achieved revenue of HK$30.442 billion (approximately RMB 28.186 billion), a year-on-year increase of 14%; attributable profit of HK$1.423 billion (approximately RMB 1.317 billion), with revenue and volume growth in Mainland China, Hong Kong, and Taiwan. Among them, Swire Coca-Cola's Mainland China business revenue was HK$13.936 billion (approximately RMB 12.903 billion), with attributable profit of HK$651 million (approximately RMB 602 million). Excluding non-recurring gains, attributable profit for the first half of 2023 was HK$616 million, a year-on-year increase of 5%. With the relaxation of epidemic prevention measures at the beginning of 2023, Swire Coca-Cola's sales volume and business have returned to normal. Revenue from soda, water, and fruit juice beverages increased by 2%, 18%, and 17% respectively, energy drinks revenue increased by 36%, and high-end coffee and tea beverages revenue increased by 19% and 20% respectively. It is understood that Swire Coca-Cola is also continuously increasing investment in China, accelerating future development potential through measures such as expanding factories and new production lines.

Nestlé: Greater China Region Sales Decreased 4.8%. On July 27, Nestlé announced first-half sales of CHF 46.3 billion (approximately 380 billion yuan), a year-on-year increase of 1.6%. Organic growth reached 8.7%, real internal growth was -0.8%, and pricing contribution was 9.5%. Overall, demand elasticity was limited in the context of pricing adjustments. The financial report showed that the Greater China region's organic growth rate in the first half of 2023 was 4.7%, with pricing contribution of 3.4% and real internal growth of 1.3%. Foreign exchange had a negative impact of 9.5%. Sales in the Greater China region decreased by 4.8% to CHF 2.5 billion (approximately 20.5 billion yuan). Nestlé pointed out that in the Greater China region, infant nutrition was the largest growth contributor in the first quarter, led by NAN professional products and Illuma. Nestlé Professional achieved mid-single-digit growth, supported by innovation and distribution expansion. Seasonings recorded low single-digit growth, with stable demand for Totole products. Confectionery achieved low single-digit growth, driven by enhanced distribution of Hsu Fu Chi. Purina PetCare achieved double-digit growth, driven by Purina Pro Plan dry cat food and prescription products. Coffee sales decreased, with positive sales momentum for instant coffee offset by negative growth in ready-to-drink coffee. Currently, China's dairy market faces challenges due to negative population growth, and in the coffee business, more and more domestic beverage companies are launching such products. It will not be easy for Nestlé to successfully expand in China in the future.

PepsiCo: China Market Beverages Achieved Double-Digit Growth. Recently, PepsiCo released its second quarter results, marking the seventh consecutive quarter of double-digit organic revenue growth, with both revenue and core earnings per share exceeding market expectations. The company also raised its full-year 2023 guidance. PepsiCo's second quarter 2023 financial results showed that despite a decline in convenience food and beverage sales volume, the company still achieved revenue of $22.322 billion (approximately 160 billion yuan), a year-on-year increase of 10.3%, and net profit of $2.748 billion, a year-on-year increase of 92.3%. Among them, beverage business declined 1% year-on-year. Combined data for the first and second quarters showed that in the first half of 2023, PepsiCo's revenue was $40.167 billion (approximately 287.5 billion yuan), compared to $36.429 billion in the same period last year; net profit was $4.68 billion (approximately 33.5 billion yuan), compared to $5.69 billion in the same period last year. Looking at the Chinese market, PepsiCo operates many well-known brands such as Pepsi-Cola, Quaker, Lay's, and Baicaowei. Its convenience food business achieved low single-digit growth, and its beverage business achieved double-digit growth. PepsiCo's Chairman and CEO Ramon Laguarta expressed affirmation of the recovery of consumer demand when discussing the Chinese market. He said: "PepsiCo feels the strong rebound in Chinese consumers' desire to spend. With the increasing prosperity of the Chinese market, the Chinese market will play an increasingly critical role in PepsiCo's global growth." Looking ahead, how will PepsiCo integrate more deeply into the Chinese market and establish closer ties with consumers? Let's wait and see.

Danone: China Market Mizone Market Share Increased. Danone released its first-half 2023 results. The report showed that in the first half, Danone's sales revenue was 14.2 billion euros (approximately 112.9 billion yuan), a year-on-year increase of 8.4%, with price factors contributing 9.4% growth and volume/mix slightly declining 1.1%. In the second quarter, sales revenue was 7.2 billion euros, a year-on-year increase of 6.4%, with price factors contributing 8.7% growth and volume/mix bringing a 2.3% decline. Notably, in the second quarter, Danone's sales revenue in China, North Asia, and Oceania reached 954 million euros, a year-on-year increase of 9.6%. Price factors contributed 0.8% growth, while volume/mix contributed 8.8% growth. Danone revealed that in the Chinese market, in the infant nutrition business, Aptamil continued to grow steadily with further market share gains; in the water and beverage business, Mizone achieved mid-double-digit growth driven by volume, with market share increasing. Danone has been deeply rooted in the Chinese market for many years, and its Mizone product has always held a place. The performance in the first half of 2023 remains impressive, fully demonstrating the steady strength of this established beverage company.

Final Thoughts

In recent years, with continuous economic development, consumer demand has become increasingly diversified and personalized, driving the continuous growth and expansion of the beverage industry. In the Chinese beverage market, competition is increasingly fierce, with major brands launching new products. To cope with market changes and challenges, major beverage companies have increased R&D investment and developed new products to meet diverse consumer needs. At the same time, brands are paying more attention to product health quality and consumer experience, hoping to stand out in the fierce market competition. Local brands and international brands compete with each other, learn from each other, and jointly promote market prosperity and development. In the future, with the continuous improvement of Chinese residents' income levels, consumption capacity will be further released, and the beverage market is expected to maintain rapid growth momentum.

Major beverage companies need to continuously adjust their strategies, adapt to market changes, and focus on product innovation and quality improvement to enhance competitiveness, so as to remain invincible in the fierce competition and share the prosperity of the Chinese beverage market.