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interface news reporter | lu yibei

interface news editor | ya hanxiang

on august 26, master kong holdings (00322.hk, hereinafter referred to as "master kong") released its financial report for the first half of 2024. during the reporting period, the company's operating income was 41.201 billion yuan, a year-on-year increase of 0.7%. although the revenue was the same as last year, the company's gross profit margin increased by 2.1 percentage points year-on-year to 32.6% during the period. driven by this, master kong's shareholders' attributable profit was 1.885 billion yuan, a year-on-year increase of 15.1%.

in terms of specific business, in the first half of the year, master kong instant noodles business revenue was rmb 13.814 billion, rmb 136 million less than the same period last year, a year-on-year decrease of 1%, and revenue accounted for 33.5%, a year-on-year decrease of 1%. the financial report shows that this is due to market pressure and product structure adjustment.

although master kong instant noodles are not selling well, its net profit is higher.

the financial report shows that due to the optimization of raw materials and product mix, the gross profit margin of instant noodles increased by 1.3 percentage points year-on-year to 27.1%. driven by this, the profit attributable to shareholders of master kong instant noodles business increased by 5.4% year-on-year to 850 million yuan in the first half of the year.

in may this year, the news that "master kong instant noodles are going to increase in price" became a hot topic. master kong was accused of adjusting the prices of some of its bagged noodles and barreled noodles. the suggested retail price of bagged noodles increased from 2.8 yuan to 3 yuan, and the classic barrel increased from 4.5 yuan to 5 yuan. the reasons for the price increase were "increase in raw material prices" and "recipe upgrades."

according to nanduwan finance, the customer service of master kong's e-commerce flagship store confirmed in july that all flavors of master kong's classic series of instant noodles have increased in price, with the selling price per barrel adjusted from 4.2 yuan to 4.57 yuan.

master kong's price increase is partly intended to counter the consumer trend of slow sales of instant noodles.

according to master kong's 2023 annual report, the instant noodle business achieved revenue of 28.793 billion yuan, a year-on-year decline of 2.84%, accounting for 35.8% of the group's revenue, a decline of 1.85 percentage points from 2022. the same trend is also reflected in the performance of master kong's old rival uni-president. according to uni-president central's 2023 annual report, the food business revenue was 9.847 billion yuan, a decrease of 1.162 billion yuan from the revenue of 11.009 billion yuan in 2022, a year-on-year decrease of 10.6%, mainly due to the decline in the revenue of the instant noodle business.

the decline in the instant noodles business is generally related to the recovery of china's consumption environment last year, the increase in demand for dining out, and the decrease in demand for stockpiling. from a longer-term consumption trend perspective, the instant noodles category is easily replaced by takeout, and with the diversification of consumers' daily choices, the diversion of the instant noodles market is also expected.

however, after master kong raised its prices, companies including uni-president central and nissin foods did not follow suit.

as the instant noodle business has been under pressure for a long time, master kong has also placed its focus on the beverage sector for growth.

the financial report shows that in the first half of the year, the revenue of master kong's beverage business was rmb 27.065 billion, a year-on-year increase of 1.7%, accounting for 65.7% of the group's total revenue.

in its financial report, master kong stated that during the period, the gross profit margin of its beverage business increased by 2.5 percentage points year-on-year to 35.2% through product portfolio optimization and improved management efficiency. as a result, the profit attributable to shareholders of the beverage business during the reporting period increased by 26.9% year-on-year to 1.115 billion yuan.

in fact, master kong has also raised the prices of its beverages. in november 2023, master kong was accused of adjusting the suggested retail price of medium-packaged tea and juice from 3 yuan to 3.5 yuan, and the price of one liter from 4 yuan to 5 yuan. by april this year, this price adjustment had been implemented at the retail end.

in addition to the price increase, master kong has made it clear that it will follow the trend of healthy and sugar-free tea to drive the steady growth of ready-to-drink tea.

ready-to-drink tea is the main source of growth for master kong's beverage business. master kong classifies its beverages into tea, water, juice, carbonated and others. in the first half of 2024, only tea revenue increased by 13.0% year-on-year to 11.392 billion yuan, while the remaining categories declined by 5.6%, 10.1% and 3.2% year-on-year respectively.

master kong has been planning sugar-free tea for a long time.

in 2020, master kong launched two sugar-free tea drinks, cold-brewed green tea and jasmine tea; in 2021, master kong's sugar-free iced black tea was launched; in 2022, master kong launched a new series of pure zero-sugar products; in 2023, master kong's sugar-free jasmine green tea was launched, and the flavor and packaging of the sugar-free iced black tea were upgraded, and a new pure zero-sugar high mountain oolong flavor was added.

in the first half of 2024, master kong launched a new high-end sugar-free tea brand "heir of tea", which comes in two flavors: yunnan qinggan pu'er and minnan tieguanyin. master kong's official flagship store on taobao shows that the new product is priced at 5.4 yuan per bottle for 500ml. this is an increase from the 3 yuan per bottle price of master kong's previous main zero-sugar green tea.

uni-president central control also made a similar layout.

in april this year, uni-president launched a new sugar-free product "chunfu green tea" with a retail price of 4 yuan. its selling points include the use of 100% real tea extraction and innovative fermentation technology. recently, chunfu green tea has launched a new 900ml large bottle based on the 500ml specification. it has been launched in many provinces and cities such as jiangsu, hubei, and xinjiang.

although the sugar-free tea market is booming, if we rank chinese sugar-free tea brands, they can be directly and clearly divided into nongfu spring (oriental leaves), suntory and others. statistics from mashangying, an offline retail monitoring agency for fast-moving consumer goods, show that in the sugar-free ready-to-drink tea category from april to may 2024, the combined market share of nongfu spring and suntory group exceeded 75%.

master kong and uni-president are not the only ones challenging the two giants. traditional beverage giants such as coca-cola, wahaha, yibibao and nestle have also entered the market, and a series of new forces such as yuanqi forest, guozishuile, cha xiaokai, youcongqi and rangcha have also emerged like dark horses.