On the evening of April 14, Dongpeng Beverage released its 2023 annual report, Dongpeng Special Drink still contributes the vast majority of revenue and net profit, and its revenue exceeded 10 billion yuan for the first time, reaching 10.336 billion yuan, which is getting closer and closer to the 23 billion yuan revenue of functional drink giant Red Bull at its peak.
However, Red Bull is not sitting still, at the 4th China International Consumer Products Expo (hereinafter referred to as the "Consumer Expo") held in Haikou recently, Tencel Group launched the first bottled Red Bull new product in China - Red Bull ® Energy Drink, which benchmarks Dongpeng Special Drink from appearance to design.
In terms of volume, Red Bull is still the brand with the highest sales of functional drinks, but the brands dominated by Dongpeng, Lehu and Pocari Water are catching up, and the market competition may be further intensified.
Price for volume
According to the financial report released by Dongpeng Beverage, in 2023, it will achieve revenue of 11.263 billion yuan, a year-on-year increase of 32.42%, and a net profit of 2.040 billion yuan, a year-on-year increase of 41.60%. Among them, Dongpeng Special Drink, a large single product, remained strong, accounting for 91.87% of the revenue, and the proportion of other beverages increased from 3.76% in the previous year to 8.13% this year.
As for the reasons for the change in operating income, Dongpeng Beverage said that it was mainly due to the continued implementation of the omni-channel intensive cultivation strategy in Guangdong, and at the same time actively explored national sales channels, driving the sales growth of new products such as 500ml gold bottles and "Dongpeng Hydration". During the reporting period, the production and sales of the company's products maintained synchronous growth, and the production and sales rate of each product remained at a high level, with the production and sales rate of Dongpeng Special Drink being 98.19% and the production and sales rate of other beverages being 94.35%, and the company's product sales turnover was fast.
A reporter from Beijing Business Daily noticed that since last year, Dongpeng Special Drink has begun to promote online and offline channels, and launched marketing activities such as "One Yuan Enjoyment". However, on the third-party complaint platform, some consumers said that the "One Yuan Enjoyment" activity was falsely advertised, and no merchant was willing to cash in the prize after winning the lottery.
Last year, Dongpeng Beverage's sales expenses hit a record high of 1.956 billion yuan, a year-on-year increase of 34.94%, and administrative expenses were 369 million yuan, a year-on-year increase of 44.25%. Regarding the increase in sales expenses, Dongpeng Beverage said that the increase in employee salary expenses was 26.21%, which was caused by the increase in the number of sales personnel in order to promote the implementation of the national strategy and further expand the sales scale, and the increase in publicity and promotion expenses was 35.69%, mainly due to the increase in freezer investment.
In this regard, Zhu Danpeng, an analyst of China's food industry, said, "The overall performance growth of Dongpeng Beverage has both 'domestic sales' and 'external sales'. Among them, 'internal sales' is Dongpeng Beverage's adjustment of market strategy, which is mainly reflected in the channel expansion of the northern market and the five-more strategic planning based on multi-brand, multi-category, multi-channel, multi-scene and multi-consumer groups;
"Copycat" Red Bull
Counting the history of functional drinks, Red Bull was founded in Thailand in 1975 and entered the Chinese market in 1993, and has single-handedly opened up the functional drink market. Founded in Shenzhen in 1994, Dongpeng is full of "cottage" flavor from the canned packaging, net content and even the advertising slogan "drink Dongpeng special drink when you are tired and sleepy".
From the product point of view, the main ingredients of Dongpeng and Red Bull are very similar, and the similarity can reach 90%, but the price of Dongpeng is much cheaper. For example, the price of Red Bull 250ml is 6 yuan, while the price of Dongpeng of the same specification is only 3 yuan, which is half of the price of Red Bull, and even as low as 2.5 yuan during the event;
In the early days, in order to control costs, Dongpeng changed the packaging from cans to plastic bottles, and Dongpeng also added a cap to the bottle, which is more convenient for consumers to use, and it is different from other functional drinks.
However, before 2011, China's Red Bull, a joint venture between Reignwood Group and Thailand's Tencel, had a market share of 87%, with sales of 23 billion yuan in 2015. Since 2016, the two companies have been engaged in a tug-of-war over the trademark licensing period for many years, and it is difficult for China Red Bull's sales to exceed 23 billion yuan.
The market share of Dongpeng Special Drink is to a certain extent ceded by Red Bull. From 2016 to 2021, Dongpeng used five years to seize the Red Bull market and landed on the A-share market in 2021. As can be seen from the annual report, Dongpeng Beverage has become the energy drink with the highest sales volume in China in 2021 and 2022, with the market share of Dongpeng Special Drink being 31.7% and 36.7% respectively, and the sales share rising from 23.4% to 26.62%, ranking second. The main reason is that Dongpeng is cheaper, so it surpasses Red Bull in terms of sales, but it is not as good as Red Bull in sales.
Red Bull has also reacted quickly and has been increasing its investment in China in the past two years. On December 14, 2023, the Red Bull Beverage (Sichuan) production base project of Tencel Group was officially put into operation in Neijiang Economic and Technological Development Zone, with a total investment of 2 billion yuan, a designed annual production capacity of 1.44 billion cans, and an annual output value of 5 billion yuan.
On April 13, 2024, at the 4th Consumer Expo, Tencel Group launched the first bottled Red Bull product in China, with a specification of 400ml, which is more convenient to carry than cans. Tencel Group said that the new products have opened up more imagination space in consumption scenarios, and at the same time created new business growth points.
Competition intensifies
According to NielsenIQ, Dongpeng Special Drink 500ml ranked third in the SKU of beverage products in the Chinese market in terms of sales amount. No. 1 in sales volume and No. 2 in sales in the energy drink market. However, as Red Bull increases its investment in China, Dongpeng may face new challenges.
Zhan Junhao, a well-known strategic positioning expert and founder of Fujian Great Aim Brand Positioning Consulting, said, "The lawsuit dispute between Tencel Group and China Red Bull has indeed provided Dongpeng Beverage with a market opportunity to seize a part of the market share. However, as the two companies become aware of the threat of Dongpeng Beverage and take corresponding countermeasures, the market landscape may change. This may bring new variables, including intensified market competition, increased legal disputes, etc."
Dongpeng Beverage is also facing the risk of too single revenue structure. According to the financial report, from 2018 to 2023, the proportion of Dongpeng special drink product revenue in the company's revenue will continue to remain above 90%, which is 94.99%, 95.11%, 93.40%, 94.47%, 96.24% and 91.87% respectively.
Zhan Junhao said, "Except for Dongpeng Special Drink, the total revenue of other beverages is less than 1 billion yuan, indicating that Dongpeng has not yet formed a second growth curve in terms of diversified products, and there is a risk of relying on large single products." In the event of volatility or increased competition in the specialty beverage market, the company's overall performance may be significantly affected."
However, in the view of Lai Yang, a member of the Expert Committee of the China Federation of Commerce and executive vice president of the Beijing Business Economics Association, the growth of functional drinks still depends on the product, and other single products still need to increase around the core brand value, rather than blindly adding, "Now consumers pay attention to sports and fitness, and the work pressure is relatively large, and the demand for functional drinks is increasing.
Regarding the dependence on a single product and how to deal with the intensification of competition, a reporter from Beijing Business Daily sent an interview letter to Dongpeng Beverage by email, but did not receive a reply before press time.
Beijing Business Daily reporter Kong Wenxie