The strategic advantages of multi-category and omni-channel have emerged, and the pattern of Dongpeng Beverage's comprehensive beverage group has been further deepened

The strategic advantages of multi-category and omni-channel have emerged, and the pattern of Dongpeng Beverage's comprehensive beverage group has been further deepened

On April 14, Dongpeng Beverage (605499. SH) released its 2023 annual report, last year, the company achieved operating income of 11.263 billion yuan, a year-on-year increase of 32.42%, net profit attributable to the parent company of 2.040 billion yuan, a year-on-year increase of 41.60%, and net operating cash flow of 3.281 billion yuan, a year-on-year increase of 61.95%. It is proposed to distribute 25 yuan (tax included) to all shareholders for every 10 shares.

In 2023, Dongpeng Beverage's revenue and net profit will grow steadily, and under the guidance of the product channel diversification strategy, the key work will be steadily advanced, the operating capacity will be significantly improved, and the profitability will continue to improve. During the reporting period, the company's fundamentals were stable, with the deepening of the layout of multiple categories such as electrolyte water and sugar-free tea, the revenue of other beverages grew rapidly, and hydration became a large single product with full potential.

Dongpeng Beverage continued to deepen the construction of terminal outlets and channels across the country and accelerated the national production and marketing layout. While further expanding the business layout of all categories by combining emerging channels such as community group buying, the company is also actively exploring overseas markets, deepening its globalization strategy, and is committed to becoming a multi-category and global comprehensive beverage group.

The fist products are "energized" for performance growth, and the diversified layout enhances the comprehensive competitiveness

Only two years after its listing, Dongpeng Beverage has shown strong performance growth potential, and the company's operating cash flow has grown rapidly from 195 million yuan in 2018 to 3.281 billion yuan in 2023. The continuous improvement of the company's business activities has further enhanced the company's financial strength and anti-risk ability.

Dongpeng Beverage is the first echelon player of energy drinks in China, and its flagship product Dongpeng Special Drink is the cornerstone of the company's stable position as a leader in the industry. According to the National Bureau of Statistics, in 2023, the retail sales of units above designated size increased by 3.2%. In contrast, Dongpeng Special Drink has far exceeded the overall growth rate of the industry. In the 2023 Nielsen China Market Beverage Single Product Ranking, Dongpeng Special Drink ranked among the top 3 single products. In China's energy drink market, Dongpeng special drink sales accounted for 43.02%, ranking first, and sales accounted for 30.94%, ranking second.

According to the annual report, in 2023, the core product Dongpeng Special Drink will achieve sales of 10.336 billion yuan, a year-on-year increase of 26.48%. At present, the sales revenue of Dongpeng Special Drink accounts for 91.87%, which provides strong support for the rapid growth of performance.

While the basic plate of Dongpeng Special Drink continues to grow, the product structure has been continuously optimized, which has further expanded the consumer group. During the reporting period, Dongpeng Beverage successively launched Dongpeng Hydrating La "Lime Flavor" and sugar-free tea "Oolong Tea", which achieved a good response in the market, and the electrolyte drink and sugar-free tea drink track ran out of the second fist product. In 2024, the company will also continue to launch a variety of flavors such as Pu'er Shangcha and Jasmine Shangcha.

In 2023, the company's sales revenue of other beverages will reach 914 million yuan, a year-on-year increase of 186.65%, and the proportion of sales revenue has increased from 3.76% to 8.13%. Among them, Dongpeng Beverage's second fist product "Hydration" has achieved gratifying performance, and the total revenue of "Hydration" and Dongpeng Coffee has reached 5.11%.

In addition to the two major products, Dongpeng Beverage has also carried out diversified product layout and improved its new product research and development capabilities. The company actively promotes the integration of production, education and research, and signed the "Agreement on Cooperation in Building a Joint Research Center for Tea Deep Processing and Beverage Development" with Amakusa Biology and Anhui Agricultural University to carry out comprehensive cooperation in the research and development of tea beverages. Through cooperative research and development, the company's tea product strength will be improved, and it is expected to develop competitive tea products, and the growth of sugar-free tea business will be accelerated.

In addition, in order to create new growth momentum, Dongpeng Beverage continues to explore new categories, and its product categories have now covered energy drinks, electrolyte drinks, coffee and tea drinks, as well as breakthrough cocktails and coconut water tracks, and the multi-category strategy has been officially upgraded. The company said that in the future, it will continue to enrich the layout of the product and category matrix to better meet the diversified needs of consumers. In the future, with the further improvement of the product matrix and the synchronous empowerment of the subdivision track, it will help Dongpeng Beverage to develop from a single category to a multi-category comprehensive beverage group.

The growth potential of the industry is huge, and the company accelerates the construction of national outlets

Under the two major trends of diversified consumption scenarios and younger consumer groups, the energy drink market has full room for growth. According to Euromonitor International's forecast, the sales scale of the energy drink industry in mainland China is expected to reach 77.997 billion yuan in 2028, and the CAGR of retail sales in the next five years is expected to be 6.26%, which is nearly 45% incremental compared with the market size of 53.3 billion yuan in 2022.

In terms of subdivisions, the application scenario of electrolyte water has rapidly extended from a single sports scene to daily life, opening up a new growth space for the industry. According to the Prospective Research Institute, the market size of electrolyte drinks in mainland China was only 900 million yuan in 2020 and will reach 2.6 billion yuan in 2022. However, compared with Japan's per capita electrolyte water consumption of more than 8L per year, the per capita annual consumption of mainland China is only about 1L, and there is a broad room for growth. According to Mojing Market Intelligence, the mainland sugar-free tea market will be 7.38 billion yuan in 2022, with a CAGR of 28.6% from 2017 to 2022, and it is predicted that the scale will exceed 10 billion yuan in 2025 and reach a double-digit CAGR from 2023 to 2027.

In the face of the broad growth space of the industry, Dongpeng Beverage actively lays a national market layout, and gradually penetrates the production, supply and terminal sales to the whole country. At present, the company has established ten production bases in Guangdong, Anhui, Hunan, Guangxi, Chongqing, Tianjin and other places that radiate the national market. According to the annual report, Dongpeng Beverage's production capacity in 2023 has exceeded 3.35 million tons/year. With the new production base put into operation, the production capacity has been gradually released, and the company's rapidly growing sales demand has been satisfied.

The production base covering the whole country has effectively reduced the cost of product transportation, greatly improved the supply efficiency, and provided strong support for the national expansion. The company's emphasis on the development of non-core regions is also reflected in the annual report, and in 2023, the sales revenue of Central China, East China, Southwest China, North China and other regions increased by 32.84%, 48.41%, 64.71% and 64.83% year-on-year respectively.

In terms of the layout of terminal sales outlets across the country, Dongpeng Beverage's products are distributed in traditional urban and rural convenience stores, supermarket chains, retail stores, gas stations, campuses, transportation service offices, entertainment venues, vending machines, etc., all over the country, which can quickly reach consumers. As of 2023, the sales network will cover more than 3.4 million terminal sales outlets across the country, and the number of dealers who maintain stable cooperation will increase to 2,981, achieving 100% coverage of prefecture-level cities.

In terms of the layout of emerging channels, Dongpeng Beverage has joined community group buying platforms such as Duoduo Food, Meituan Preferred, and Taocaicai, and developed a new sales model of cross-border cooperation in catering channels. In addition, the company is also actively exploring overseas markets, increasing its global layout, and exporting its products to 18 countries and regions such as Vietnam, Malaysia, Singapore, and the United States.