The annual sale of "Cestbon" reached 39.5 billion, and China Resources Beverage, the "second" in the industry, went to Hong Kong to seize the secondary market

Another big "water seller" sounded the clarion call for listing on the Hong Kong stock market.

On April 22, according to the official website of the Hong Kong Stock Exchange, China Resources Beverage (Holdings) Co., Ltd. (hereinafter referred to as "China Resources Beverage"), the parent company of the pure water brand "Cestbon", submitted a listing application to the main board of the Hong Kong Stock Exchange, with Securities, Bank of China International, CITIC Securities and UBS Group as its joint sponsors.

According to Zhitong Financial APP, one of the controlling shareholders of China Resources Beverage is China Resources Group, which is a leading state-owned enterprise group headquartered in Hong Kong, with core businesses including large consumption, integrated energy, urban construction and operation, big health, industrial finance, technology and emerging industries, and ranks 74th in the Fortune Global 500 in 2023.

After 40 years of development, CR Beverage has grown into the second largest packaged drinking water company in China and the largest drinking water company in China (in terms of retail sales in 2023), and its "C'estbon" brand drinking water products have reached 39.5 billion yuan in retail sales in 2023, making it the No. 1 brand in China's drinking water market.

As the second largest packaged drinking water company in the industry, backed by a strong controlling shareholder, China Resources Beverage's fundamentals do not need to be worried, but what is the purpose of the company's trip to Hong Kong to go public?

With 56 SKUs in hand, the fundamentals are "solid"

With the "Cestbon" brand as the center, through continuous enrichment of product matrix and expansion of product specifications, CR Beverage has developed into a leading ready-to-drink soft drink enterprise covering various consumption scenarios such as going out, home, business, catering, and sports.

According to the prospectus, at present, CR Beverage mainly has a product portfolio of 13 brands, including Cestbon, Zhiben Qingrun, Honey Water Series, Holiday Series and Flavor Tea, with a total of 56 SKUs. In 2023, the Company ranked fifth among ready-to-drink soft drink companies in China in terms of retail sales.

Among them, Cestbon is a well-deserved core source of revenue for the company: in 2023, China Resources Beverage sold more than 14.6 billion bottles of "Cestbon" brand aquatic products. In terms of retail sales, the retail sales of "Cestbon" brand drinking purified water products reached 39.5 billion yuan during the period, and its share in the drinking purified water market reached 32.7%. In addition, the "Cestbon" brand is also one of the seven brands in China's ready-to-drink soft drink market with retail sales of more than 30 billion yuan.

In addition to the revenue banner of "Cestbon", the "Zhiben Qingrun" chrysanthemum tea products under China Resources Beverage have also grown rapidly in recent years - in 2023, the retail sales of "Zhiben Qingrun" chrysanthemum tea products will reach 756 million yuan. In terms of retail sales, "Zhiben Qingrun" ranks first in the domestic chrysanthemum tea beverage market, with a market share of 38.5%.

Of course, in addition to building a strong business territory, CR Beverage has also built a relatively complete sales network.

During the Track Record Period, the Company has successfully cooperated with more than 1,000 dealers across the country, covering more than 2 million retail outlets in China. According to the CIC report, in 2023, CR Beverage's packaged drinking water products have the highest market share in the packaged drinking water market in China's six major provinces (i.e., Guangdong, Hunan, Sichuan, Hainan, Guangxi and Hubei) in terms of regional distribution.

Driven by the above-mentioned layout and leading effect, the fundamentals of CR Beverage undoubtedly show the characteristics of "steady growth".

From 2021 to 2023, the company will achieve revenue of 11.34 billion yuan, 11.34 billion yuan, and 13.515 billion yuan, with a year-on-year growth rate of 9.17%; The gross profit was about 4.971 billion yuan, 5.259 billion yuan and 6.035 billion yuan respectively, with a compound annual growth rate of 10.18%; The net profit was approximately RMB858 million, RMB989 million and RMB1.331 billion respectively, with a compound annual growth rate of 24.56%;

Not only that, the company's profitability has also shown stable characteristics in the past three years: from 2021 to 2023, the gross profit margin will be about 43.84%, 46.38%, and 44.66% respectively; The net profit margin was about 7.57%, 8.72% and 9.85% respectively, especially the growth rate of net profit and net profit margin was the most significant.

Based on the above, it is not difficult to see that as one of the drinking packaging faucets in the industry, the "basic plate" of China Resources Beverage is quite stable.

To seize the market, the leader also needs to "recruit troops"

It is undeniable that "selling water" is a golden track with a large scale and a lot of demand.

According to the CIC report, the size of China's packaged drinking water market in terms of retail sales was RMB215 billion in 2023, growing at a CAGR of 7.1% from 2018 to 2023 and is expected to reach RMB314.3 billion by 2028, at a CAGR of 7.9% from 2023 to 2028.

(Data source: China Resources Beverage Prospectus)

However, just like the development law of "big water and many fish", this 100-billion-level track is also full of greater competitive pressure.

In the risk warning, China Resources Beverage also said frankly: "The company is in China's ready-to-drink soft drink industry, and it is and will continue to maintain a high degree of competition. The company faces stiff competition from existing competitors as well as new industry entrants. Some competitors have established market positions in multiple categories and have more financial, R&D, marketing and other resources. The company also competes with smaller brands, which may be more innovative, better able to bring new products to market, and enter and serve niche markets more effectively and quickly. ”

In addition, let's look at another data: according to the CIC report, the concentration of China's packaged drinking water market is increasing, and the total market share of the top five companies in terms of retail sales has increased from 56.2% in 2021 to 58.6% in 2023. The high concentration of the industry means that the industry is becoming more and more mature, and the competition pattern is becoming more and more obvious.

In short, in the packaged drinking water track, CR Beverage not only needs to face the scale suppression of the "industry leader", but also needs to face the market encroachment of the "industry leader".

Based on the above-mentioned development risk stimulus, in recent years, CR Beverage has also begun to develop a diversified strategic layout on the one hand, and on the other hand, it has also begun to accelerate its nationwide expansion.

Product matrix: In recent years, CR Beverage has actively diversified its strategic layout and further enriched its product matrix, expanding its product coverage to sports drinks, coffee, milk drinks, sugar-free tea, milk tea, fruit juice and other categories. However, from the perspective of revenue proportion, the company's main revenue still depends on the "main business" packaged drinking water. According to the prospectus, from 2021 to 2023, the revenue of China Resources Beverage Packaged Drinking Water Products will account for 95.4%, 94.3% and 92.1% respectively, and the revenue of beverage products will account for less than 10%.

In terms of national expansion: In recent years, China Resources Beverage has also accelerated the construction of factories, trying to further seize the market in East China, South China and Southwest China. According to the prospectus, there are currently five new factories and two expanded factories in China Resources Beverage, and the main production category of these projects is packaged drinking water, which is expected to be put into operation this year. In addition, China Resources Beverage said that in addition to the above projects, it plans to continue to expand its own production capacity in 2026 and 2027.

As of the end of 2023, CR Beverage's cash and cash equivalents at the end of the year were 2.075 billion yuan, current assets were 6.133 billion yuan, and current liabilities were 5.725 billion yuan. In view of this, China Resources Beverage also had to choose to go to Hong Kong to "replenish blood".

To sum up, even if it is the industry leader, China Resources Beverage is inevitably having some growing pains. However, from a long-term perspective, under the Matthew effect, China Resources Beverage may still be able to "grow" steadily in the industry.