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Monthly Digest: What Happened in China Food Industry | March 2020

Products Launched

1. Coca-Cola launched COSTA ready-to-drink coffee in China. The price is 7 yuan/bottle ($1), including two flavors of Americano and latte. It is the first ready-to-drink coffee launched by Costa and follows shortly after Coca-Cola's $5.1bn (35.64 billion yuan) acquisition.

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2. Coca-Cola launched Appletiser, a high-end fizzy fruit drink that contains 99% concentrated juice. Currently, the new product costs about 13 yuan ($1.86) each in Taobao. It is positioned as a high-end product for parties and dinners.

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3. Convenient food enterprise Jinmailang launched two kinds of self-heating food, which are self-heating rice and self-heating hot pot. This is Jinmailang's first foray into the self-heating food market. Self-heating food is now in high demand because of the COVID-19 epidemic.

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4. Junlebao launched ULTREE organic milk powder—the first organic milk powder in China that is produced from a vertical supply chain in which all links are owned by Junlebao. The product uses moderate hydrolyzed whey protein and two active probiotic formulations—Bb-12 and HN019. The product already gained traction amongst consumers. In the first month, sale orders exceeded 120 million yuan ($17.17 million).

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5. Junlebao also released two adult milk powder products. Junlebao Xinyi lactoferrin milk powder focuses on strengthening the immunity of the whole family. In contrast, Junlebao Legal high fiber milk powder is marketed as a high protein supplement that promotes digestive health. 

6. Dali Group has expanded the product portfolio of its soy milk brand Doubendou and launched three new products-- nut soy milk, sesame black soy milk, and jujube soy milk.

7. Chinese beverage brand Nongfu Spring unveiled its first drip coffee on the Tmall official flagship store. This series contains three products, with coffee beans sourced from Brazil Montague Manor, Ethiopia, and Guatemala. 

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8. China’s snack brand LYFEN launched a new nut mix fortified with the probiotic GanedenBC30.The product is positioned as an aid to intestinal health and improving immunity. 

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9. Abbott announced the launch of two new products of its Eleva organic milk powder—one milk powder for pregnant and lactating women and one stage 4 milk powder for children. This generational care trend is an important consideration during product development.

10. Bright Dairy and Guan Sheng Yuan jointly launched the White Rabbit Ice Cream. This crossover product (dairy + confectionary) is available in both a bar and a cup.

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11. Yili's ready-to-drink coffee brand SUNRELAS announced the launch of new cold-brewed sparkling coffee, available in plain and Kaman orange flavors. Each can (240ml) is fortified with 3.75g of dietary fiber and is sugar and fat-free.

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12. Yili's sub-brand FoodCode launched Oreo flavored freeze-dried yogurt cubes. It is now sold on its Tmall flagship store, Tmall Supermarket, and other e-commerce platforms. Sales of the product on Tmall exceeded 1 million yuan on the first day.

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Regulatory compliance

1. On March 6, 2020, China opened a consultation on a new draft standard that would allow the importation of dairy permeate powder from the U.S. China currently does not have a reference standard for dairy permeate powder. If the draft successfully passes public feedback, it will be the second time China has approved the importation of a foodstuff not regulated by a Chinese national standard. 

2. As of Mar. 11, 21 infant formula were granted infant formula recipe approval in 2020, 9 of which were imported infant formula products. Fifteen infant formula products were rejected by NMPA, 9 of which were imported IF recipes.

3. On March 12, China SAMR clarified requirements and the deadline in which formula and labels must be amended after approval of FSMP registration alteration. The main contents include FSMP formulas and labels should be replaced within three months, starting from the approval date of product formula and label registration change, etc.

4. On March 19, General Administration of Customs announced the List of Measures Controlling and Preventing COVID-19 Epidemic and Facilitating Customs Clearance. The List encourages the expansion of food imports and agricultural products to ensure supply.

Company dynamics

1. Philippine snack brand Oishi will delay its listing this month two days after it passed a hearing on the Hong Kong Stock Exchange. The COVID-19 impact is likely the reason behind this decision.

2. The plant-based meat company STARFILED announced that it had raised tens of millions of yuan. This is the highest amount of financing completed by any Chinese plant-based meat company to date.

3. Beingmate announced on March 2 that its shareholder Fonterra has completed the reduction of 3% of the company's total share capital. Fonterra still holds a 14.82% stake in Beingmate.

4. CEO of a2 revealed that a2 Platinum® China label saw strong growth in China's offline channels, with sales doubling to N.Z. $146.7 million ((about 640 million yuan). a2 is now available in 18,300 stores, up from 16,400 stores at the end of 2019.

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5. Meituan published the Standard Specification of Contactless Service and advocated that restaurants should provide contactless dining service, including mobile ordering and payment, pre-ordering, take-out, and other non-contact operating solutions.

6. On March 14, Beingmate said it signed a series of annual agreements or supplementary agreements with Tatua of New Zealand and other mainstream suppliers of raw materials. Based on the current estimate of 10,000 yuan ($1431) per kilogram of lactoferrin, Beingmate expects to save 40 million yuan ($5.72 million) in the whole year.

7. China’s two leading tea drink brand HEYTEA and NAYUKI have both opened Tmall flagship stores. HEY TEA has no products on the shelf currently, and it plans to roll out new categories like juice, yogurt, and biscuits, while NAYUKI sells themed gift cards and packaged tea.

8. Nongfu Spring’s overseas IPO approval was accepted by the CSRC on March 23. This means that Nongfu Spring is getting closer to formally submitting its listing application to overseas exchanges.

9. On March 13, Starbucks announced that it would build a Coffee Innovation Industrial Park in China’s Kunshan (Jiangsu province), integrating coffee roasting, intelligent warehousing, and logistics. The first phase of the project will cost about 900 million yuan ($130 million). This is Starbucks' largest strategic investment outside the U.S. and its first in the A.P. market.

10. Junlebao has secured funds from Hillhouse Capital, Sequoia Capital, SINOLION, and Hebei Construction Investment Development Fund. Sequoia Capital became the largest institutional shareholder of Junlebao, with an investment of over 1.2 billion yuan ($171.72 million).

11. Coca-Cola said it was withdrawing its 2020 forecast in response to the impact of the COVID-19 pandemic on the group's business because it believed the expected numbers would not be met. The group had expected proprietary revenue to grow 5% and adjusted earnings per share to rise 7% to $2.25 in 2020.

Financial Results

Food companies

Company2019 Revenue (billion yuan)YOY
Three Squirrels10.19+45.61%
Master Kong61.98+2.13%
Uni-president22.02+1.1%
Dali Group21.38+2.5%

Beverage companies

Company2019 Revenue (billion yuan)YOY
China Resources Beer33.19+4.2%
Tsingtao Beer27.98+5.3%
Chengde Lolo2.25+6.29%

Dairy companies

Company2019 Revenue (billion yuan)F.Y. 2020 (billion yuan)YOY
Mengniu79.03/+14.6%
Ausnutria6.74/+25%
Feihe (Firmus)13.722/+32%
Beingmate2.797/+12.31%
Junlebao16.3/+25%
H & H Group10.925/+7.8%
Modern Farming5.51/
+11.2%
Danone
192.9/+2.6%
FrieslandCampina
87.055/-2.2%
Nestle661.4/+1.23%
Abbott222.9/+7.7%
Arla Foods79.616//
Fonterra
/43.4 (interim results)/
Synlait/2.237 (half-year results)/
a21.834 (China market)/+73.6%

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