How Coffee Formulation Trends Cut Into Non-Dairy Creamer Sales

Jiahe Foods reported first-half 2024 revenue of 1.073 billion yuan, down 19.12% year on year, with net profit of 69.4439 million yuan, a 48.77% decline. The company attributed the drop to lower sales revenue and higher selling expenses. The result reflects a broader change in coffee formulation, as new-style tea and coffee brands move away from non-dairy creamer in their drink recipes.

Jiahe Foods built its position on non-dairy creamer, holding a 14.33% domestic market share and 26.85% export share by 2018. Non-dairy creamer, commonly called coffee mate, became a standard ingredient in coffee and milk tea for its solubility and shelf life. Changing ingredients in coffee drinks, driven partly by trans fat concerns, now pressure that core business.

Jiahe Foods delivered a less-than-stellar performance in the first half of 2024: revenue of 1.073 billion yuan, down 19.12% year-on-year; net profit of 69.4439 million yuan, nearly halved year-on-year. This company, known as the "king of non-dairy creamer," once rode the wave of Nestlé's instant coffee era and the explosive growth of the milk tea industry to secure a top position in the sector, but now faces a wave of new tea beverage brands collectively "removing non-dairy creamer." Starting from the financial report data, this article traces the rise and fall of non-dairy creamer from coffee mate to milk tea base, examines how the trans fatty acid controversy has reshaped the industry landscape, and explores the prospects of Jiahe Foods in the era of zero non-dairy creamer.

On August 31, Jiahe Foods disclosed its 2024 semi-annual report. Data showed that the company's total operating revenue in the first half of the year was 1.073 billion yuan, a decrease of 19.12% from the same period last year; net profit was only 69.4439 million yuan, a year-on-year decline of 48.77%.

Jiahe Foods' explanation for this was that the sharp decline in net profit during the reporting period was mainly due to reduced sales revenue and increased selling expenses.

Public information shows that Jiahe Foods was founded in 2001, with core businesses covering the R&D, production, and sales of non-dairy creamer, coffee, and other solid beverages. As early as 2018, the company's non-dairy creamer products ranked among the industry leaders with a 14.33% domestic market share and a 26.85% export share. With the halo of "king of non-dairy creamer," Jiahe Foods was highly sought after by capital at the time of its listing, with its stock price once climbing to 32.95 yuan in July 2021, and total market value once reaching 13 billion yuan.

Non-dairy creamer has a more colloquial name on the consumer side—"coffee mate." This product was born in the 1950s and is made into a solid powder using edible vegetable oil and other ingredients. It can not only simulate but even surpass the taste of dairy products, and also has characteristics such as a long shelf life and easy solubility in water. A small amount added can instantly make bitter coffee sweet and mellow, so it quickly became popular in the global coffee market.

In the 1990s, Nestlé instant coffee brought this "coffee mate" into the Chinese market. For the first generation of domestic coffee consumers, drinking instant coffee with "coffee mate" almost became a fixed practice, aimed at making the originally bitter instant coffee smoother.

However, what truly propelled the domestic non-dairy creamer industry to take off was the milk tea industry. It is understood that the earliest batch of domestic milk tea brands was born during a period when the dairy industry was not yet well developed. In the 1990s, milk sources were limited, and the basic flavor of milk tea mainly relied on non-dairy creamer, milk tea powder, chemical additives, and artificial colors. As the market gradually matured, mid-range tea beverage brands emerged in large numbers and began introducing ingredients such as broken tea leaves, canned fruit, and jam for upgrades, but non-dairy creamer always retained a place in milk tea formulations.

When Jiahe Foods was listed in 2021, its prospectus disclosed a group of major customers, many of which are well-known brands, including CoCo, Auntea Jenny, Good me, Yihetang, Mixue Bingcheng, Xiangpiaopiao, Uni-President, Wahaha, and Unilever.

Non-dairy creamer itself is a permitted food additive under Chinese regulations and does not pose a food safety problem. But the problem lies in its key raw material, hydrogenated vegetable oil—if the hydrogenation reaction is incomplete, trans fatty acids may be produced, and long-term excessive intake of trans fatty acids is harmful to health.

The World Health Organization launched the "REPLACE" action plan as early as 2018, aiming to push countries to remove industrially produced trans fatty acids from the food supply chain by 2023.

As consumers pay more attention to food safety, concerns about trans fatty acids have also deepened. Although non-dairy creamer and trans fatty acids cannot be directly equated, the public's attitude toward non-dairy creamer still tends to be conservative, and there has even been a situation of "turning pale at the mention of non-dairy creamer."

Since last year, the domestic new tea beverage industry has collectively "escaped" from non-dairy creamer, with major brands successively announcing the replacement or upgrading of milk tea bases: at the end of July 2023, Chagee announced that its stores would use a new base, "Bingbolang non-hydrogenated base milk," and promoted that the product contains no creamer, non-dairy creamer, or hydrogenated vegetable oil; in August, ChaPanda launched a real fresh milk tea series, highlighting that it contains no non-dairy creamer or trans fatty acids and is low in fat and light; in September, Heytea launched real milk developed specifically for tea beverages, emphasizing that it contains no non-dairy creamer or any additives, and that every 100 milliliters contains 3.8 grams of protein. Almost all leading tea beverage brands began to focus on promoting "no non-dairy creamer" products to alleviate consumers' concerns about food additives.

After the release of the semi-annual report, Jiahe Foods' stock price fell to 10.57 yuan per share, down nearly 70% from its historical high of 32.95 yuan per share. In the face of the zero non-dairy creamer era, how Jiahe Foods will transform is worth continued attention.

Image source: Internet

The above content is compiled by CoffeeHunters, a coffee news website.