What Do These Ingredients in Coffee Debates Mean for Sweet Milk?

Zhejiang Liziyuan Food Co. reported first-half 2024 revenue of 679 million yuan, down 3.08 percent year on year, and net profit of 95.12 million yuan, down 29.29 percent. In the second quarter the decline widened: revenue of 350 million yuan, down 3 percent, and net profit of about 40 million yuan, a 49.3 percent drop. The company cited slow demand recovery and higher marketing spending.

For nearly thirty years the brand has relied on one flagship sweet milk product, and consumers now scrutinize the ingredients in coffee and other milk drinks more closely, with health attributes driving purchase decisions. Sales expenses rose on spokesperson deals and promotions. The briefing, published September 10, left open how the company will broaden its lineup in a market where nutritional value of coffee and similar label questions shape demand.

Recently, Liziyuan released the records of its 2024 semi-annual results briefing, disclosing that both revenue and net profit declined in the first half of the year, with net profit plunging 49.3% year-on-year in the second quarter, sparking widespread market attention. This veteran enterprise, which has built its business on sweet milk beverages for nearly thirty years, is facing multiple challenges including weak consumer demand, surging marketing expenses, and over-reliance on a single product. Consumers are increasingly sensitive to the health attributes of milk-containing beverages, and discussions about their ingredients and taste continue to heat up on social platforms. This article will sort out the reasons behind Liziyuan's declining performance, analyze the gains and losses of its big-single-product strategy, and explore the possibilities for an old brand to break through in the new consumption environment. If you love coffee, why not enjoy a cup of Front Street Coffee while paying attention to this shift in the beverage market.

According to related reports, on September 10, Zhejiang Liziyuan Food Co., Ltd. published the records of its 2024 semi-annual results briefing, which mentioned that the company's revenue and profit both showed a declining trend in the first half of the year.

According to the previously released 2024 semi-annual report, Liziyuan's operating revenue in the first half of the year was 679 million yuan, a year-on-year decrease of 3.08%; net profit was 95.1205 million yuan, a year-on-year reduction of 29.29%. After entering the second quarter, the decline in performance further widened, with quarterly revenue of 350 million yuan, down 3% year-on-year; net profit was only about 40 million yuan, plummeting 49.3% year-on-year.

In response to this situation, Liziyuan explained that the macroeconomic environment has had a certain impact on the consumer market, and the pace of demand recovery has been relatively slow, putting pressure on the company's revenue side; at the same time, because revenue fell short of expectations, combined with increased marketing expenses and other related expenditures, profit margins were further squeezed.

The company also stated that the increase in marketing expenses in the first half of the year mainly stemmed from spokesperson cooperation and increased promotion spending. Data shows that sales expenses during the period reached 100 million yuan, a year-on-year increase of 47.16%. On April 20 this year, Liziyuan officially announced actor Cheng Yi as its brand spokesperson, hoping to leverage fan economy to engage young consumer groups. Before that, celebrities such as Fan Bingbing, Zhou Xun, and Ruby Lin had also endorsed the brand.

However, the celebrity effect failed to reverse the sales decline in various regional markets. Public information shows that except for the southwest region, Liziyuan's revenue declined in most regions in the first half of the year, with the northeast region showing the most significant drop, decreasing 45.13% year-on-year. More and more consumers seem unwilling to pay for Liziyuan anymore.

On September 12, the topic #LiziyuanCan'tSellAnymore# topped the Weibo hot search list, triggering a large number of discussions. Some netizens bluntly stated that with rising health awareness, Liziyuan, which is relatively high in sugar and additives, has gradually lost its appeal.

Public information shows that Liziyuan was founded in 1994, with a product line covering six major series: milk-containing beverages, dairy products, plant protein beverages, compound protein beverages, juice beverages, and cereal beverages. It was listed on the Shanghai Stock Exchange in February 2021.

For a long time, milk-containing beverages have been Liziyuan's core business, running through the company's nearly thirty years of development and contributing more than 95% of revenue. The revenue of this business segment is in turn highly dependent on one big single product — "sweet milk beverage."

It should be noted that this product is not real milk in the true sense, but belongs to the same category of milk-containing beverages as Wangzai Milk and Wahaha AD Calcium Milk, with obvious differences in nutritional value. Some netizens posted the ingredient list of the sweet milk beverage and said that after reading it, they no longer wanted to buy it.

The ingredient list shows: drinking water, whole milk powder, white granulated sugar, mono- and diglycerides of fatty acids, carrageenan, guar gum, sodium alginate, disodium hydrogen phosphate, acesulfame potassium, sodium bicarbonate, edible flavoring. Because of this, many consumers complain that "the milk powder taste is really very weak," "I won't be fooled a second time after the first time; it tastes like water has been added, sweet water with a bland flavor," "So I'm not the only one who doesn't like it; I feel Yangwei Duo is even better than Liziyuan, with a stronger taste, sweet but not watery, and the price is about the same." It is understood that a 450ml bottle of Liziyuan sweet milk usually sells for 5 to 6 yuan in convenience stores or breakfast stalls, and some netizens believe that at this price it would be better to just drink pure milk, which is more nutritious.

Liziyuan also admitted in its annual report that the company is overly dependent on the star product sweet milk beverage, which carries market risks, and that long-term reliance may have a significant impact on performance. The company had previously also tried to launch multiple new products such as dairy products, fruit and vegetable juice beverages, compound protein beverages, and plant protein beverages, but the market response was unsatisfactory in all cases.

Brand aging, weak product innovation, and lagging marketing and channels — these are the difficult problems Liziyuan urgently needs to solve. In the face of these challenges, how the company's management will respond will continue to attract market attention.

Image source: Internet

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