What Does Yangyuan Beverage's First-Half Result Signal?

Yangyuan Beverage reported revenue of about 2.942 billion yuan for the first half of 2024, down 2.02 percent year on year, while net profit rose 12.97 percent to roughly 1.03 billion yuan. The stock fell 8.82 percent to 19.23 yuan on the day the report was released, reflecting concern about its reliance on Six Walnuts.

Six Walnuts still contributes more than 90 percent of revenue, and the newer Yangyuan Plant Milk line remains at the million-yuan level. The company's long-running heavy marketing, light R&D approach has kept advertising spending well above R&D expenses, a pattern that limits coffee beverage development and other diversification efforts across the plant-based drinks market.

With the catchy advertising slogan "Drink more Six Walnuts when you use your brain a lot," Yangyuan Beverage once turned Six Walnuts into a phenomenon-level blockbuster product in the plant-based protein beverage sector. However, its parent company has faced sustained performance pressure in recent years. According to its 2024 semi-annual report, Yangyuan Beverage's revenue in the first half of the year was approximately 2.942 billion yuan, a slight year-on-year decline, while net profit grew against the trend. The market reacted negatively, with the stock hitting the daily limit down on the day the semi-annual report was released. For a long time, Yangyuan Beverage has followed a "heavy marketing, light R&D" approach, with advertising spending far exceeding R&D expenses. Today, Six Walnuts, which contributes more than 90% of revenue, is struggling to grow, and the revenue of the new Yangyuan Plant Milk series is only at the million-yuan level. This article will analyze the difficulties and challenges faced by Yangyuan Beverage from the perspectives of performance data, marketing and R&D investment, and product structure.

"Drink more Six Walnuts when you use your brain a lot" — this highly brainwashing advertising slogan once made "Six Walnuts" create a sales miracle as a blockbuster product in the plant-based protein dairy market. Public data shows that its parent company, Yangyuan Beverage, once reached revenue of 9.117 billion yuan in 2015, but since then it has continued to decline and has never achieved a bigger breakthrough.

On August 26, Yangyuan Beverage released its 2024 semi-annual report. The report shows that the company achieved revenue of approximately 2.942 billion yuan in the first half of the year, a year-on-year decrease of 2.02%; net profit of approximately 1.03 billion yuan, a year-on-year increase of 12.97%; and net profit after deducting non-recurring gains and losses of 775 million yuan, a year-on-year increase of 8.23%.

On the day the semi-annual report was announced, Yangyuan Beverage's stock price directly hit the daily limit down, closing at 19.23 yuan as of August 26, a drop of 8.82%, with total market value shrinking to 24.335 billion yuan, reflecting market concerns about its future profitability prospects.

Yangyuan Beverage listed on the Shanghai Stock Exchange on February 12, 2018, with an issue price of 78.73 yuan per share. Since listing, the company has remained profitable, but its performance peak remained in its first year of listing, when its market value once reached 60.999 billion yuan.

Yangyuan Beverage's main business is the research and development, production, and sales of plant-based protein beverages using walnut kernels as raw materials, and its best-known product is Six Walnuts. The company has long pursued a "heavy marketing, light R&D" strategy. Through overwhelming advertising bombardment, combined with famous host Chen Luyu's line "Drink more Six Walnuts when you use your brain a lot," the product quickly swept the country. In addition to celebrity endorsement, Six Walnuts also once sponsored Jiangsu TV's "Super Brain" for a sky-high price of 158 million yuan. According to statistics, from 2014 to 2018, Yangyuan Beverage's cumulative advertising expenses reached 2 billion yuan, while R&D expenses during the same period were only 19 million yuan, with advertising spending more than 100 times R&D investment.

Regarding the revenue decline in the first half of the year, Yangyuan Beverage explained that it was mainly affected by decreased market sales demand. As for net profit growing while revenue declined, the company did not explain in detail. Some analysts believe this may be related to lower costs. The semi-annual report shows that during the reporting period, operating costs, advertising expenses, and management expenses all decreased compared with the same period last year, falling by 5.33%, 0.07%, and 1.91%, respectively.

At the same time, since 2021, Yangyuan Beverage's investment in R&D has continued to shrink. Public information shows that in 2017, the company's selling expenses were 1.073 billion yuan, and R&D expenses were 11.1 million yuan. By 2022, R&D expenses were 28.92 million yuan, an increase of only 17.82 million yuan over six years. In the first half of 2023, R&D expenses were 13.98 million yuan, while selling expenses reached 318 million yuan, with marketing expenses 22 times R&D expenses.

Usually, when revenue scale declines, a company will strengthen financial cost control, and R&D expenses may be cut. As a result, R&D activities are restricted, which may affect a company's innovation capability and long-term development.

Various signs indicate that Six Walnuts, which has long contributed more than 90% of Yangyuan Beverage's revenue, can no longer be sold, and this flagship product is gradually fading from consumers' view. On the other hand, while the core blockbuster product walnut milk has encountered a sales bottleneck, Yangyuan Beverage's efforts to develop new products have not yet gained market recognition. The semi-annual report shows that although the company launched the Yangyuan Plant Milk series, the revenue of this segment in 2023 was only 1.315 million yuan, far from the 5.7 billion yuan scale of walnut milk.

As the saying goes, "Success is also Six Walnuts, and failure is also Six Walnuts." In an environment of weak domestic consumer market and fierce competition, as the leader in the walnut milk industry, whether Yangyuan Beverage can emerge from the trough through innovation and tell a new brand story remains to be seen.

Image source: Internet

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