China equities investment opportunities from summer consumer trends

Exploring beverage and sportswear industry trends and movements of publicly traded players

Welcome to a dive into the summer consumption patterns in China. We cover soft drinks, beer, and sportswear sectors in this article, leveraging BigOne-tracked e-commerce, offline catering, and supermarket data.

This exclusive analysis, crafted from our insights presented at the Morgan Stanley Summit, is reserved for our esteemed investors. It offers a revealing look into the latest industry trends and the performance of major market players. Key topics include:

• Nongfu Spring (9633.HK)'s recovery strategies and the effects on its sales, following its public sentiment challenges since Feb;

• Eastroc Beverage (605499.SH)'s competitive stance against Red Bull in the energy drink market and its performance in the electrolyte water segment;

• The impact of the 2024 Paris Olympics on the sales of China's leading sportswear brands, Anta (2020.HK) and Li-Ning (2331.HK).

Soft drink industry: structural change driven by consumer preferance shift

The soft drink market is witnessing structural changes as consumer preferences shift toward healthier lifestyles and a passion for sports. Categories such as water, energy drinks, electrolyte water, and sugar-free tea have seen a year-on-year increase in GMV share, outperforming other segments.

Additionally, competition within the industry is intensifying, leading to a trend of decreasing concentration across most categories. In the energy drink sector, Eastroc Beverage continues to expand, capturing a share of Red Bull's market. Meanwhile, Nongfu Spring's sales have been impeded following a public opinion incident, allowing competing brands in its main categories to grow.

Nongfu Spring (9633.HK): bouncing back from a PR crisis, but challenges persist on two key product lines

Nongfu Spring, a leading beverage brand, has experienced mixed results in its recent market performance. While its sugar-free tea line has shown only marginal growth, its green bottled water has propelled the company's market share in the water category, particularly due to its competitive pricing strategy.

Nongfu Spring has navigated through a tumultuous period marked by public opinion challenges. This context is crucial to understanding the strategic introduction of its Green Bottle Water product. We talked about this before in our previous article.