First-half revenue for food company Want Want fell 12.8 per cent to RMB9709.5 million (US$1.45 million) while gross profit margin reached a record high.
Yet despite the Chinese New Year sales period being 11 days shorter than last year, sales of rice crackers edged up 0.8 per cent to RMB2071.6 million.
Intensified competition resulting from sluggish overall growth in the industry hit sales for dairy products and beverages. An emerging sub-category, room-temperature yogurt, hit demand for children’s flavoured milk, with the segment’s revenue dropping by 18.5 per cent.
Floods and unfavourable weather in China hit snack foods revenue, particularly popsicles, plus an increase in counterfeit products negatively affected sales of the group’s star snack product Hot-Kid ball cakes. The overall revenue of snack foods fell by 11.1 per cent.
The cost of sales in the first half amounted to RMB5069 million, a decrease of 20.9 per cent. The cost of key raw materials, such as whole-milk powder, decreased by more than 30 per cent. This enabled the group to increase its investment in product display and incentives to distributors, and resulted in a 5.3 per cent jump in gross profit margin to 47.8 per cent – a record since the listing of the group.
However, the management aims to maintain an “appropriate” profitability level while continuing to invest in branding, product research and development. Because of the fall in revenue, gross profit eased by 1.9 per cent from the same period last year to RMB4640.5 million.
The group has been gradually introducing healthy products, such as brown-rice/brown-sugar rice crackers and Baby Mum-Mum products to address the increasing health-consciousness of consumers.
Want Want has also increased its interaction with consumers through new media. Online themed activities had about 19 million views, and the number of members participating in the Hot-Kid club reached 6 million.