Winston Lo Yau-fai, Vitasoy’s executive chairman, says his favourite drink from the beverage firm’s 300-strong roster is its original one – soya bean milk.
“I like Vitasoy soya bean milk the most and drink it every morning. I like to add one third of a pack to my coffee, making it nutritious and tasty,” he told the South China Morning Post.
The story of Vitasoy begins in Hong Kong in the 1940s when Lo’s father Kwee Seong Lo started working with refugees from mainland China. Worried about the malnutrition of many of the children, he also noticed that many of the immigrants were lactose intolerant. Soybean is a rich source of fat and proteins, which he believed would help the malnourished.
The original Vitasoy soya bean milk, which is slightly sweetened, quickly became a household name in Hong Kong.
Over the years Vitasoy has added tea-based beverages like lemon and chrysanthemum to its product range.
It was so popular that Coca-Cola even launched a brand of non-carbonated drink called Yeung Gwong (which means Sunshine in Cantonese) to challenge its dominance and compete against a variety of Vitasoy’s most popular drinks. However, Yeung Gwong failed to erode the Hong Kong firm’s market share.
Vitasoy has proven an enduring competitor, which Lo puts down to its heritage.
“To many local consumers, Vitasoy is more than a casual drink. It represents quality and wholesomeness. There is a strong emotional bond between Vitasoy and our customers. We grew up together,” he says.
Although Chinese consumers haven’t grown up with Vitasoy in quite the same way that many people in Hong Kong have, the company is betting that they’re going to be equally receptive to its drinks. To that end Vitasoy now boasts factories in Shanghai, as well as in Shenzhen and Foshan, both of which are in Guangdong province. Last week, it announced that it will invest a further Rmb500 million ($81.48 million) in a new plant in Wuhan, which is expected to start production next year.
The fact that Vitasoy is making another major investment only three years after opening the Foshan plant suggests that it is confident about expanding beyond southern China. But Apple Daily reckons that it is too early to tell whether the plan will succeed. “Even though Vitasoy has performed well in China, its business is largely in Guangdong province [which is close to Hong Kong]. So it is much harder to predict whether it will succeed in other parts of the country,” one industry-watcher told the newspaper.
Hua Ling, an analyst at China Merchant Securities, was more optimistic. “Compared with Yili, Mengniu and other dairy producers, which focus on the production of milk and yogurt, Vitasoy sells mainly soya milk. At the moment, it has no direct competitor in that arena and no one comes even close to its size.”
National Business Daily was positive about Vitasoy’s prospects too, believing that more lactose-intolerant consumers will switch to plant-based alternatives.
Moreover, one of Vitasoy’s strengths is its ability to release new drinks flavours that appeal to Chinese tastes. In July it launched Hong Kong-style milk tea – a mixture of black tea and evaporated milk – to much excitement.
Mainland China is Vitasoy’s largest market outside Hong Kong, contributing 34% of its total revenue. Last year, sales reached $192 million, a growth rate of 28%. The Hong Kong market grew only 6% to $238 million, or 42% of total sales, during the same period.
“The development of the Hong Kong market has become increasingly mature. On the other hand, the growth rate for the mainland market will continue to grow faster… It won’t be too surprising when the China business exceeds Hong Kong,” says Lu Botao, Vitasoy’s chief executive.
But Coca-Cola may not have given up entirely on the soya milk market. There are rumours that the soda giant is interested in acquiring VV Group, another soya milk producer, says the Hong Kong Economic Journal. VV Group, which is based in China and which also produces food and alcohol, had Rmb500 million of sales last year.
© ChinTell Ltd. All rights reserved.
Exclusively sponsored by HSBC.
The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.