China Consumer

Protein power

Hong Kong’s Vitasoy soaks up fast-growing soymilk sales across the border


Folklore suggests it was Liu An, a prince and an advisor to the emperor during the Han Dynasty, who discovered soymilk when tending to the needs of his ailing mother. Knowing that the nutritious legume needed a lot of chewing, he soaked it and ground it into liquid. Miraculously Liu’s mother regained her strength after a daily fix of the drink. Hey presto: soymilk became a symbol of wellness.

The world’s first soymilk factorywas built in France, not China, however. Li Yuying, an agricultural economist and a supporter of revolutionary Sun Yat-sen, set up Caséo-Sojaïne in 1908, to produce a variety of soy products including flour, bean curd (or tofu) and soymilk. Using the factory as a base for Chinese students to exchange political ideas, Li and his colleagues also developed proprietary techniques for making soy products and won the world’s first patent for soymilk.

In recent decades the influence of Western diets saw dairy grow at the expense of the soy equivalent in China. However, an increasing interest in low-fat products and vegetarianism has reignited local interest in the plant-based protein drink. Hong Kong is at the vanguard, in. terms of soymilk’s popularity with the average consumer spending $27 on the drink per year. Mintel, a London-based consulting firm, says demand across the border is catching up, with soymilk’s estimated compound annual sales growth running at about 24% in recent years.

Hong Kong-based Vitasoy International is one of the brands looking to benefit by turning processed soymilk into a conveniently packaged drink.

Vitasoy’s financial results have been supercharged over the last two years, with its mainland sales logging double-digit growth quarter after quarter. In the first half of 2018, Vitasoy’s revenues there rose a third on the year, dwarfing the 4% lift on its home turf. The jump in profit was even more impressive, at 42%, compared to a 5% uptick in Hong Kong. In fact, the mainland has been Vitasoy’s largest market since 2015, accounting for two-thirds of its sales – which totalled HK$4.45 billion ($570 million) as of September. Vitasoy is one of very few Hong Kong brands that have succeeded in grabbing a major share of the Chinese market.

Founded in 1940 by Lo Kwee-seong, a native of Shaanxi who spent his teenage years in British Malaya and later studied at the University of Hong Kong, Vitasoy is a household name in the former colony.

Lo started his business from a refugee camp for people fleeing the civil war in China, after he noticed many cases of malnutrition. Company folklore has it that he bought a stone grinder, soybeans and sugar, and taught onlookers how to make soymilk. A major commercial breakthrough came in 1953, when the company developed a sterilisation technology that allowed its milk to be stored without refrigeration. “Vitasoy’s sales then crossed one million [Hong Kong dollars] for the first time,” Winston Lo Yau-lai, who took over his father’s empire in the late 1970s, told Apple Daily.

The adoption of the Tetra Pak packaging technology in 1975 further propelled revenues. By virtue of extending the soymilk’s shelf life to six months, the novel (and much lighter) packaging encouraged Vitasoy to think about exports to other parts of Asia and beyond. But inevitably the mainland market was always going to be the gamechanger. News portal Jiemian said Vitasoy commanded 42% of the ready-to-drink segment within the overall soymilk market in 2017 (which amounted to approximately $9 billion in sales, including fresh soymilk). This is despite Vitasoy’s commercial presence still being rather concentrated in China’s southern and coastal areas.

Although dietary tastes seem to be evolving in Vitasoy’s favour, the problem it now faces is competitors trying to piggyback on its success. Fujian-based Dali Foods Group, for instance, launched Doubendou in April 2017. Within nine months the soymilk brand had reached breakeven, with sales jumping 72% in the first half of 2018. “The ambition of Doubendou is beyond taking down Vitasoy or commanding the soymilk market”, wrote Kuaixiaorui Guancha, a zimeiti. “More significantly it is looking to grab customers from the dairy milk market, which is also the breakfast market.”

Vitasoy doesn’t want to be dependent on its soymilk sales and it has widened its range into tea, juices and bottled water. Its lemon tea has been a particular favourite recently, backed by an attention-grabbing meme that went viral proclaiming “Drinking Vita Lemon Tea is cooler than smoking marijuana”.

A survey by food delivery platform in November found that Vitasoy’s Lemon Tea was the second most popular beverage in Guangzhou (after Coke) and ranked fifth in Shanghai.

Investors’ bullish outlook for the company has driven its Hong Kong-listed shares 50% higher in the past year, trading at 55 times its trailing earnings as of mid-January.


© ChinTell Ltd. All rights reserved.

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.