Food and Drinks

Cooler than marijuana? Hong Kong’s iconic Vitasoy drinks brand is on a high thanks to Chinese memes

  • The 78-year-old Hong Kong drink maker has suddenly found itself one of the hottest brands among Chinese youth
  • The company was founded as a way to fight malnutrition after its founder witnessed the plight of refugees in wartime Hong Kong
PUBLISHED : Tuesday, 01 January, 2019, 10:03am
UPDATED : Wednesday, 02 January, 2019, 8:57am

Whether it’s “cooler than marijuana”, as suggested by recent internet memes, is a matter of personal taste and probably one best debated in private.

But one thing beyond dispute is that Vitasoy, the 78-year-old Hong Kong drink maker, has all of a sudden found itself one of the hottest brands among China’s young people.

Its iconic lemon tea is so popular in the world’s biggest beverage market that internet users are jokingly comparing the experience of savouring the sweet-and-sour taste to that of smoking marijuana.

In Hong Kong, shares of Vitasoy soared by almost 50 per cent over the course of 2018, a stellar performance against a 14 per cent slump in the broader market.

It’s been a remarkable journey for a company founded in wartime Hong Kong as a way to fight malnutrition after its founder witnessed the plight of refugees.

“It’s decades of work, R&D [research and development], and having operations outside Hong Kong that bore fruit,” said Roberto Guidetti, chief executive of Vitasoy, in an interview.

Homegrown Hong Kong: the wholesome story of Vitasoy

Vitasoy is one of the few Hong Kong brands that have so far succeeded in capturing a major share of the vast Chinese retail market, and one seen by many as having the potential to become an international success.

Riding on China’s increasing household incomes and a shift towards healthier drinks, Vitasoy has expanded from Hong Kong and the adjacent Guangdong province to the central and eastern regions over the past few years.

It is now a leading player in China’s soymilk market, which was valued at 9 billion yuan (US$1.3 billion) last year by market research firm Euromonitor International.

The secret ingredient of the brand’s success lies in its well paced expansion in mainland China and an unwavering focus on improving its plant-based drinks, according to the company’s top official.

But analysts warned challenges and competition lie ahead for the company if it is to maintain the outstanding growth it’s seen.

Vitasoy was founded in 1940 by Lo Kwee-seong, an entrepreneur raised in British Malaya. Lo was motivated to provide cheap, nutritious food to the masses after he arrived in Hong Kong aged 20 and volunteered at a refugee camp.

The soymilk maker survived the subsequent Japanese occupation of Hong Kong and expanded from a single factory in Causeway Bay to overseas markets in Australia, Singapore, and the US over the next few decades.

74 per cent of drinks cartons in landfill from Vitasoy – firm ‘must recycle’

But it was the discovery of the enormous demand across the border in mainland China just six years ago that really ignited the firm’s growth.

“When we talked about scaling up in size, mainland China had the biggest impact,” said Roberto Guidetti, chief executive of Vitasoy.

“[People’s] interest in premium, high-quality, functional, healthy, nutritional products has increased. Purchasing power has increased,” he said.

The company decided its two main products, soymilk and lemon tea, were well placed to be part of that trend.

Both are plant-based drinks made from natural raw materials like soybean and tea leaves, rather than chemical ingredients or powders.

Vitasoy began exploring opportunities in 2012, making its way into regions beyond Guangdong province, including Hubei province in central China and the southern provinces of Fujian and Guangxi.

An e-commerce boom over the past few years only accelerated the company’s growth.

Now the mainland Chinese market accounts for 69 per cent of the company’s profits, up from less than 20 per cent a decade ago. Revenue from mainland China grew more than sixfold to HK$3.7 billion (US$473 million) last year from 2009.

Vitasoy enjoys over 40 per cent market share in the Chinese soymilk segment, making it the largest player, according to Euromonitor International.

“The best thing Vitasoy has done is that it entered the mainland market from southern China, which reduced costs. It expanded to central and eastern China only when the products proved to be successful,” said Cyrus Tai, an equity analyst with Orient Securities (Hong Kong).

Demand has been so strong that Vitasoy decided to invest 1 billion yuan (US$145 million) in building a brand new factory in Dongguan, Guangdong province in order to keep up with the orders.

The Dongguan plant, scheduled to be put to use in 2021, will span 100,000 square metres and become Vitasoy’s largest factory.

The rapid development of mobile internet has been a huge boost to Vitasoy’s growth in China.

“In the past it was almost impossible for a company that started from just one province to gain national recognition,” said Guidetti, who joined Vitasoy in 2013 after working for Coca Cola’s China business for six years.

That was because only large brands could afford to put up advertisements on platforms such as China’s state television broadcaster to increase brand awareness. But the rise of social media, e-commerce platforms and online video streaming sites made it much easier for smaller provincial players to gain popularity, Guidetti said.

This is especially true for Vitasoy – the unexpected trending of funny internet memes about its lemon tea since last year has exposed the brand to a much wider market.

The memes usually feature cartoon figures grabbing a box of Vita Lemon Tea and gulping it with a straw, complemented with the jingle, “Drinking Vita Lemon Tea is cooler than smoking marijuana,” which rhymes in Chinese.

Guidetti is keen to stress that the company did not start or drive any of the memes.

“When this came out in the beginning, some of our associates in China were not so sure whether it’s a good thing,” he said.

“It’s one of those things with social media that people find funny or relevant, and it just happens like that. We saw a lot of creativity in building visuals, animations and all these stories, it’s amusing.”

The company cares more about its long-term image and growth than just “being super cool”, in spite of the benefits of the social media exposure, Guidetti said.

Sales through e-commerce platforms, which enabled Vitasoy to access markets yet to be covered by its sales representatives, now account for about a tenth of its revenue in mainland China.

It sold 720,000 bottles of soymilk and lemon tea in its first month of sales on e-commerce website earlier this year, making it one of the most popular beverage brands, according to a report by the China National Commercial Information Centre.

But strong competitors have emerged and greater challenges lie ahead for Vitasoy to keep up its stunning growth rate, analysts said.

Mainland Chinese food giants such as Dali Foods Group and Mengniu Dairy have ventured into soymilk and have been entering markets in northern China, where Vitasoy has yet to make a strong presence.

Moreover, the fact that Vitasoy relies essentially on only two products is a great source of risk, according to Orient Securities’ Tai.

“If they don’t diversify their products, the market will be saturated after the company expands to other parts of China,” said Tai.