China’s fresh-drink stocks leave investors thirsty for returns amid heated competition
Too much money could be chasing the same growth story, S&P Global Ratings says
“China’s demand for fresh-made drinks is growing fast as marketing, innovation and supply chains strengthen for this segment,” credit analyst Sandy Lim said in a report on Tuesday.
The trend could “ratchet up competitive spending and strains”, pressure margins and even dim the growth prospects of similar categories, Lim said.
The mainland market for fresh-made beverages – which includes juices, tea, milk, ice cream and coffee – could expand by close to 18 per cent a year between 2023 and 2028, the rating agency said, adding that the segment could reach 1 trillion yuan (US$139 billion) in sales by 2027.
However, investor confidence quickly tumbled for beverage chains that lacked a clear edge in the fiercely competitive industry, where supply-chain capacity is of paramount importance. Shares in Auntea Jenny have lost 21.3 per cent from their May 8 debut. Naixue has plunged more than 92 per cent since its July 2021 listing, and US-listed Chagee is down over 5 per cent since April.