In the Quant Value Newsletter, Quant Investing provides a valuation analysis of China Foods Limited, highlighting its beverage portfolio, recent results, strategic initiatives, and growth prospects in Asia.
Disclosure: I consider the publisher of Quant Investing (Tim Du Toit) a friend for over a dozen years now and I enjoy his writing and analysis. I think readers will too so I asked him if I could share some excerpts from his older newsletter issues with readers. This post contains affiliate links so we may earn a few dollars if you purchase a subscription to any of Tim's services. - Jacob Wolinsky, Founder of Hedge Fund Alpha
Also see:
Discover winning stock strategies with the Quant Value Newsletter, check our flexible pricing, and find top opportunities instantly with the screener. Subscribe now and take control of your investing edge.
China Foods Limited - Asia
Description
China Foods Limited (China Foods) is a Hong Kong-based investment holding company primarily engaged in the beverage industry.
The company operates under the umbrella of the state-owned COFCO Group, its core business involves the processing, bottling, marketing, and distribution of a wide range of non-alcoholic beverages.
Products and Services
China Foods manufactures and distributes an extensive portfolio of beverages under the Coca-Cola series in Mainland China. Its product offerings include:
- Sparkling drinks (e.g., Coca-Cola, Sprite)
- Juice
- Bottled water
- Milk drinks
- Energy drinks
- Tea-based beverages
- Coffee drinks
- Functional nutrition drinks
- Sports drinks
- Plant-based protein beverages
Sales by Geography
All the company’s business activities and revenues are generated within Mainland China.
Market Presence
China Foods’ market presence is primarily tied to its exclusive relationship with Coca-Cola, managing a significant portion of Coca-Cola’s bottling operations across Mainland China.
This makes the company a crucial player in one of the world’s largest beverage markets. Its extensive distribution network allows it to maintain a strong brand presence throughout urban and rural China.
Management and Shareholding
China Foods is owned primarily by the China State-Owned Assets Supervision and Administration Commission (SASAC), which holds about 74.1% of the company’s shares valued at approximately USD 829 million.
SASAC is a subsidiary of COFCO Group, a large state-owned food processing company in China. This state-backed ownership underscores the company's strategic importance in China's consumer goods sector.
Recent results
For the full year ended 31 December 2024, sales increased marginally by 0.2%, reaching RMB 21,491.8 million, up from RMB 21,446.4 million in 2023.
While sales volume decreased by 9.7% primarily due to the transformation and upgrading of the water product category, the company implemented price increases and product mix improvements, which offset the volume loss.
Operating profit amounted to RMB 1,865.9 million, up 0.9% from RMB 1,849.0 million in 2023. The modest growth was driven by an improved product mix and higher average selling prices, which offset a decline in sales volume. Additionally, lower procurement costs for most raw materials (excluding sugar) contributed to an improved gross profit margin.
Profit attributable to owners of the company rose 3.4% to RMB 860.5 million in 2024 from RMB 832.6 million in 2023, mainly due to a RMB 5.3 million contribution from the share of results of associates, compared to no such contribution in 2023.
As a result, earnings per share grew by 3.4% to RMB 30.76 cents in 2024 from RMB 29.76 cents in 2023.
Operational Highlights
China Foods underwent significant strategic and operational restructuring:
Product Category Transformation:
Introduced innovative products like Coca-Cola & Oreo limited edition, and Velvet Latte under the Costa brand.
New offerings in functional beverages like “Predator” and expanded soda water lines under the Lohas brand.
Marketing & Sales Network Overhaul:
Direct customer share increased to 46%.
Catering channel revenue surged 132% year-on-year.
Rural market coverage expanded to 280 cities.
Market distribution rate improved 20%; frozen terminal growth in key areas hit 35%.
Value Chain Optimization:
Per-unit revenue rose by RMB 1.59, and main packaging unit prices grew by RMB 1.27, improving gross margin by 2.6 percentage points.
Supply Chain Modernization:
A central planning system enabled 13% production cost reduction and 25% improvement in inventory turnover through cross-regional mould sharing and collaboration with upstream suppliers.
New Retail and Smart Retail:
Smart retail scale expanded to 280+ cities across 31 provinces; machine network now tops the industry.
COFCO Yuexiang Club recorded 88% growth in direct-to-consumer revenue, covering 56 million fans, and achieved double-digit revenue growth.
Online platforms experienced significant growth in member activity, repurchases, and order volume.
Outlook
Sales Growth & Strategy:
In 2025, China Foods highlighted it’d continue its dual-track strategy of “reshaping + innovation”.
Traditional businesses will benefit from the deepening of the “Dingsheng Programme” with Coca-Cola - enhancing product mix, price strategy, and execution to improve sales, profit, and market share.
Profitability Enhancements:
Despite anticipated aluminium price increases (due to reduced supply), other key raw material prices are expected to remain stable.
The company aims to continue improving gross margins through product mix upgrades and business optimization.
Market Environment & Risks:
Although external headwinds may deepen, China’s domestic consumption remains robust.
Government policies targeting increased domestic demand and income growth are expected to stimulate consumption further.
The company is actively investing in high-margin premium products and expanding into new consumer segments and channels, with a continued push into digital and intelligent retail.
Further Reading
Portfolio
