China’s traditional food giants struggle to stay relevant in digital age

Among the string of Hong Kong-listed companies filing earnings results this month, food companies whose focus is mainland China have reported mixed performances, with those seen as technology savvy having the upper hand in attracting young customers and growing revenues.

Taiwan based Want Want China, the largest rice cracker and flavoured milk producer in China, saw a 14.5 per cent fall in net profit to 1.5 billion yuan (US$225 million)for the first half of the year, while Ajisen China, a ramen chain founded by Hong Kong billionaire Poon Wai, registered 80.9 per cent slump in net profit for the period amid its ongoing store closures and after last year’s one off gain from its investment in Baidu Takeout Delivery, which added 500 per cent to net profit last year.

In contrast, boasting a market cap of only HK$17.8 billion compared to HK$64.7 billion for Want Want China, braised duck neck supplier Zhou Hei Ya posted a 5.3 per cent gain in first half net profit to 401 million yuan, mainly lifted by surging online sales and increased number of retail stores across the country.

“The group has established a strong presence in 11 major domestic online marketplaces, including one newly operated storefront on Jumei.com, in the first half of 2017,” Zhou Hei Ya said in a filing to the Hong Kong stock exchange. “By leveraging its own social media channels, the company enhanced customer loyalty by active interaction with the customers.”

The Wuhan based company, built by self made billionaire Zhou Fuyu, has been reshaping its brand into a trendy snack in an attempt to lure young customers, especially millennials, into buying what used to be seen as an old fashioned snack food.

The company made headlines in 2014 when its logo briefly appeared on screen in the Hollywood blockbuster Transformers: Age of Extinction, creating valuable media buzz for the brand.