Hong Kong drink maker Vitasoy’s profits sink after mainland China boycott sparked by leaked memo controversy

Name: Global brands face backlash in China for rejecting Xinjiang cotton
Uploaded: 2021-11-25T10:15:17.000Z
Duration: 2 min 38 s
Description: Global brands face backlash in China for rejecting Xinjiang cotton

The beverage company’s net income plummeted 95 per cent, dented by a sharp fall in sales in mainland China

A memo expressing condolences to the family of an employee who had stabbed a Hong Kong policeman before killing himself surfaced in the summer

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The drinks company declared no interim dividend, citing its disappointing results. Photo: AFP

Cheryl Heng

Published: 6:15pm, 25 Nov 2021

Hong Kong beverage company Vitasoy saw its profits tank in the six months to the end of September as business took a huge hit from boycotts in mainland China that at one point saw the iconic soy drink being pulled from shelves.

Revenue slid 18 per cent to HK$3.6 billion (US$460 million) in the period, according to a filing to the stock exchange on Thursday. Net income plummeted 95 per cent to HK$32.8 million, dented by a fall in sales in mainland China, even as its operations in other markets including Hong Kong grew steadily.

In the same period of 2020, mainland China accounted for about three quarters of Vitasoy’s revenue. Its mainland unit recorded a net loss of 27 million yuan (US$4.23 million) in the first half of the financial year, an enormous decline from profit of 670 million yuan a year earlier. Lower sales volumes and fewer government subsidies were to blame for the weak earnings, the company said.

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Global brands face backlash in China for rejecting Xinjiang cotton

The iconic drink company found itself embroiled in a political storm in July, when mainland users called for a boycott after a leaked memo surfaced on social media. The memo expressed condolences to the family of an employee, who had stabbed a Hong Kong policeman before killing himself.

Vitasoy later said the memo had been written without official approval. More than US$475 million of its market value was erased during the ensuing public backlash.

“During the months of July and August, we were off shelves and also we did not advertise. This is quite a unique situation to be in as it is the big season in the summer. As of September, our sales team was able to gradually restore our presence on shelves in mainland China,” said Roberto Guidetti, Vitasoy’s group chief executive officer, via a video conference on Thursday.

Promotions during holidays such as the Mid-Autumn Festival, National Day and the start of the school year also boosted the recent recovery, said Guidetti.

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