In-Depth Analysis of Master Kong's Beverage Business: Dilemmas in Product Innovation and Paths to Breakthrough

Based on the latest public information and market data, I will systematically analyze the challenges faced by Master Kong’s beverage business and the possible response strategies of Wei Hongcheng.

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According to the H1 2025 financial report released by Master Kong Holdings (0322.HK), the company’s overall revenue reached RMB 40.092 billion, a year-on-year decrease of 2.7%, marking its first mid-term revenue decline since 2021 [1][2]. In this performance report, as the largest revenue contributor, the beverage business achieved revenue of RMB 26.359 billion, accounting for 65.70% of the total revenue; however, it declined by 2.6% year-on-year, also marking the first decline of this business in half-year and annual reports since 2021 [1][2].

From the perspective of specific categories, the three core categories of tea beverages, packaged water, and fruit juice declined by 6.3%, 6.0%, and 13.0% respectively, showing a situation of overall pressure [2]. Notably, despite the revenue decline, Master Kong’s net profit in H1 2025 reached RMB 2.271 billion, with a year-on-year growth rate of over 20%, mainly driven by cost reduction and efficiency improvement brought by a 5.35% decrease in sales costs [3]. However, the sustainability of the “profit growth without revenue growth” model warrants caution.

Looking back at the performance trajectory of the beverage business since Wei Hongcheng took charge in 2019, the revenue of the beverage business grew steadily from 2019 to 2024: reaching RMB 35.6 billion, RMB 37.28 billion, RMB 44.802 billion, RMB 48.336 billion, RMB 50.939 billion, and RMB 51.621 billion respectively, with its proportion in total revenue gradually increasing from 57.44% to 64% [1]. In terms of profit, it increased from RMB 0.946 billion in 2019 to RMB 1.919 billion in 2024, and even reached RMB 1.335 billion in H1 2025, exceeding the full-year profit of 2023 and approaching the full-year profit level of 2022 [1]. This data indicates that Wei Hongcheng has indeed achieved remarkable results in improving the operational efficiency of the beverage business.

However, a growth inflection point has emerged. The downward trend in H1 2025 has sounded an alarm for the new CEO - how to reactivate the revenue growth engine while maintaining profits has become the primary issue facing Wei Hongcheng.

Sugar-free tea is one of the fastest-growing segments in China’s beverage market in recent years. According to data from iiMedia Research, the scale of China’s sugar-free tea industry was only RMB 2.26 billion in 2015, and soared to RMB 40.16 billion in 2023, with a compound annual growth rate of 48%, achieving an explosive year-on-year growth of 101.2% in 2023. It is expected that the market size will reach RMB 81.56 billion in 2028 [1]. This track has naturally become a must-compete arena for major beverage giants.

However, Master Kong faces severe structural disadvantages in this high-growth track. According to data from Mashangying, comparing the beverage peak seasons (April-September) of 2024 and 2025, the absolute market share of sugar-free ready-to-drink tea of “comprehensive beverage groups” including Master Kong has shrunk significantly; while established sugar-free tea enterprises such as Suntory have achieved a market share of over 86% in the 2025 peak season, showing strong market dominance [2]. In addition, according to a report from the China Tea Marketing Association, as of June 2025, Nongfu Spring’s market share in the sugar-free tea market increased by 10.94 percentage points year-on-year to 79.36%; while Suntory’s market share decreased by 6.96 percentage points year-on-year to approximately 20% [4].

This means that head brands represented by Nongfu Spring’s Oriental Leaf and Suntory Oolong Tea together occupy nearly 95% of the sugar-free tea market share, while Master Kong’s market share is less than 1/3 of Suntory’s, at around 6%-7% [2][4]. More severely, this data shows a downward trend, and Master Kong’s presence in the sugar-free tea market is being further diluted.

Master Kong started its layout in the sugar-free tea field relatively late and faces multiple competitive pressures. First, Nongfu Spring’s Oriental Leaf has already occupied a high ground in consumers’ minds with its clear positioning of “original leaf tea” and strong channel capabilities. Second, Suntory Oolong Tea has firmly held the high-end market for more than 20 years. Although its share has declined in recent years, its brand loyalty and channel advantages remain stable. In addition, new and old players such as Genki Forest and Coca-Cola have entered the track one after another, leading to high homogeneity in the track and a price war that could break out at any time. Although Master Kong has two product lines, “Pure Zero Sugar” and “Heir to Tea”, its fatal shortcomings are scattered product lines, insufficient brand voice, and vague consumer awareness [2].

The core dilemmas faced by Master Kong’s beverage business can be analyzed from three dimensions: product innovation, channel transformation, and brand trust.

, Master Kong has adopted a dual-track strategy of “sugar-free transformation of classic products + incubation of new brands”. Since 2020, the company has launched sugar-free versions of traditional sugary teas, including sugar-free iced black tea and sugar-free jasmine tea; in 2022, it launched the mid-range product series “Pure Zero Sugar”, which uses cold extraction and slow filtration technology, focusing on 0 sugar, 0 fat, 0 calories, and 0 additives from original tea; in 2024, it further launched the high-end brand “Heir to Tea”, focusing on regionally characteristic teas such as Yunnan Green Mandarin Pu’er, Southern Fujian Tieguanyin, and Chaoshan Fenghuang Dancong [1][3].

However, this product matrix has obvious structural problems. First, the product lines are too scattered to form scale effects. Unlike Oriental Leaf which focuses on the single brand of “original leaf tea”, Master Kong’s sugar-free tea business lacks a unified brand strategy, with “Pure Zero Sugar” and “Heir to Tea” operating independently, diluting brand resources. Second, high-end products are difficult to achieve high sales volume. The “Heir to Tea” series is priced at RMB 9.9 per bottle. Although the limited-edition Oriental Beauty sugar-free tea launched in September 2025 sold out 50,000 bottles in 83 minutes on Douyin Live, showing certain market appeal, this scarcity marketing is difficult to replicate in regular product lines [1]. Third, product homogeneity is severe. The taste of Master Kong’s sugar-free tea is not significantly different from that of competitors, and it lacks distinct recognition in terms of raw materials, technology, and brand stories, making it easy to fall into price war competition.

, Master Kong’s traditional channel advantages are collapsing. In 2024, the number of its distributors plummeted from 76,875 to 67,215, with a loss of nearly 10,000 in one year, the largest decline in the past five years [2]. Behind this is not only the overall shrinkage of the traditional FMCG channel environment, but also a reflection of distributors’ shaken confidence in Master Kong’s growth prospects. At the same time, competitors such as Nongfu Spring have launched a “freezer hegemony” war, by providing free smart connected freezers to terminal stores and using “exclusive agreements” to seize prime display positions, while Master Kong’s investment in channel digitalization and sinking is obviously insufficient [4].

, Master Kong is facing a “trust deficit” crisis. In 2024, the company raised prices for a number of core products. Although it boosted profits in the short term, it angered price-sensitive users. The new product “Chopped Chili Fish Fillet Soup Noodles” launched in October of the same year contained only 0.3 grams of dehydrated fish fillets in the vegetable packet, which was accused of inconsistency between the promotional image and the actual product, triggering mockery from netizens [2]. This “image fraud” incident not only damaged the brand image of the instant noodle business, but also affected consumers’ trust in Master Kong as a whole. When consumers find that new products are just packaging gimmicks rather than substantive upgrades, brand loyalty is quickly lost.

Facing the above-mentioned dilemmas, Wei Hongcheng needs to carry out systematic restructuring at the strategic level. Based on industry trends and Master Kong’s resource endowments, the following strategies are worthy of key consideration.

. Master Kong should shift from “dispersed layout of multiple brands” to “focused breakthrough of core SKUs”, concentrating resources to build 1-2 flagship products with clear differentiated positioning. Specifically, it can learn from the successful experience of “Heir to Tea” in regionally characteristic teas, deeply explore the characteristic tea resources of various provinces in China, and build a “local tea” product matrix, forming competitive barriers with cultural stories and scarce raw materials. At the same time, increase investment in technology, such as further upgrading technologies like cold extraction and slow filtration, and in-depth cooperation with origin tea gardens, to build a quality moat from the supply chain end.

. In terms of the distributor system, Master Kong needs to re-examine the profit distribution mechanism with distributors and launch more attractive incentive policies to curb the trend of distributor loss. In terms of terminal construction, refer to Nongfu Spring’s “freezer strategy”, increase the deployment of smart freezers, and improve terminal management efficiency through digital means. In terms of channel sinking, given the growth potential of third- and fourth-tier cities and rural markets, Master Kong should increase the coverage of sinking channels to avoid ceding market space to competitors.

. The recession cases of Japanese brands (such as Suntory and Yakult) in the Chinese market indicate that the “core SKU” strategy is no longer applicable in the rapidly changing Chinese market [4]. Master Kong should establish a more agile product innovation mechanism to shorten the cycle from concept proposal to product launch. It is recommended to increase the proportion of R&D investment to more than 3% of the current level, establish a rapid response mechanism of “quarterly new product launches”, and keep up with the consumption trends of health, functionality, and scenario-based application. At the same time, strengthen linkage with new retail platforms, such as cooperating with channels like Hema and Douyin E-commerce, to achieve rapid response of “R&D in the current month, launch in the next month” [4].

. At the product level, Master Kong needs to show genuine innovation sincerity, avoid “gimmick-based” marketing, and let consumers feel the substantive upgrade of products. At the communication level, it should tell good brand stories and convey the brand values of “sincerity, health, and innovation”. At the pricing level, it is necessary to balance cost pressure and consumer acceptance, avoiding the loss of core user groups due to aggressive price increases.

. Wei Hongcheng has a bachelor’s degree from Imperial College London and an MBA from Harvard Business School, and has worked at Blackstone Group and PepsiCo, with international vision and modern management experience [2]. This advantage can be transformed into Master Kong’s differentiated competitiveness by introducing advanced international product concepts, management models, and supply chain resources to improve overall operational efficiency and product strength.

Master Kong is in a critical strategic transition period. The shrinking trend of the instant noodle business is irreversible, and the growth engine of the beverage business is facing the risk of stalling. New CEO Wei Hongcheng is entrusted with the important task of revitalizing the “Master Kong” brand.

From the positive perspective, Master Kong still has profound brand accumulation, a huge channel network, and sufficient cash reserves, providing sufficient buffer space for strategic adjustments. The year-on-year net profit growth of over 20% in H1 2025 indicates that the company’s cost reduction and efficiency improvement have achieved initial results [3]. Although the revenue of the beverage business has declined, the profit level is still improving, showing the potential for business structure optimization.

From the challenge perspective, the competitive landscape of the sugar-free tea market has basically solidified, with Oriental Leaf and Suntory forming a duopoly. It is extremely difficult for Master Kong, as a latecomer, to break through. Reconstructing channel confidence and consumer trust takes time, and the evolution of the industry competition situation may not leave much breathing space for Master Kong.

Overall, whether Wei Hongcheng can reverse the dilemma depends on whether he can give correct answers to the following three key questions: How to make instant noodles “worth eating” again? How to build a truly recognizable brand in the red ocean of sugar-free tea? How to rebuild trust with distributors and consumers? There are no standard answers to these questions, but it is certain that Master Kong must break out of the traditional “comfort zone” and embrace consumption changes with a more open attitude to win back the market in the new round of competition.

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[1] Sina Finance - “The Founder’s Son Takes Over as CEO: Can He Lead Master Kong to Break Through?” (https://finance.sina.com.cn/tech/roll/2026-01-05/doc-inhfhavm2112371.shtml)

[2] Alpha Factory - “Master Kong’s Ambition in CEO Replacement: Core Business Decline, Return as King in 2026?” (https://news.qq.com/rain/a/20260107A07ACN00)

[3] Eastmoney - “Master Kong’s Ambition in CEO Replacement: Core Business Decline, Return as King in 2026?” (https://caifuhao.eastmoney.com/news/20260108102103173628650)

[4] 36Kr - “The ‘Domestic Brand’ Misrecognized by 84% of Chinese Sees Plummeting Profits: The… of Japanese Beverage Giants” (https://m.36kr.com/p/3613383587508741)