Multiple media outlets reported on August 14 that WANT WANT CHINA (00151.HK) Chairman Tsai Eng-meng issued an internal letter to all staff in early August, labeling the company's first-quarter performance for fiscal year 2026 (April to June) as a "major operational crisis." The letter called for a company-wide reflection on issues such as insufficient product innovation and aging sales channels, urging reforms.

According to the disclosed internal letter, Tsai wrote: "I anticipated this difficulty a few years ago. We have enjoyed nearly 30 years of good times relying on a few blockbuster products, but we have failed to innovate and adapt. When the market underwent drastic changes in recent years, our cooperation methods with distributors and dealers failed to keep pace with the times, leading to customer loss and declining profits from operating WANT WANT CHINA products." He attributed the crisis to "complacency and failure to take timely corrective measures" over the past few years, emphasizing that the company must reflect on itself rather than blaming the market, customers, or the broader economic environment. He expressed confidence in WANT WANT CHINA's competitive advantages in products and brands.

Tsai demanded that employees "save as if spending your own money," eliminate roles without output or contribution, and actively and courageously try new business approaches in response to the changed market. A staff member confirmed the letter's authenticity to China Business Journal.

On July 26, WANT WANT CHINA issued a profit warning, estimating a 6% year-on-year decline in revenue for the first quarter of fiscal year 2026 (April 1 to June 30) and a 38% drop in profit attributable to equity holders. The announcement warned that if current business trends do not significantly change, the first-half results for fiscal year 2026 would be adversely affected. The interim report for that period is typically released in November.

The company cited several reasons for the first-quarter profit decline, including a double-digit drop in revenue from traditional wholesale channels, which account for over half of total revenue; a high single-digit increase in operating expenses due to divisional restructuring and marketing investments; and rising raw material costs, with imported whole milk powder costs rising by a mid-double-digit percentage and palm oil costs by a low-double-digit percentage.

In the prior fiscal year 2025, WANT WANT CHINA achieved record-high total revenue of 24.401 billion yuan, up 3.8% year-on-year, but net profit attributable to equity holders fell 11.5% to 3.837 billion yuan, indicating a trend of revenue growth but declining profit. The fiscal year 2025 report showed that traditional wholesale and modern trade channels still accounted for nearly 70% of total revenue but had experienced high single-digit declines for two consecutive years.

Overall operating expenses (distribution and administrative costs) for fiscal year 2025 rose 14.2% year-on-year. Distribution costs (selling expenses) increased by 16.9% to 3.54 billion yuan, rising from 12.9% to 14.5% of total revenue. Administrative expenses grew 11.4% to 3.352 billion yuan. The company explained that this was due to increased spending on new product launches, channel investments, and staffing costs after reorganizing into product-based divisions.

WANT WANT CHINA is a leading food and beverage listed company. The Want Want brand was officially established in 1983, starting with rice crackers and expanding into a diversified food and beverage enterprise. It was listed on the main board of the Hong Kong Stock Exchange in March 2008. Core business segments include rice crackers, dairy and beverages, and snacks. Iconic products include Want Want Milk, Want Want Snow Rice Crackers, and Want Want Senbei, alongside other product lines like candies, jellies, alcoholic beverages, and coffee, sold in multiple domestic and international markets.

In fiscal year 2025, revenue from rice crackers reached 5.936 billion yuan, a slight increase of 0.5%, with growth for Snow Rice Crackers and Senbei nearly stagnant. The largest revenue contributor, dairy and beverages, brought in 12.342 billion yuan, up 1.9% year-on-year. However, revenue from the flagship product Want Want Milk declined by 0.3% year-on-year. This dairy beverage, a "childhood taste" for many, is currently the company's only product exceeding 10 billion yuan in annual sales, accounting for nearly half of total revenue, and is now in a competitive phase of market share.

These are the "few blockbuster products" Tsai mentioned, which have remained largely unchanged. A bright spot in the fiscal year 2025 results was the snack segment, which grew 10.4% to 5.915 billion yuan, with candy revenue hitting a record high, driven by new QQ soft candy series and marketing tied to wedding scenarios, sports, and gaming IPs.

In recent years, WANT WANT CHINA has been pursuing innovation in products, organization, and channels to reduce reliance on traditional blockbusters. Financial data shows that revenue from new products launched in the past five years accounts for a mid-teen percentage of total revenue, though most have not yet become major hits.

Beyond the mature rice cracker and dairy segments, WANT WANT CHINA has expanded into new areas like alcoholic beverages, coffee, and functional snacks. In the alcoholic beverage sector, it has launched products such as Sawa Mini Milk Wine, Chili Liqueur, and Green Plum Soaked Wine, targeting young consumers through convenience stores. The coffee business, under the Bond Coffee brand, has expanded its product matrix to include bagged coffee and ready-to-drink coffee. On the snack and beverage front, the company has introduced products like peeled fruit juice soft candies, probiotic rolls, and electrolyte jelly, moving towards healthier and functional options.

Organizationally, at the end of fiscal year 2024, WANT WANT CHINA restructured its product matrix, established new product divisions, and adjusted internal performance metrics to accelerate new product launches and expansion into new cities. While traditional wholesale channels have long supported the company's main revenue, WANT WANT CHINA is now focusing on online platforms and snack discount stores, offering differentiated product sizes for different channels. However, new product development and channel expansion have increased operating expenses, and the return on investment for some innovative initiatives remains to be seen.