Shares of Eastroc Beverage (Group) Co., Ltd. (SH: 605499) have been under significant pressure, with the stock price nearly halving since the start of the year.

The company recently found itself at the center of controversy due to a false online video, which it has strongly denied and reported to authorities.

The video, which spread across social media platforms, purported to show the company's founder and chairman, Lin Muqin, refusing to drink the company's flagship energy drink, Eastroc Super Drink, at an internal dinner. The clip suggested he stated, "I don't usually drink this, I drink something else," leading to the damaging "founder doesn't drink his own product" narrative.

In response, Eastroc Beverage issued a clarification statement on June 27, labeling the video as completely fabricated with no factual basis. The company stated that the false information misled consumers and investors, damaging its reputation, and that it had secured evidence and filed a report with public security authorities. It vowed to pursue legal action against those responsible.

Further reports clarified that the footage originated from an event on April 16 involving a visit to the Chongqing headquarters of Zhangxue Motorcycle. Eastroc stated that Chairman Lin was not present at that event due to work commitments, and the man in the video was not him. The founder of Zhangxue Motorcycle also posted a video to dispel the rumor, explaining the context was related to a different conversation entirely.

The partnership between Eastroc and Zhangxue Motorcycle began earlier this year, with Eastroc Super Drink becoming the official sponsor in January and the relationship was upgraded to a global naming partnership in April.

Impact on Share Price and Market Performance

The controversy has coincided with a steep decline in the company's stock. By the close on June 26, Eastroc's A-share price had fallen to 110.9 yuan, marking a drop of 1.62% for the day and extending a four-session losing streak. This price represents a decline of nearly 50% from its level of 211.19 yuan at the beginning of the year.

Despite the recent challenges, the company reported strong financial results for 2025, with total revenue reaching 20.875 billion yuan, a year-on-year increase of 31.8%, and net profit attributable to shareholders of 4.415 billion yuan, up 32.72%.

Dominance of the Core Product

The company's success is heavily reliant on its core energy drink, Eastroc Super Drink. Founded in 1994 and listed on the A-share market in 2021 (with a subsequent Hong Kong listing in February of this year), Eastroc Beverage carved out its market position by focusing on this single product starting in 2009.

It strategically targeted a blue-collar demographic in construction, logistics, and delivery sectors with a competitive pricing strategy, differentiating itself from the market leader, Red Bull. The company further capitalized on Red Bull's trademark disputes from 2016 onward, aggressively expanding its distribution channels and using high-probability promotional campaigns like "One Yuan Enjoy" to rapidly grow its market share in the energy drink sector.

In 2025, revenue from Eastroc Super Drink alone exceeded 70% of the company's total, reaching 15.599 billion yuan, a 17.25% increase, and making it the sales leader in China's energy drink industry.

Challenges in Diversification Efforts

Following the success of its flagship drink, Eastroc attempted to diversify its product portfolio. It launched products targeting female consumers, such as the "She Can" juice energy drink in 2021, and an "Eastroc Sparkling Super Drink"气泡水 in 2022. However, these efforts have seen limited success, and the products are now difficult to find in the market.

More recently, the company has entered the competitive electrolyte water and tea beverage markets with products like "Hydrate Now" and "Fruit Tea." Leveraging its established distribution network and similar promotional tactics, these new lines achieved revenues of 3.274 billion yuan and approximately 1.986 billion yuan (including other beverages), respectively, in 2025.

Nevertheless, these segments are fiercely contested. "Hydrate Now" faces competition from brands like Genki Forest's Alien and new entrants from giants like Mengniu, PepsiCo, and Coca-Cola. "Fruit Tea" competes against established players such as Nongfu Spring's Tea π and Uni-President's Ice Black Tea. Analysts question whether Eastroc can replicate its energy drink success in these crowded markets.

Food and beverage industry analyst Lin Yue noted that while promotions like "One Yuan Enjoy" can boost sales, their core value lies in building digital channel infrastructure. He suggested that Eastroc's playbook from its energy drink success is replicable in theory. However, the intense competition in the broader beverage market, with giants like Coca-Cola, Red Bull, and PepsiCo fully engaged, poses a significant challenge. Heavy reliance on low-price promotions can erode profits and potentially hinder investment in product development and marketing. The success of new products like "Fruit Tea" remains uncertain and will ultimately depend on the strength of the product itself.

Attempts to reach Eastroc Beverage for comment on its stock performance and product strategy for items like "Fruit Tea" were unsuccessful.