In the first half of 2026, the persistent decline of traditional spicy strip products positioned vegetable-based snacks, led by the konjac snack Mo Yu Shuang, as the pillar of Weilong's revenue, contributing over 65% of total sales. However, the growth rate for this segment has decelerated sharply from 44.3% in the same period last year to 15.8%. With its primary growth driver losing momentum, product moats thinning, and a new product pipeline yet to materialize, Weilong faces the pressing question of how to sustain its growth narrative.

Growth Deceleration, Yet Online Sales Surge

For the first half of 2026, Weilong reported revenue of 3.715 billion yuan, a 6.7% year-on-year increase, and net profit of 766 million yuan, up 4.0%. While this marks a gain in both top and bottom lines, the performance falls short of expectations when compared to the high double-digit growth rates of the previous two years. Amid this slowdown, significant shifts are occurring in both Weilong's product mix and channel structure.

From a product perspective, revenue from seasoned flour products (spicy strips) fell 9.8% to 1.181 billion yuan, shrinking their revenue share from 37.6% to 31.8%. Conversely, vegetable-based products, primarily Mo Yu Shuang, generated 2.441 billion yuan, a 15.8% increase, raising their share from 60.5% to 65.7%. Other categories, including stinky tofu, contributed 92 million yuan, a 44.1% jump, but accounted for only 2.5% of total revenue. This trend underscores a clear substitution effect, with spicy strips declining as vegetable snacks take the lead.

Regarding channels, offline remains the dominant force, but its revenue share dropped from 90.4% to 87.0%, with growth of just 2.7% lagging the overall 6.7% increase. In contrast, online channels saw a substantial 43.8% surge to 483 million yuan, with direct online sales soaring 62.4% to 370 million yuan. Online's share of revenue rose to 13.0% from 9.6% a year ago. Weilong attributed this divergence to a deep restructuring of retail channels, noting that traditional offline channels face persistent pressure while emerging formats like discount snack stores and membership supermarkets rapidly evolve. Similarly, traditional e-commerce is losing steam as instant retail, livestreaming, and online-offline integrated models gain traction, fragmenting consumer purchasing paths. In response, Weilong is expanding into these new channels, though this strategy comes at a cost.

The regional performance of offline channels further highlights the challenges. Sales in the Southwest region surged 84% to 747 million yuan, while the East China market, Weilong's largest, grew slightly by 4.7% to 781 million yuan. However, the remaining four regions all declined: South China plummeted 31.7% to 436 million yuan, Central China fell 18.0% to 395 million yuan, and North China and Northwest China saw minor contractions of 1.4% and 0.5%, respectively. Weilong attributed the volatility in some regions to a shift in contract signing from regional to a headquarters-based model for certain direct-to-customer accounts, effectively reclassifying revenue to the company's headquarters location in East China. This accounting adjustment, however, masks the true market performance in key areas like South and Central China.

Konjac Segment Cools, Raising New Growth Questions

While offline channels struggle, interest-based e-commerce platforms, such as Douyin and Kuaishou, have become standouts, driving rapid growth. This success, however, is expensive, most directly reflected in a sharp rise in selling expenses. These expenses increased 26.9% to 669 million yuan, with the expense ratio climbing from 15.1% to 18.0%. The primary driver was a spike in promotional and advertising costs, which nearly doubled from 161 million yuan to 307 million yuan, accounting for almost the entire increase in selling expenses. This spending covered brand building, including celebrity endorsements, and platform traffic acquisition costs. The surge in selling expenses led to a decline in operating profit despite a rise in gross profit. Gross margin improved to 47.8% from 47.2%, and gross profit increased by 8.1% to 1.776 billion yuan. Yet, operating profit fell 3.3% to 918 million yuan. The 4.0% net profit growth was largely supported by non-operating factors, including a 13.8% decrease in income tax expenses and a 24.8% increase in net financing income.

Despite the expense-related pressure, Weilong remains among the more profitable snack companies in China. Its longer-term challenge, however, is not about current profitability but about sustaining its growth narrative. The vegetable-based products, led by Mo Yu Shuang, have been a key growth driver, with revenue growth of 56.6% in 2024 and 44.3% in 2025, propelling overall company growth. The slowdown to 15.8% in the first half of 2026 has consequently decelerated the company's overall performance. This deceleration is driven by intensifying competition. As the konjac snack category has boomed, more snack companies have entered the market. For instance, Yanjin Puzi generated 1.737 billion yuan from its konjac category in 2025 and has listed it as a core growth area. Qia Qia's first konjac production base began operations in Yunnan in late July, and Juezi Food has also designated konjac as a core category in its product lineup. While Weilong pioneered the konjac snack category, product moats are thinning in a market moving toward oversupply, making it difficult to maintain lasting brand loyalty among consumers. As competition intensifies and the market becomes a red ocean, the potential for incremental growth within the konjac snack category is uncertain.

To navigate this, Weilong must both defend and expand the market share of its mature Mo Yu Shuang product while also developing the next potential blockbuster to prepare for future product transitions. Currently, other categories, including new products like stinky tofu, generated only 92 million yuan in revenue in the first half of the year. Developing new hit products will take time and carries inherent uncertainty.

Notably, despite the slowdown in performance and uncertainty about future growth, Weilong's share price rose 10.47% on the first trading day after the earnings release, pushing its market capitalization back above 20 billion yuan. This was largely driven by its generous dividend policy. The company announced a combined interim and special dividend of 0.28 yuan per share, representing a payout ratio of approximately 90%. Furthermore, a new dividend plan for 2026-2028 commits to distributing at least 80% of distributable net profit attributable to equity holders as cash dividends annually, subject to conditions. This dividend return, which far exceeded market expectations, has directly boosted investor confidence, temporarily overshadowing concerns about the sustainability of Weilong's growth. Ultimately, however, products have life cycles, and competition in the consumer goods industry is never-ending. Weilong's long-term success will depend on its ability to consistently develop products that resonate with consumers.