Summary of Key Points
China's Want Want company saw a slight increase in revenue but a decline in profits for the 2025 fiscal year. Wangzai Milk remains the mainstay of its performance, generating approximately 11 billion yuan annually (accounting for 90% of its dairy business), although its growth has peaked. The core issues it faces include: a mismatch between the demand for reconstituted milk and current consumer preferences, difficulty in creating another blockbuster product that generates tens of billions in sales, profit compression due to changes in distribution channels, and the challenges associated with organizational restructuring (new products failing to gain traction and increased costs from reforms). The company is trying to find a breakthrough by maintaining its existing market share, expanding new markets, adjusting its distribution channels, and undergoing organizational changes, but it will still rely on the stable market for Wangzai Milk in the short term.
I. Why Has the Growth of Wangzai Milk Peaked?
Wangzai Milk's revenue for the 2025 fiscal year was around 11 billion yuan, a slight decrease of 0.3% year-on-year, indicating that its growth has slowed down. The reasons for this are as follows:
- Mismatch between Product and Demand: Wangzai Milk is made from reconstituted milk (made by mixing powdered milk with water), but younger consumers prefer pure milk and low-temperature yogurt, which they consider healthier. As a result, Wangzai Milk's main uses are now limited to gifts during the New Year and as a nostalgic product, with diminishing demand for its regular consumption.
- Exhaustion of Growth Momentum: In the past, Wangzai Milk's popularity stemmed from its distinctive sweet and cute packaging. However, there have been no significant improvements in its formula or production process in over 30 years. While it still managed to grow at a high rate in the 2023 fiscal year, its growth slowed down in 2024 and then declined in 2025, indicating that the market has become saturated, with no new customers being acquired.
- Cost Pressures on Profits: Rising prices of imported whole milk powder have reduced the gross profit margin of the dairy segment by 2.6 percentage points (from 49.7% to 47.1%), resulting in less profit.
II. Why Can't Another “Wangzai Milk” Be Created?
Despite having a national brand, distribution channels, and production capacity, it is difficult to replicate another blockbuster product like Wangzai Milk for several reasons:
- Disappearance of Competitive Advantages: The success of Wangzai Milk in the past was due to several favorable factors: limited domestic milk supply (making reconstituted milk more convenient), consumers' lack of knowledge about the difference between reconstituted and pure milk, and no competitors in the market. These advantages no longer apply; now there is an abundance of milk supply, and consumers are aware that reconstituted milk is less nutritious than pure milk, with companies like Mengniu and Yili entering the market, turning this once-lucrative segment into a competitive one.
- Stricter Regulatory Policies: In 2005, regulations required the labeling of reconstituted milk ingredients, and in 2015, further measures were implemented to improve transparency. This has exposed Wangzai Milk's nutritional shortcomings, leading to decreased sales.
- Changing Industry Trends: The current trend in the dairy industry is towards demand for room-temperature pure milk and low-temperature yogurt, which are considered essential household staples. Reconstituted milk has been categorized as a “recreational beverage,” losing its status as a daily necessity. The overall market for dairy-flavored beverages has shrunk from 102.6 billion yuan in 2014 to 60.4 billion yuan in 2020.
The stagnation in sales of similar products, such as Wahaha AD Calcium Milk and Nutritional Express, indicates that this is a widespread issue across the industry, not just for Wangzai Milk.
III. The Challenges of Transformation: Maintaining Existing Market Share or Expanding New Markets?
Wangwant's transformation strategy focuses on “maintaining existing market share, expanding new markets, and adjusting distribution channels,” but the process is painful:
- Maintaining Market Share: The company relies on its brand and gift-giving culture to stabilize its core business. With a 30-year-old brand and a stable demand for New Year gifts, as well as an expanded presence in rural supermarkets and small stores, it is unlikely to see a sudden decline in sales. However, without product innovation, it will struggle to enter new markets.
- Expanding New Markets: Many new products (such as children's pure milk and probiotics) have been launched but are tied to the Wangzai brand, lacking their own distinct identity. In the 2025 fiscal year, only the children's pure milk product sold over 100 million yuan, while other new products generated only around 30 million yuan, which is not enough to drive overall performance.
- Channel Adjustment: While snack vending stores have contributed to revenue growth (accounting for 15% of total sales), they also squeeze profits by forcing Wangwant to lower prices. This has contributed to the decrease in gross profit margins.
IV. Organizational Reform: A Short-Term Investment for Long-Term Potential?
To address these challenges, Wangwant began implementing a “category business unit system” in the second half of 2024, separating its dairy, ice cream, and snack businesses for more efficient resource allocation:
- Short-Term Costs: The division of the company has led to increased expenses for labor and marketing, with sales costs rising by 16.9% and administrative costs by 11.4% in the 2025 fiscal year, further reducing profits.
- Long-Term Benefits: This approach allows each business unit to focus on specific markets and consumer preferences. For example, the dairy division can develop healthier products that appeal to younger consumers, while the ice cream division can target summer demand. In the 2025 fiscal year, new product revenue accounted for double-digit growth, although it still does not replace Wangzai Milk as the main contributor to overall sales.
In summary, Wangwant's current situation is one where it can still rely on its past successes, but it must change if it wants to achieve long-term growth. While Wangzai Milk's core business remains stable for now, the company faces difficulties if it cannot innovate its products and adapt its distribution channels effectively.