Pacific Securities: The Southeast Asian energy drink market is vast and the pattern is uncertain, focusing on opportunities for domestic industry leaders to go overseas

The Zhitong Finance App learned that Pacific Securities released a research report saying that the year-round high temperature environment in Southeast Asia provides a natural foundation for the development of soft drinks. Among them, the local energy drink industry is the fastest growing sub-industry for soft drinks. The overall retail sales volume of energy drinks in 2024 was about 30.6 billion yuan, and the retail sales CAGR for energy drinks in 14-24 was 6.0%. The Southeast Asian energy drink market lacks an absolute leader, and the growing market can achieve breakthroughs through cost-effective and differentiated products. Currently, the Southeast Asian energy drink industry has broad space and the market pattern is undecided. Dongpeng Drink (605499.SH) has a clear overseas plan and will soon be listed on H shares to seek overseas development. The company is expected to explore overseas markets with cost-effective product positioning and localized supply chain layout strategies.

Pacific Securities's main views are as follows:

The Southeast Asian market has a young population structure, a high proportion of the labor force, increased internal volume intensity, and significant consumption upgrade dividends. Energy drinks are the fastest growing sub-category of soft drinks

The total population of the six Southeast Asian countries exceeds 610 million. Among them, Indonesia, Vietnam, and the Philippines are the most populous countries. The population structure of Southeast Asia is young and accounts for a large proportion of the working population. The population under 30 accounts for more than 40% of the population, and generally more than 50% of the working population. The characteristics of the population structure are suitable for the growth of energy drinks with refreshing energy needs. At the same time, Southeast Asia's overall per capita disposable income is growing at a low to medium rate, and consumption upgrades coexist with demand for cost performance.

Southeast Asia's year-round high temperature environment provides a natural foundation for the development of soft drinks. In 2024, the total retail sales of the Southeast Asian soft drink industry was about 287.2 billion yuan, and the CAGR for 14-24 was 2.2%. Among them, Vietnam and the Philippines are the fastest growing countries in the soft drink industry. Among them, the energy drink industry in Southeast Asia is the fastest growing sub-sector for soft drinks. The overall retail sales volume of energy drinks in 2024 was about 30.6 billion yuan, and the retail sales CAGR of energy drinks in 14-24 was 6.0%.

Vietnam and Cambodia lead the energy drink market, and the pattern is scattered and contains opportunities

By country, energy drinks in Southeast Asia can be divided into three types of markets: 1) Growth markets - Cambodia and Vietnam: Vietnam is the largest market for energy drinks, followed by Cambodia. Both countries are also the fastest growing markets for energy drinks. In 14-24, the retail sales of energy drinks in Vietnam and Cambodia were both 12% and 9%, far faster than the Southeast Asian energy drink industry as a whole. 2) Mature market - Thailand: Energy drinks developed the earliest in Thailand, the overall growth of the industry is slowing down, and the pattern of the top three in the industry is stable. 3) Potential markets - Philippines and Indonesia: Overall, influenced by local culture, the pace of life is slow, but the population is large and there is no adequate education on energy drinks.

The Southeast Asian energy drink market lacks an absolute leader, and the growing market can achieve breakthroughs through cost-effective and differentiated products

Among the leading players in the Southeast Asian energy drink market, Pepsi is the only global brand. According to Euromonitor statistics, Pepsi Sting has a total retail sales of 7.57 billion yuan in the main Southeast Asian market, accounting for the top share of energy drinks in Southeast Asia; followed by three Thai beverage companies, namely Tencel TC Group, Carabao, and Osptspa. The rest of the local brands are relatively weak in terms of financial strength and brand base.

The Southeast Asian energy drink market lacks leading brands with an absolute advantage. It is not dominated by global brands like other sub-categories of soft drinks, such as packaged water, carbonated drinks, juice, etc., and the Southeast Asian market is still growing rapidly. At the same time, the price range for energy drinks in Southeast Asia is concentrated at 2.5-3 yuan, mostly in small packages. Cost-effective and innovative products have opportunities for latecomers. For example, No. 1 in the second tier of growth markets such as Vietnam and Cambodia, Pepsi Sting has achieved differentiated breakthroughs with more cost-effective, PET bottled products, and fruity products.

Investment advice

The Southeast Asian energy drink industry has broad space and the market pattern is undecided. Dongpeng Drinks (605499.SH) has a clear overseas plan and will soon be listed on H shares to seek overseas development. The company is expected to explore overseas markets with cost-effective product positioning and localized supply chain layout strategies. According to estimates of the size and pattern of the energy drink industry in Southeast Asian countries, the company can be expected to achieve revenue of 5 billion dollars in the medium to long term when going overseas to Southeast Asia. In the future, it is expected that the company's specialty drinks+new products+overseas third-tier parallel will support a revenue volume of 40 billion yuan. Assuming that the company's net interest rate stabilizes at 21%, the corresponding net profit is 8.4 billion yuan, steady state PE is 23-25X, and the corresponding forward market value space is 1932-210 billion yuan.

Risk Alerts

Overseas policy risks; overseas channel construction blocked; overseas factory construction blocked; overseas product promotion fell short of expectations; industry competition intensified.