Goldman Sachs: Uni-President China’s beverages under pressure in the third quarter; reduced promotions support margins

Why was third-quarter profit broadly flat?

Uni-President China’s third-quarter net profit in 2026 was 730 million yuan, up 0.5%, in line with Goldman Sachs’ expectations. Improvements in food and cost controls broadly offset the effects of weaker beverage sales and gross margin, as well as higher raw-material prices.
Third-quarter food sales grew at a mid-single-digit rate year over year, while beverage sales declined at a mid-single-digit rate, though the decrease narrowed from the second quarter. Contract-manufacturing sales grew at a high-single-digit rate year over year. Management said sales trends from October to early November were broadly similar to those from August to September.

Third-quarter instant-noodle sales grew at a mid-single-digit rate year over year, while product premiumization lifted average selling prices: products priced above 5 yuan accounted for about 47% of instant-noodle sales, a record high. Management believes there is still room to grow by expanding sales coverage for key products.
In beverages, milk tea performed relatively resiliently. Management said reduced-sugar jasmine green milk tea posted triple-digit growth this year, but its penetration was about 40% that of the original-flavor product. The energy drink “Huanshen” had reached about 500 thousand sales outlets, and the company plans to continue expanding its reach.
Part of the third-quarter growth in contract manufacturing came from new customers, but their strong bargaining power also weighed on gross margin. The company said it would continue screening orders for quality and profitability.

PET raw-material cost pressure intensified in the third quarter, and the group’s gross margin edged down. Reduced promotions, favorable sugar costs, product upgrades within categories, and cost savings provided a partial offset. Management said the year-over-year decline in the expense ratio in the third quarter exceeded the decline in gross margin.
Management expects raw-material inflation to weigh on gross margin by about 0.5 to 1 percentage points in 2027, with more of the pressure concentrated in the first half: PET cost pressure began to emerge in May 2026, making the year-earlier comparison base more challenging.
The company believes there is still about 5 to 6 percentage points of potential room to reduce promotions, with relatively greater scope for promotion and expense savings in beverages. Management expects gross margin to remain under pressure in the fourth quarter of 2026. Sales are seasonally lower in that quarter, which could further weaken the dilution of expenses.

Management expects instant-noodle sales, beverage sales, and group profit all to grow in 2027. Supporting factors include expanded distribution for core instant-noodle products, stabilization in sweet tea, new products ramping up, and further promotion optimization.
Citing recent beverage pressure, Goldman Sachs lowered its sales forecasts for 2026 to 2028 by 1% to 2%, and its reported net profit forecasts by 3% to 5%. The bank expects group sales to decline 0.4% year over year in the second half of 2026, with beverages down about 5% and instant noodles up about 6%.
Goldman Sachs expects full-year reported net profit of 2.18 billion yuan in 2026, up 6% year over year, but recurring net profit to decline 3%. Recurring net profit is expected to fall 13% year over year in the second half. The bank cut its 12-month target price from HK$8.36 to HK$8.20 and maintained a Neutral rating.