The Shenzhen-based company is rapidly developing beyond its original energy drink focus, as it continued to post strong growth in the first half of this year

Key Takeaways:

• Eastroc has filed a second Hong Kong IPO application, after its original one lapsed, showing its sales rose 37% in the first half of this year
• A billion-dollar listing could help the beverage maker fund new production bases as it expands beyond its original energy drink focus

In 2017, Eastroc Beverage (Group) Co Ltd. (605499.SH) was largely confined to its home base in South China's Guangdong province, where it started as a state-owned enterprise in 1994. Fast forward to the present, when, under its current private ownership, it has served up its signature drinks across China and is taking baby steps into overseas markets in Indonesia, Vietnam and Malaysia.

Now, the company is aiming to serve up its stock to thirsty Hong Kong investors who seem eager to purchase just about anything in one of the city's best IPO markets in years. Despite its old-economy background, the company could attract strong interest for its rapid growth story as it expands both geographically beyond China, and also into new beverage areas beyond its original energy drink focus.

The company's stock is already listed across the border in Shanghai, and the new application would follow a recent trend for globally minded Chinese companies already listed in Shanghai and Shenzhen to make second IPOs targeting more international investors in Hong Kong.

Eastroc has also been expanding its four existing production bases and begun construction of three new ones, with an eighth being planned. Its overall production capacity of 4.9 million tons last year, with an 89.5% utilization rate, is already up sharply from 2.8 million tons in 2022. The company expects its current works in progress, including 5.9 billion in new investment, to lift its total capacity to 12 million tons per year, according to the prospectus.

Holders of Eastroc's Shanghai-listed shares seemed unimpressed with the latest Hong Kong listing application. After rising by 2.5% in the two days after the announcement last week, the stock gave back all those gains and more over the next trading days.

That could be because the company previously released its first-half financials to the Shanghai Stock Exchange. What's more, Hong Kong IPO investors already have many other choices, as the red-hot market is on track to outrank the New York Stock Exchange and Nasdaq in new listings this year. A total of 66 companies raised $23.27 billion on Hong Kong Stock Exchange through the end of September, with six IPOs raising over $1 billion.

Strong performer

According to independent research in its prospectus, Eastroc has now bulldozed the original Red Bull to become China's leading energy drink purveyor. Its marketing strategy positions its drinks between the more premium-focused Red Bull, with its heavy focus on sports sponsorships, and number-three player Dali Food Group's Hi-Tiger, which focuses on low price and sponsorship of local sports events.

The company mentions Vietnam and Malaysia as overseas markets where its products are currently sold, but notes that China still accounted for the vast majority 99.8% of its revenue in the first half of this year.

Such sports drinks are aimed at a different demographic than energy drinks, which are favored by factory workers and students seeking a boost to overcome fatigue from working long hours. By comparison, sports drinks target athletes and e-sports users. Eastroc has yet to catch up with more established names like Danone's (BN.PA) Mizone and Coke's (KO.US) Powerade, but seems to be making steady progress.

Eastroc has also been diversifying into the healthy drink category, listed in its prospectus as "other beverage products." The contribution of that segment rose from 6.7% of revenue in 2024 to 8.2% in the first half of this year, coming from brands like Shangcha Superior Tea, Tea of Fruits, Quench & Nourish, Coffee Master, Coco Island and Amla Juice. 

"We all know of beverage brands that have found success with either going deep into just one core product like Monster, or with going broad into multiple product development such as Coca-Cola and Nongfu Spring," Eastroc director Viv Jiang told FoodNavigator Asia in an interview at an industry event last September. Jiang added that Eastroc had tried both approaches and decided to go with the broader multi-category route.

That raises the question of whether Eastroc could someday become China's answer to Coke. It still seems like a dream, as Coca Cola's global reach, its $287.5 billion market cap and $47 billion in sales last year dwarf Eastroc's figures. But Chinese mythology includes the story of a giant fish called Kun that can transform into a giant bird called Peng, capable of flying vast distances. Perhaps Eastroc might do the same.

Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.