Sold out: my last Chinese share

Want Want China Holdings Ltd (HKSE:00151) is known for its rice crackers and Hot-Kid milk. Besides these best sellers, it offers a range of other consumer products like tea, coffee, snack food, candy, instant noodles and cookies. 90% of its sales are within Mainland China, where the company has its headquarters.

The company grows slowly: only a few percent per year in revenues. Product lines are long established, sometimes decades ago. There is some uplift from new or refreshed products if those are received well. The company's ROIC is high, but that is of limited use without growth. Most products are popular with children (Hot-Kid milk). This will raise some challenges, considering China's rapidly declining birth rates. On the other hand, Want Want's management knows this and can adapt products over time. Free cash flow and dividend yields are good. This is not the kind of share that will double, but I bought it at a reasonable price a few years ago, making it a safe investment.

Is China un-investable? Lately, we have seen a lot of publications trying to answer that question. Many argue that the Chinese government is intervening too strongly in many business sectors. Can Chinese authorities somehow disrupt the Want Want business? It is hard to imagine ideological objections against rice crackers and milk. However, there are already objections against the high sugar levels in certain products. As a 7 billion USD market-cap company, we can expect Want Want's R&D department to adapt its products to stricter standards. In conclusion, I am not overly worried about possible interventions by the Chinese authorities.

Is China investable? I don't know. I sold Want Want to prevent this question from keeping me awake at night. It was my last remaining Chinese share and 2% of my total portfolio. I had already sold my other Chinese shares (Yihai, Nissin Foods, Uni-President, China Foods, WH Group, Natural Foods, Da Ren Tang Group, and Guangzhou Baiyunshan) for company-specific reasons.

By selling Want Want, I free up a lot of my mental space by not having to understand the economic and ideological intentions of the Chinese government. I have no more horses in that race. It feels as liberating as selling Daiwa House Logistics Trust in September 2023. I was comfortable with Daiwa House, but since it was the last Japanese company as well as the last REIT in my portfolio, selling it created a lot of space for not having to think about Japan and REITs anymore. 

I have Chinese and Japanese companies on my watchlist, as well as REITs. When a considerable margin-of-safety arises in their share prices, I might purchase some again. A large margin-of-safety compensates for the macroeconomic worries related to these categories. But right now, Want Want is not in deep-value territory.

Disclosure: No more positions in the stocks mentioned.

Coffee in my portfolio

I named my investment approach the Coffee Can Portfolio APAC after a buy-and-hold method developed by American analyst Rob Kirby. I tweaked the approach he suggested by focusing on infrastructure and consumer staples stocks. As a result, I have a bunch of coffee-related companies in my portfolio. I thought it would be fun to highlight those.

JDE Peet's is the unmistakable coffee king in my portfolio. The company offers many coffee brands all over the world: Peet's Coffee, Jacobs, Douwe Egberts, Campos, Tassimo, Senseo, L'OR, Super (Singapore), Old Town White Coffee (Malaysia), and tens of other brands. Some of those have cafe-type outlets which you can visit. The picture shows a pop-up store of Peet's Coffee in Shanghai.

Luckin Coffee is a Chinese coffee giant which runs cafes but has no packaged product yet. In some of their outlets, you can sit down to enjoy your coffee, but most are takeaway only. They have more stores than Starbucks in China, but in revenue, Luckin is still second because their products are cheaper.

Maxim's Caterers is a 50% participation of my holding DFI (Dairy Farm International). Maxim's has the license to exclusively run Starbucks stores in Singapore, Hong Kong, Macau, Vietnam, and Cambodia.

Maxim's Caterers has a joint venture with Fraser & Neave, another holding of mine, to run Starbucks stores in Thailand. This joint venture is also 50/50.

Staying with Dairy Farm International, its house brand Meadows offers instant coffee and 3-in-1 coffee mix in their supermarkets, such as Giant and Cold Storage as well as in third-party outlets (Foodpanda).

South-Korean consumer goods conglomerate LG H&H runs a beverage bottling operation that produces drinks from the Coca-Cola Company. The canned coffee brand GEORGIA is one of the Coca-Cola drinks they licensed for Korea. 

China Foods Limited is licensed to sell Coca-Cola beverages in 19 provinces of China. They don't offer GEORGIA, but they do have another canned coffee drink in their portfolio called Costa RTD coffee. Costa is a coffee shop chain acquired by the Coca-Cola Company in 2019. There are Costa coffee shops in China too, but it seems that China Foods is not involved in those. 

The strangest coffee drink from my holdings comes from Want Want China: Mr. Bond Coffee. I could not find any information about it. Are they referring to James Bond? The man shown on the can resembles detective Sherlock Holmes rather than master spy James Bond. Also, I am pretty sure Bond prefers Martini over coffee.

For the final two coffee servings, we leave Asia. British bakery chain Greggs sells coffee to go with their sausage rolls and sandwiches. Classics such as Mocha, Americano, and Latte, with special editions during holidays. Recently they added two canned coffee offerings: Caramel Latte and Original Latte, as the picture shows.

Associated British Foods offers various grocery items all over the world. In their long listing of those, I found Jarrah, which is an Australian brand of powdered coffee. You pour hot water over the powder to make it ready for consumption. Jarrah offers a hot chocolate variant too.