Weak investor sentiment has dogged Eastroc since its Hong Kong IPO in February, even as the energy drink maker reports strong growth

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Key Takeaways:

  • Eastroc lost over $1 billion in market cap over five days as its Shanghai- and Hong Kong-listed stocks tanked after the release of an AI-generated video involving its chairman
  • Sentiment towards the stock was already weak even before the selloff, possibly reflecting the company’s struggles to shed the working-class image of its signature energy drink

It was one of those incidents that should have been easy for a good legal or public relations team to quickly shake off. On June 22, a video went viral showing Lin Muqin, founder and chairman of Eastroc Beverage (Group) Co. Ltd. (9980.HK; 605499.SH), trading toasts with motorcycle entrepreneur Zhang Xue. The kicker was Lin’s deferral when offered his own product, an energy drink often likened to the Red Bull of China.

"I don’t normally drink this," Lin says in the video.

Although it quickly became evident that the video was manipulated using AI, Eastroc’s Shanghai- and Hong Kong-listed shares took a bath over the next four trading days, wiping out a combined 7 billion yuan ($1 billion) in market value. The selling frenzy only calmed after Zhang Xue released the original video and police identified the culprit behind the AI version, stabilizing the stock.

Fraud and scams are a dime a dozen for consumer brands in China, often perpetrated by rivals and others out to undermine a popular product. But the fact that so many people believed the video spotlights a bigger problem for Eastroc, namely its working-class image. That issue is making it hard for the company’s products to gain traction among more affluent and bigger spending Gen Z consumers.

The Shanghai Consumer Council and other industry bodies show that people from Gen Z, typically born between 1995 and 2012, often check product labels for sugar content and verifiable claims. That’s not great for Eastroc, whose core energy drink contains an eye-popping 66.5% sugar per 500 milliliter can – 2.1 times what Red Bull contains.

The same can of Eastroc sells for 4 yuan to 5 yuan, versus 6 yuan for a 250 milliliter can of Red Bull. That difference may be enough to sway lower-paid blue collar workers, but might not be enough to convince more nutrition-conscious Gen Z white collars.

Homegrown beverage giant

Eastroc is China’s first dual-listed beverage company, after making a HK$10 billion ($1.28 billion) Hong Kong IPO in February to complement its existing Shanghai listing dating back to 2021. The Hong Kong stock has moved steadily downward since the listing and, at Wednesday’s close of HK$112.40, is down about 40% from its IPO price.

Eastroc isn’t exactly alone, as the Shenwan Hongyuan Securities’ Food and Beverage Industry Index is also down 20.42% in the first six months of 2026, reflecting weak investor sentiment towards the sector. But Eastroc should be able to defy that trend, at least based on its strong financial performance.

The company’s revenue rose 31.8% last year to 20.9 billion yuan, while its net profit rose by a similar 32.7% to 4.42 billion yuan. It sold more than 10 billion bottles of its various beverages and announced a slower but still healthy 20% growth target for 2026 revenues. Its first quarter revenue rose 21.46% to 5.8 billion yuan, putting it on target to meet that goal. The company is also quite popular among analysts, with active coverage by more than 30 institutions.

Eastroc fought an earlier battle in China with the original Red Bull, and emerged as the clear winner. It controlled 51.6% of China’s energy drink market by volume and 38.3% by sales last year, according to Nielsen IQ data. By comparison, Red Bull entities controlled 35% of the market by volume.

Modest roots

Like many of China’s most famous entrepreneurs, founder Lin Muqin certainly has the working class roots he seemed eager to shed in the fake AI video. Born in the city of Shanwei in Guangdong, into a family that made its living from fishing, he moved to Shenzhen in 1984 when the city was still relatively small. He worked there at a company that began making the Red Bull energy drink in a joint venture in 1995.

Lin moved from there to a state-owned soymilk producer in 1997, and bought the company in 2003 when it was on the verge of bankruptcy. He turned to energy drinks by 2009, using his experience to create a product tailor made for Chinese workers, including a lid that shielded the drink from the dust at construction sites, and a price about half that of Red Bull.

Lin has been working to pump up his company’s share prices, approving a plan in April to repurchase up to 2 billion yuan worth of the Shanghai-listed stock. He also increased his holdings of the Hong Kong-listed stock by 49,800 shares worth HK$6.5 million in late May, and said he would consider spending up to HK$200 million of his own funds on more shares.

Eastroc’s core product is its original energy drink, but it has been working hard to build a broader line of sports drinks. Energy drinks accounted for 74.8% of the company’s revenue last year, while sports drinks made up 15.7%.

Both drink types are part of a Chinese functional drinks market worth 166.5 million yuan in 2024 and growing 8.3% annually, according to third-party research in Eastroc’s Hong Kong IPO prospectus. Energy drinks are the largest segment of the market, with retail sales of 111.4 billion yuan in 2024, while sports drinks had sales of 54.7 billion yuan

But that space is increasingly crowded. Monster Beverage (NASDAQ:MNST), 19% owned by global giant Coca-Cola (NYSE:KO) saw its net sales in China rise 95% year-over-year in the first quarter, after launching its Predator brand aimed at blue-collar workers in 2024. TCP Group, one of the names behind the Red Bull brand in China, also announced plans for a third Chinese manufacturing facility in the Guangxi region in 2024.

As those and other rivals piled into the market, growth rates for Eastroc’s flagship products have been slowing. Revenue for its core energy drink rose just 17.25% in 2025, and the rate fell further to 13.11% in the first quarter of 2026, compared to 41.6% in 2021. Its key sports drink also dropped to 13% growth in the first quarter, compared to 119% in 2025.

As growth for those key products slows, Citigroup recently lowered its 2026 and 2027 earnings forecasts for Eastroc by 10% and 15%, respectively, and cut its sales forecasts for those years by 7% and 12%, citing unfavorable weather conditions and intensifying competition. It also slashed its price target for Eastroc’s Hong Kong shares from HK$310.80 to HK$161.70.

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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.