68-year-old Chengde Lulu is striving for 'self-rescue,' but turning things around seems difficult. Continuous 'Self-Rescue' Entering 2018, Hebei Chengde Lulu Co., Ltd. (hereinafter referred to as Chengde Lulu) began eagerly launching new products. From the 'countdown' starting on the first day of the new year to the 'breakfast nutrition bus' landing in Beijing from the 2nd to the 8th, it was indeed thoughtful. On the 8th, the new Lulu almond milk hot drink was launched, along with its breakfast nutrition plan. According to Chengde Lulu's plan, the new product will first be launched in white-collar gathering areas in five cities: Beijing, Xi'an, Shijiazhuang, Zhengzhou, and Dalian. While some praised Chengde Lulu's changes, voices of 'disappointment' followed. "In the second and third quarters of 2017, Chengde Lulu's sales expenses increased by more than 50% year-on-year. We thought Lulu would finally do something big, but after seeing the new product, we were speechless," an investor told New Financial Observation. The key point is that this heavily promoted new product is considered 'just a repackaged product.' In the investor's view, the 'newness' of the new product 'is mainly reflected in packaging changes: lighter colors, removal of spokesperson elements, and that's it.' In fact, this foray into the breakfast market is one of Chengde Lulu's 'self-rescue' plans. To 'self-rescue,' 'Chengde Lulu has also launched walnut milk, peanut milk, and other products in the past two years, but unfortunately, the market hasn't responded well,' food industry observer Ma Lei told New Financial Observation. Importantly, in Ma Lei's view, this breakfast plan may still not achieve 'self-rescue.' "Although the product emphasizes the concept of a nutritious breakfast, Chengde Lulu does not have breakfast channels; it does not conform to breakfast drinking habits, nor does it have a breakfast scenario guide," Ma Lei emphasized. "It is right to try to bring the brand closer to young consumers and continue to expand almond milk, but the direction is not wise." Traditional and lukewarm are the impressions Chengde Lulu leaves on the outside world. Although it has always tried to change, the results have been minimal. The decline in performance makes 'self-rescue' particularly important. To 'self-rescue,' in 2016, new General Manager Lu Yongming took office, accompanied by internal reforms. In 2016, Chengde Lulu launched walnut milk, walnut with nuts, peanut milk, and other new products, followed by Xiao Lulu and Lulu Selection series. In 2017, Chengde Lulu also adjusted its organizational structure, optimizing the original 14 departments into 7 departments plus 1 marketing center, emphasizing the core position of the marketing center... Unfortunately, none of the 'self-rescue' efforts were reflected in performance. Financial reports show that in 2016, Chengde Lulu achieved operating revenue of 2.521 billion yuan, a year-on-year decrease of 6.85%. In the first half of 2017, operating revenue was 1.038 billion yuan, a year-on-year decrease of 29.00%; net profit was 228 million yuan, a year-on-year decrease of 16.60%. The worst decline came in the first quarter of 2017, when Chengde Lulu achieved revenue of 791 million yuan, a year-on-year decrease of 36.92%. Old Ailments Unhealed In the domestic food and beverage industry, Chengde Lulu is an 'old-timer.' Public information shows that Chengde Lulu's predecessor was Chengde Canned Food Factory, established in 1950, listed on the Shenzhen Stock Exchange in 1997, and now 68 years old. Over 68 years, it has weathered storms, and old ailments are also important factors affecting its development. At that time, when Six Walnut (Yangyuan Zhihui) was facing bankruptcy, Chengde Lulu was already an undisputed leader in the beverage industry. But in the past 10 years, Six Walnut's development has left Chengde Lulu far behind. In terms of operating revenue alone, from January to June 2017, Six Walnut achieved operating revenue of 3.666 billion yuan despite a year-on-year decline of 9.03%. From 2014 to 2016, its operating revenues were 8.262 billion yuan, 9.117 billion yuan, and 8.9 billion yuan, respectively. Compared with Six Walnut, besides the management team not being hardworking enough, 'Chengde Lulu's today is both due to and constrained by its brand,' Ma Lei said. He emphasized that almond milk is one of the sub-categories of plant protein beverages, and the 'Lulu' brand is basically synonymous with almond milk. Because the category is too narrow, Lulu's market scale is hard to expand; additionally, because almond milk's taste is less accepted in the southern market, it is easily squeezed by other plant protein products. Another old ailment stems from Shantou High-tech Zone Lulu South Co., Ltd. (hereinafter referred to as Shantou Lulu), which, according to industrial and commercial information, was established in 1996. Announcements show that Chengde Lulu has repeatedly expressed its intention to acquire Shantou Lulu, the most recent being in 2016. However, by 2017, the acquisition turned into litigation. Announcements state that 'Shantou Lulu used Chengde Lulu's three packaging patents without authorization and used the packaging for its almond milk products, thus becoming a defendant; also named as a defendant was Beijing Walmart Co., Ltd. Jianguo Road Branch, for allegedly selling and offering for sale Shantou Lulu's infringing products.' Interestingly, Chengde Lulu's 2003 announcement shows that Lulu South Co., Ltd. (predecessor of Shantou Lulu) was a subsidiary controlled by Lulu Group, mainly engaged in beverages, with the main product being Lulu brand almond milk (in two packaging specifications: one is three-piece tin can, the other is Tetra Pak). The product was sold in four southern provinces, self-produced and self-sold, with pricing referencing the northern market. The lawsuit has not yet been heard, but the aforementioned products have been removed from shelves in all 61 Walmart (China) Investment Co., Ltd. chain supermarkets in Northeast, North China, Northwest, and Central Plains regions. Although some investors see this as a sign that Chengde Lulu's internal adjustments are gradually coming to an end, its inconsistent attitude toward Shantou Lulu seems not to be explained in a few words. Another factor that cannot be ignored is Chengde Lulu's actual controlling shareholder, Wanxiang Sannong. 'Its main business is not food, which to some extent restricts Chengde Lulu's development,' Ma Lei said. As of press time, Chengde Lulu had not responded to the new product plan or the many questions raised by New Financial Observation. Article from: New Financial Observation -END-