Compared with the earlier fierce competition between the two herbal tea giants, the market has been quiet for nearly two years as JDB and Wanglaoji have kept a low profile. However, JDB's drive to go public remains undiminished. ■ Source: Compiled from China Times and 21st Century Business Herald On December 1, JDB Group announced on its official WeChat account that it had fully repaid the 1.5 billion yuan owed to COFCO Packaging (0906.HK) for the buyback of equity in the concentrate plant. On the afternoon of November 30, JDB renewed a strategic cooperation agreement with COFCO Packaging at COFCO Fortune's headquarters. Signing ceremony site (JDB official website) As seen in the photos, not only was the recipient COFCO Packaging pleased, but JDB's signing representatives, including Chairman Wang Jinchang and President Li Chunlin, were all beaming. Given this scene, it is hard to imagine that just two years ago, the two sides were at loggerheads. In the past two years, the herbal tea market has been quiet for a long time. But JDB's internal drive to go public remains undiminished. On November 30, COFCO Packaging (00906.HK) issued an announcement, signing a strategic cooperation agreement with JDB regarding packaging, and also mentioned that JDB Group is planning an overall listing. This strategic cooperation will help JDB Group's overall listing, reigniting the heat around JDB's listing. The listing plan was first proposed two years ago. In 2018, JDB clarified its listing plan, setting a goal of "achieving listing within three years." Now, the deadline appears to be next year. As the herbal tea market gradually enters a plateau, and JDB is still in a "recovery" phase, time is running out for JDB. -01- Is Listing Within Reach? A source close to JDB's senior management told reporters that the funds used for the share buyback were mainly "payments" from distributors. According to the source, JDB raised funds specifically from distributors, with a minimum investment threshold of 20 million yuan. "Some major channel distributors were very enthusiastic. After all, they have made money with JDB over the years and there is a foundation of trust. I know two distributors, from Luoyang and Wuhan, who each invested 20 million yuan," he said. As for what rights these "paying" distributors will have in the future—whether they will get goods at lower discounts or participate in the company's future listing plans—the source did not elaborate. However, reporters found that in the latest announcement, JDB has not given up its plan to list in Hong Kong. "JDB is planning an overall listing to make JDB herbal tea an internationally renowned brand," the company said. It added that in 2018, JDB's management implemented reforms, formulated a new strategy, actively expanded market space, and sought new profit growth points. In 2019, the group achieved substantial profitability, and despite the severe impact of the pandemic this year, operating performance still exceeded expectations. The aforementioned source told reporters that JDB's biggest sales season each year is the Spring Festival, with large-scale gift promotions. Based on current ordering status, this year's Spring Festival promotion will definitely far exceed last year's. "Last year, JDB's profits were good, but this year, affected by the pandemic, they may use this year as the first year of data (for listing)," he said. According to a WeChat chat screenshot shown to reporters, JDB President Li Chunlin said regarding the buyback: "JDB successfully repurchased the 30.58% stake in JDB Concentrate held by COFCO Packaging and signed a new strategic cooperation agreement, clearing the biggest obstacle to listing." According to the agreement signed this time, JDB committed to making COFCO Packaging the preferred and main supplier of packaging products needed by the group, with COFCO Packaging's share not less than 70%-80% of the group's total packaging procurement; when JDB uses new can types such as two-piece cans, PET, or other beverage packaging, COFCO Packaging will be given priority supply under the same conditions. COFCO Packaging also committed to prioritizing JDB Group's packaging needs, actively following up on production layout in line with JDB Group's strategic development plan, and providing efficient, comprehensive packaging services in a timely manner; establishing a communication mechanism with JDB Group in advanced manufacturing, product innovation, and technology R&D to ensure the leading position of JDB Group's product packaging technology. It is not hard to see that, in terms of commitments, JDB directly clarified its annual procurement total, which is more concrete than COFCO's "priority guarantee," also highlighting the negotiating position of both sides. Affected by the payment news, as of the close at 4:00 p.m. on December 1, COFCO Packaging's share price was HK$3.62 per share, up 3.43%, with a total market value of HK$4.031 billion. COFCO Packaging closing price on December 1 After the previous battle between the two giants, there are differing opinions in the industry about the current size of the domestic herbal tea market. The only certainty is that this year, under the impact of the pandemic, the herbal tea market has been further pressured. According to the semi-annual report of Wanglaoji's parent company Baiyunshan (600332.SH), in the first half of the year, the health business segment, mainly deriving revenue from Wanglaoji herbal tea, recorded revenue of 4.501 billion yuan, a year-on-year decrease of 23.11%. Currently, JDB has relatively sufficient distribution in the southwest and north China regions, but in Wanglaoji's stronghold, the south China region, it is almost absent. Zhu Danpeng, an analyst at China Food Industry, believes that without COFCO's endorsement, if JDB wants to list in Hong Kong, in addition to capital and scale, it must also face historical issues left over from the past. "JDB's former chairman and major shareholder fled abroad on bail at the time. If it goes to the Hong Kong stock market, will that have an impact? It's unknown," he said. -02- Dreaming Is a Bit Hard in the Short Term JDB's listing dream has never stopped, but it is rarely mentioned. Due to accumulated grievances from previous legal disputes, JDB's road to listing has not been smooth. First, there are the disputes between JDB and Wanglaoji. The two herbal tea brands have fought for years over advertising slogans, trademark rights, and packaging copyrights. During this period, which lasted seven years, there were no fewer than 20 lawsuits, involving a total amount of 5 billion yuan. To this day, the trademark dispute between JDB and Wanglaoji has not been completely resolved. To conquer the outside, one must first stabilize the inside. With external lawsuits, JDB's internal struggles have not been peaceful either. In the words of an industry insider, JDB is still in the "recovery" stage. Public reports show that JDB has faced collective employee strikes over unpaid wages, factory shutdowns, distributors in multiple regions unable to receive goods, and shortages of JDB products on the market. In July 2018, workers at JDB's Hangzhou factory went on strike due to unpaid wages; in September of the same year, the Hangzhou factory was forced to halt production. It must be admitted that JDB has made many efforts to successfully list. It not only cut several departments to increase revenue and reduce expenditure, but also sorted out its suppliers. For example, in September this year, JDB stated that it would invest an additional 200 million yuan in injection molding and canning production lines at the Qiantang New Area, on top of the existing bottled herbal tea production line, with a total investment reaching 600 million yuan. Years of internal and external battles have taken a heavy toll on JDB. The situation where the two herbal tea giants once divided the market seems to have tilted to one side. Currently, JDB's two main products are JDB Herbal Tea and Kunlun Mountain Mineral Water. However, industry analysis points out that the herbal tea market faces competition from Wanglaoji, and Kunlun Mountain Mineral Water has not developed satisfactorily in recent years. Insufficient product strength has become a stumbling block on JDB's development path. Zhu Danpeng, an analyst at China Food Industry, said in an interview with reporters that JDB's proposal to go public may be more to boost the morale of employees, distributors, and channel partners. At present, JDB is not very attractive to the capital market in terms of performance or products. JDB has not publicly disclosed its sales data. In September this year, JDB President Li Chunlin said externally that performance in June, July, and August had improved significantly compared with last year, achieving stable growth, and future performance is promising. However, the actual sales situation is difficult for outsiders to gauge. Source: China Times, 21st Century Business Herald Tips will be paid 400-2000 yuan once adopted.