Article | Special contributor to Food Business Observation (FBC) Li Shu Since 2017, when news broke of Zhao Qisan's cooperation with Henan Weiqun Salt Industry, Zhao has been appearing as the founder of Golden Monkey. Even when he made headlines, it was because of Golden Monkey. Either former employees were sued and 'everyone' couldn't find Zhao Qisan, or Zhao Qisan wanted to take back some Golden Monkey brands and was slapped in the face by Hershey. But at the 2018 Two Sessions, as a deputy to the National People's Congress, Zhao Qisan finally 'endorsed' the salt industry. Never having taken the high-end route, this time Zhao Qisan wants to take a different salt path—launching a premium salt. Does this salt have a chance? Golden Monkey's Uncertain Future "Our plan for Golden Monkey this year only goes up to June; it seems it should be sold," a Hershey employee revealed to Li Shu. "But it definitely won't be sold to Zhao Qisan, because we can't afford to lose face." he added. In 2018, the biggest change at Hershey was that the team had been replaced with Chinese people. Maybe the Chinese understand the Chinese market better, or maybe the previous team was paying for the 'aftermath' of the Golden Monkey acquisition. In 2017, at the cooperation meeting between Zhao Qisan and Henan Weiqun Salt Industry, the invitation letter mentioned 'discussing with Hershey the buyback plan for Maeli Su and Golden Monkey milk candy,' which made people re-examine this acquisition drama. Let's go back five years. At that time, China's candy market was unprecedentedly booming. High-end candy companies represented by Ferrero were looking for emerging markets outside Europe and America. China, with its demographic dividend, naturally attracted foreign investors, especially Hershey, which was very interested in Golden Monkey's rural market. However, not understanding Chinese companies well is a common problem for all foreign companies. It also makes many foreign companies fall into pitfalls during acquisitions. So we often see that brands acquired by foreign companies mostly end in failure, and the bitterness is known only to the foreign companies. For example, Johnson & Johnson's acquisition of Aihé was a classic case—before the acquisition, cornstarch powder was Aihé's best-selling product, with single-product sales accounting for 10% of total sales. However, because international regulations require companies producing cornstarch to have explosion-proof licenses, and no domestic OEM factory producing cornstarch powder could meet the basic safety requirements to eliminate dust explosion risks, Johnson & Johnson had to temporarily stop production of this product and produce it in foreign factories before importing it. However, in front of the Hershey-Golden Monkey acquisition 'case,' Aihé's experience is actually a small witch compared to a big one. Golden Monkey's business model was 'self-contained'—employees guaranteed for distributors, goods first and payment later, collecting some interest from distributors. This way, although distributors earned less, it ensured their capital flexibility. It was precisely this internal informal credit that dug a big pit for Golden Monkey employees. In 2014, after Hershey completed 80% of the payment for Golden Monkey (2.4123 billion yuan, equivalent to two years of Golden Monkey's sales), in September of that year, at the Jiuzhaigou meeting, Hershey asked distributors to list market problems. During the meeting, Hershey discovered that Golden Monkey's sales data differed significantly from the originally reported data. Given this, Hershey was not prepared to pay the remaining 20% to Golden Monkey. This led to both parties going to court. Finally, both sides made concessions: Golden Monkey agreed to increase sales, and Hershey agreed to pay. The basis for increasing sales was Golden Monkey's use of the company's long-standing micro-credit strategy. Let salespeople guarantee for distributors, goods first and payment later. This way, salespeople could get commissions, and Golden Monkey could make the numbers look better to meet Hershey's requirements for paying the final payment. However, the promise once made to distributors was 'return unsold goods,' but in the end, it became expired goods piled up in warehouses. But fortunately, distributors hadn't paid at the time (due to the aforementioned goods-first-payment-later policy), so they didn't think much about it. But as things developed, factory workers went on strike because they were dissatisfied with Hershey's piece-rate wage system; many frontline sales personnel were also laid off by Hershey. After frequent problems, Hershey began to re-examine the 'old accounts' of this acquisition. Hurt Employees In dealing with employees, Hershey is still a civilized and law-abiding enterprise. No matter what problems employees have in the company, as long as they are laid off, they are compensated with N+3, plus a signing fee. As for what employees owe the company, the company will resolve it through legal or out-of-court settlements. Perhaps only when layoffs happen do Chinese enterprise employees know the happiness of working in a foreign company. The only bad thing is that Chinese enterprise employees think that after receiving compensation for layoffs, they have no relationship with the company, but Hershey is not like that; it will settle accounts later. To settle those large amounts of informal loans, those goods 'borrowed' to distributors in the name of office directors, where did they all go? A massive class-action lawsuit erupted. Hershey sued the former Golden Monkey office directors and distributors in court. In the face of a large amount of facts, and without the defendants appearing in court, the court ruled in Hershey's favor. It wasn't until then that all the defendants—former Golden Monkey office directors and distributor partners—panicked. They began to look for Zhao Qisan, hoping he would come forward to help explain the situation and prove that employees hadn't run away with distributors' payments; distributor partners also wanted Zhao Qisan to prove that the goods sent had far exceeded the distributors' sales. When they chose a date to gather at the Golden Monkey Shenqiu factory, hoping Zhao Qisan could lend a hand, Zhao Qisan didn't show up. Some even went to Zhao Qisan's home, but only heard: "He's out." Helpless, they had to face Hershey's lawsuit. The distributors considered themselves unlucky, paid out of their own pockets, made up the money, and exchanged for Hershey's withdrawal of the lawsuit; while those office directors mostly lost the cases. Fortunately, Hershey didn't let the court enforce the judgments; it just put these people on a blacklist, unable to engage in high consumption. The story that should have ended took a turn in 2018. At the beginning of the year, many old employees received invitations from Zhao Qisan, but unfortunately, no one was willing to board Zhao Qisan's big ship again. "I'm heartbroken. All these years of feelings were just a chess piece in his hands," said a former Golden Monkey old employee. "This should be Boss Zhao's consistent style. When he acquired the Shanghai Hongqiao Antique City, he used even more excessive means to force the tenants to leave." "It's not about whether a person has money or ideas, but about his character. After all, when things are done to this extent, it's hard to get people to follow you again," the aforementioned old employee complained. Reputation is something that takes years to accumulate but can be toppled by just one or two incidents. Although Zhao Qisan's treatment of employees isn't as fierce as 'Hongmao medicinal wine,' it has basically spread in Henan. You can spend a lot of money to hire employees, but you can't spend a lot of money to create a team. The 'Chaotic' Salt Market What's more fatal than a weak team foundation is that looking at Zhao Qisan's experience, he has no successful experience in high-end products. Neither his channel control nor his distributor layout ability can support him in doing premium salt. The third- and fourth-tier markets and township markets were the foundation of Golden Monkey's success. △Zhao Qisan Now a 70-year-old man, to re-create channels and switch tracks, can he really do it? Countless companies have gone bankrupt because of cross-industry moves. Will Zhao Qisan be an exception? Since the state opened up the salt business strategy, various gimmicks have appeared in the salt market. Yes, too many companies want to give the simple salt more missions, as if salt is no longer salt but a panacea 'Hongmao medicinal wine.' Health salt, negative ion salt, etc., chaos abounds, leaving consumers at a loss. Once, monopoly and state-owned were considered signs of backwardness and poor service. But in recent years under the market economy, people have begun to miss them again. When we see a doctor, we prefer public hospitals; when our children go to school, we prefer public schools... Because these matters concern people's livelihoods, 'public' units can provide pensions for employees, so employees cherish their positions more. Similarly, in the salt industry, although there have been sky-high priced salts in the past, consumers still hope that the salt industry is controlled by the state. In such a context, Zhao Qisan wants to sell salt at over 10 yuan. Who gave him the courage? With his 70-year-old age, starting a second business, Zhao Qisan's spirit is admirable. When Ren Zhengfei passed the position to his daughter Meng Wanzhou (according to media reports), and Zong Qinghou still wants to give his daughter Zong Fuli a push, we rarely hear about Zhao Qisan's cultivation of a successor. Not everyone who returns is the return of the Great Sage, with a protagonist's halo. The world doesn't have so many written scripts. Winning people's hearts is hard, and winning the market is even harder... Source: Food Business Observation (ID: fbc180)