****A Bumpy Road to Listing On the evening of May 18, the CSRC website published a supplementary announcement stating that due to Xi'an Bingfeng Beverage Co., Ltd.'s application to withdraw its filing materials, the review of its issuance application was canceled. Originally, the CSRC planned to review Bingfeng's listing application on May 19. This means that Bingfeng's IPO sprint will be paused, and the title of "first domestic soda stock" cannot yet be claimed by Bingfeng. When asked why the listing application was withdrawn, Caijing Tianxia Weekly called Bingfeng but had not received a response by press time. Looking back at Bingfeng's listing journey, it has been quite bumpy, and behind the "first domestic soda stock" title lies internal fragility. In July 2021, Xi'an Bingfeng Beverage Co., Ltd. formally submitted its main board listing application to the Shenzhen Stock Exchange, but the process was not smooth thereafter. (Image source: Bingfeng official Weibo) On December 3, 2021, the CSRC official website disclosed feedback on Bingfeng Beverage's IPO documents. In this feedback, the CSRC raised 54 questions regarding Bingfeng Beverage, mainly covering four aspects: standardization issues in the prospectus, information disclosure issues, financial accounting data-related issues, and other issues. Among them, the core concerns of the CSRC included whether there were adjustments to revenue, profits, or costs through related-party transactions, and whether there were benefits transfers. In fact, since the controlling shareholder, Sugar and Wine Group, completed the restructuring of the state-owned enterprise, equity disputes have persisted within Bingfeng, and there have been multiple lawsuits surrounding the actual controller, Zhang Jun. The connection between Zhang Jun and Sugar and Wine Group dates back to the restructuring of the group. In 2006, six units including Xi'an Food Factory and Xi'an Sugar, Tobacco, Alcohol, and Non-staple Food Group Company were merged and restructured into a limited liability company. After the restructuring, the net asset value of the six units, after deducting stripped non-performing assets, was appraised at -88.8368 million yuan, and in 2008, it was transferred at zero consideration. During 2006-2008, a total of 309 former employees signed the "Employee Commitment Letter for Share Subscription" and invested in shares, with 36 shareholder representatives registered as named shareholders in industrial and commercial registration. The remaining 273 shareholders signed "Entrusted Investment Agreements" with Zhang Jun, Li Jubao, and Wen Gang, respectively, entrusting these three named shareholders to hold shares on their behalf. Among them, Zhang Jun became the largest shareholder of Sugar and Wine Group with an investment of 739,500 yuan and a shareholding ratio of 14.79%. After the restructuring, Sugar and Wine Group directly held 20% of Xi'an Pepsi's equity. In April 2009, Zhang Jun was appointed as vice chairman of Xi'an Pepsi by Sugar and Wine Group. In January 2021, Sugar and Wine Group, Xi'an Pepsi, and Pepsi (China) Investment Co., Ltd. signed an "Equity Transfer Agreement," transferring all 20% of Xi'an Pepsi shares held by Sugar and Wine Group to Pepsi China. Two months after Sugar and Wine Group transferred its Pepsi shares, Zhang Jun left Xi'an Pepsi. Four months later, Bingfeng submitted its IPO prospectus. Therefore, in the 54 opinions, the CSRC required Bingfeng to explain whether Zhang Jun's position at Xi'an Pepsi involved conflicts of interest or benefits transfer, and whether there were disputes or potential disputes between Xi'an Pepsi and the issuer. (Image source: Bingfeng official Weibo) Currently, Zhang Jun is the actual controller of Bingfeng Beverage, with a shareholding ratio of 91.83% through direct shareholding, serving as executive partner of other shareholders, and entrusting voting rights of other shareholders. Through Sugar and Wine Group and Jiuyue Group, he controls 100% of the voting rights of Bingfeng Beverage. Bingfeng Beverage responded that Zhang Jun did not have conflicts of interest or benefits transfer during his tenure at Xi'an Pepsi, and there are no potential disputes between Xi'an Pepsi and Bingfeng Beverage. In addition, Bingfeng's multiple dividends have also raised doubts among investors. From 2018 to 2020, the company distributed cash dividends of 50.6 million yuan, 55.46 million yuan, and 62 million yuan, respectively, accounting for 81.2% and 82.6% of the previous year's net profit after deducting non-recurring gains and losses. At the end of 2020, Bingfeng announced the distribution of that year's profits for the first time before the fiscal year ended, with cash dividends as high as 50 million yuan, less than half a year after announcing the distribution of 12 million yuan in dividends for 2019 profits in July. Analysts pointed out that this practice of rushing dividends before listing means the company will first "eat up and clean out" and then list to raise money. On one hand, this will increase the company's debt-to-asset ratio; on the other hand, it is not friendly to investors. However, under the rush dividends, Bingfeng has become increasingly stingy with ordinary employees' salaries. From 2018 to 2020, the average salary of ordinary employees at Bingfeng decreased from 76,661 yuan to 69,629 yuan, a decrease of nearly 10,000 yuan in two years, with an average monthly salary of less than 6,000 yuan. Behind Bingfeng's difficult listing path lies the various difficulties a regional brand faces when expanding to the national market.
****A Cola Ambition Without Cola's Fate Bingfeng is a local soda brand born in Xi'an. In the eyes of most Xi'an people, a glass bottle, orange soda, and a straw are enough to constitute their childhood memories of soda. Moreover, Bingfeng, together with two specialty foods, liangpi (cold noodles) and roujiamo (Chinese hamburger), forms the well-known "Sanqin Set Meal," which has become one of the must-eat foods for out-of-towners visiting Xi'an. There are three versions of how Bingfeng got its name. In 1948, a businessman surnamed Li introduced an advanced soda manufacturing equipment from Tianjin, planning to transport it to Xinjiang to set up a factory. However, on the way, a heavy snowstorm forced him to leave the equipment in Xi'an, where he opened Xi'an's first soda factory, Northwest Soda Factory, at Machangzi on East Street. This was the predecessor of Bingfeng soda. The name "Bingfeng" (Ice Peak) originated from another heavy snow. According to legend, there was a clear and sweet old well in Nanxiaoxiang, Xi'an, from which people drew water to make soda. After a heavy snow, people found the wellhead and windlass covered with snow, forming an ice peak, so the well was named "Bingfeng Well," and the soda was named Bingfeng. However, there is also a rumor that after the public-private partnership, the Northwest Soda Factory established a soda workshop named "Bingfeng" on Xiguan Zhengjie, so the soda brand was called Bingfeng. (Image source: Bingfeng official Weibo) As a local brand representing strong national sentiment, Bingfeng's market position in Xi'an has been difficult to shake. In 1984, Bingfeng's sales exceeded 10 million bottles. Shaanxi TV station reported in 2016 that each Xi'an resident drinks an average of 25 bottles of Bingfeng per year. What better reflects Bingfeng's combat effectiveness is that in 1993, Xi'an's soda market was besieged by brands such as Coca-Cola, Jianlibao, and Xuefeili, and its market share once plummeted to 30%. According to Chen Weiping, current director and general manager of Bingfeng, at that time, the machines "if turned on, production exceeded sales; if turned off, there was nothing to sell," making it a dilemma whether to run the machines or not. However, during the years of competition with beverage brands, other brands left the Xi'an market due to acclimatization issues, while Bingfeng survived. Since then, Bingfeng's development in Xi'an has been smooth sailing. By 2008, Bingfeng's annual sales exceeded 100 million bottles. Lao Tai, a native of Xi'an, has been drinking Bingfeng for over 20 years. Talking about Bingfeng's influence on him, he joked that "Bingfeng flows in my blood." From his observation, as long as Xi'an people eat out, they must order Bingfeng, just as people must drink cola with hamburgers; it is a matter of course. However, since last year, Lao Tai noticed that Bingfeng had quietly raised its price. The original 2-yuan glass bottle of Bingfeng has now risen to 3 yuan. Despite being a loyal fan, Lao Tai finds it hard to accept the price increase. His simple northwestern philosophy tells him that a meal should be filling and satisfying; spending 2 yuan on noodles with Bingfeng is acceptable, but spending 3 yuan on Bingfeng feels like being a "sucker." "For 3 yuan, there are similar sodas like Coca-Cola, Sprite, and Fanta, with so many choices and larger volumes than Bingfeng. Why choose Bingfeng?" Lao Tai said. In his view, Bingfeng has become "arrogant." Even a one-yuan increase has made many locals give up on Bingfeng. In fact, Bingfeng's price increase began in 2018, but it was not until 2021 that Bingfeng responded, saying that due to rising raw material and labor costs, the ex-factory price of glass bottles was raised by 0.5 yuan. At the same time, Bingfeng also stated that the previous 2-yuan price in Xi'an was largely to give back to Xi'an citizens. The price increase now can alleviate and supplement the pressure on distribution channel operating profits. According to Zhu Danpeng, an analyst in China's food industry, the purpose of Bingfeng's price increase is to increase revenue and further improve gross margins. However, given its size in the overall carbonated beverage market, Bingfeng does not have the say or pricing power in this channel, lacking the "confidence" to compete with head carbonated beverage companies like Coca-Cola and Pepsi. Therefore, he is not optimistic about Bingfeng's strategic prospects. Although eager to try, truly challenging cola's market position in China's carbonated beverage market is not realistic given Bingfeng's current size.
****Bingfeng's Many Perilous Peaks In addition to the price increase criticized by loyal consumers in northern Shaanxi, Bingfeng itself must overcome many perilous peaks. From the prospectus, Bingfeng's difficulties stem from threefold over-reliance: over-reliance on Shaanxi market, over-reliance on orange soda products, and over-reliance on offline sales channels. Chen Weiping, director and general manager of Bingfeng, once said that "Bingfeng" is more suitable for the Xi'an market in terms of formula. For example, many Xi'an people report that when eating roujiamo, drinking other beverages only makes them thirstier, but drinking "Bingfeng" is particularly refreshing. Like Beibingyang, which went public through a backdoor listing last year, Bingfeng, as a local Xi'an soda brand, also has the problem of being too regional. According to statistics from the China Beverage Industry Association, the domestic beverage industry market size in 2021 was 519.3 billion yuan, while Bingfeng's total annual revenue is only around 300 million yuan. Zhu Danpeng said that Bingfeng's annual revenue scale of 300 million yuan is typical of a regional brand. Without capital support or excellent team management, it is difficult to break out of the regional market. This may be the main reason Bingfeng is sprinting for an IPO. From 2018 to the first half of 2021, the revenue brought by the Shaanxi market to Bingfeng Beverage was 249 million yuan, 245 million yuan, 266 million yuan, and 170 million yuan, accounting for 87.44%, 81.73%, 80.23%, and 77.79%, respectively. Bingfeng also stated that over-reliance on the Shaanxi market poses a certain risk of sales regional concentration, which restricts the development of external business expansion. In addition, Bingfeng's revenue structure also has the problem of excessive singularity. According to Bingfeng, the company's main products include "Bingfeng" glass bottle orange soda, canned orange soda, glass bottle sour plum drink, canned sour plum drink, and other categories. However, its revenue mainly relies on the flagship product, orange soda. During the reporting period, Bingfeng orange soda sales accounted for over 80% of total revenue. To break the dominance of orange soda, Bingfeng has made multiple attempts, launching sour plum drink, fruit soda, peanut milk, and other products, but the results have been mediocre. The sour plum drink, which Bingfeng has been vigorously promoting as its second growth curve, has had lackluster sales since its launch in 2015. In 2020 alone, Bingfeng sour plum drink sales were only 42 million bottles, one-sixth of the 254 million bottles of orange soda. (Image source: Bingfeng official Weibo) On the other hand, as a time-honored brand, Bingfeng has also failed to catch up with the trend of digital marketing. In 2015, Coca-Cola had already opened an official Tmall flagship store online. It was not until two years later that Bingfeng arrived late, but it was joined by Beibingyang, another time-honored brand. E-commerce channels have never been advantageous in Bingfeng's sales channels. From 2018 to the first half of 2021, Bingfeng Beverage's e-commerce channel sales were 4 million yuan, 11 million yuan, 20 million yuan, and 11 million yuan, accounting for 1.43%, 3.66%, 6.09%, and 4.96% of current revenue, respectively. Bingfeng has also considered opening the market through promotional campaigns. In previous brand promotion cooperation, Bingfeng cooperated with film and television company Wanhe Tianyi. The prospectus shows that Tianyi Film and Television was Bingfeng's second-largest advertiser in 2018 and the largest in 2019 and 2020. Bingfeng invested advertising fees of 2.3077 million yuan, 1.2587 million yuan, and 1.049 million yuan, accounting for 24.51%, 20.53%, and 18.51% of the company's annual advertising spending, respectively. However, for Bingfeng, this promotional cooperation did not bring significant communication effects. After announcing the first group of brand ambassadors, Bai Ke, Zheng Hehuizi, and Professor Yi Xiaoxing from Wanhe Tianyi, Bingfeng's public opinion peak came to an abrupt end. Of the proposed 60 million yuan in fundraising, Bingfeng planned to put nearly 43 million yuan into "marketing service network upgrade and brand building," showing its intention to make efforts in marketing. However, paradoxically, Bingfeng places so much importance on brand building in the prospectus, but its promotional cooperation expenses have shown a declining trend year by year: during the reporting period, Bingfeng Beverage's advertising expenses were 9.4172 million yuan, 6.1319 million yuan, 5.6664 million yuan, and 4.3071 million yuan. Insufficient advertising investment has limited Bingfeng's market awareness to Xi'an. Zhu Danpeng said that under multiple difficulties, it is actually difficult for the "time-honored brand" Bingfeng to leave Xi'an by only playing the nostalgia card. With Coca-Cola and Pepsi firmly holding their market positions as two carbonated beverage giants ahead, and new-style beverages like Genki Forest rising behind, how far can Bingfeng go besides relying on "selling nostalgia" and playing the "childhood card"? Source: AI Finance and Economics (ID: aicjnews) Written by Zhang Jikang, author of Caijing Tianxia Weekly -END-