Click to read the original article for details On April 8, 2022, Jiajia Food announced that in February of this year, the company's actual controllers Yang Zhen, Yang Zhen's spouse Xiao Saiping, Yang Zhen's son Yang Zijiang, and the company's supervisory board chair Jiang Xiaohong were listed as dishonest judgment debtors by the People's Court of Jinfeng District, Yinchuan, due to contract disputes. The news that "the actual controller's family of three of Jiajia Food became dishonest debtors" once again pushed Jiajia into the spotlight. Why "once again"? In fact, this is not the first time that the actual controllers of Jiajia Food have fallen into financial risk. On June 12, 2020, Jiajia Food stated that during a self-inspection, it discovered that it had provided illegal guarantees for its controlling shareholder Zhuoyue Investment and its related parties, with the total outstanding principal of illegal external guarantees amounting to 466 million yuan, accounting for 19.94% of the company's latest audited net assets. Starting from June 15, Jiajia Food was subject to other risk warnings, and its stock abbreviation changed to "ST Jiajia". Jiajia, which frequently had violations and credit issues, then faced its first loss since listing, which can be described as one wave after another. According to Jiajia Food's 2021 financial report, the company achieved annual revenue of 1.755 billion yuan, a year-on-year decrease of 15.34%; net profit attributable to the parent company was a loss of 80.16 million yuan, a sharp decline of 145.48% year-on-year, with the company's profit being 176 million yuan; after deducting non-recurring gains and losses, the net loss was 96.48 million yuan, a decrease of 159.25% year-on-year. The company attributed the 2021 loss to "the lingering effects of the COVID-19 pandemic, weak consumer demand, rising prices of various raw materials, vicious competition from community group buying, and supply constraints due to power rationing and production restrictions." However, these factors affected the entire industry, not just Jiajia. Comparing with other companies in the industry, Qianhe Weiye's 2021 revenue reached 1.925 billion yuan, a year-on-year increase of 13.7%; Haitian Weiye's 2021 revenue reached 25 billion yuan, a year-on-year increase of 9.71%. Although the growth rates were not as high as in previous years, they all maintained slow growth. It is clear that the poor macro environment only toppled companies that were already unstable. But Jiajia Food is, after all, the first soy sauce stock in China. Why is it unstable? Let's first look at Jiajia Food's revenue in recent years. As the first listed soy sauce company in China, in its first year, 2012, its revenue reached 1.657 billion yuan, but after years of development, its performance growth was minimal, with the highest revenue only reaching 2.073 billion yuan, an increase of only 1.25% compared to the initial listing period. Looking at the stock price and market value, public data shows that since Jiajia Food's listing, the highest stock price reached 9.87 yuan, and the market value once exceeded 11.3 billion yuan. But as of the midday close on May 24, 2022, the stock price was 4 yuan per share, with a total market value of 4.608 billion yuan. From the data, Jiajia Food's performance has stagnated or even shrunk in recent years. In contrast, Qianhe, listed in 2016, had revenue of 1.925 billion yuan in 2021, more than double its initial listing period. Haitian, listed in 2014, had revenue of 25 billion yuan in 2021, 2.5 times its initial listing period. From glory to stagnation, what exactly has Jiajia experienced over the years? Jiajia Food was founded in 1996 and became famous overnight with its innovative pull-ring cap with a hole. (Before 1995, domestic soy sauce commonly used traditional sealed bottle caps that required a sharp object to puncture, often causing spills and contamination.) At the same time, Jiajia keenly perceived the business transformation brought by consumption upgrades in the domestic market and positioned itself as mid-to-high-end. At that time, the average price of soy sauce on the market was 1.6 yuan, while Jiajia sold for 6.5 yuan. At that time, Jiajia had great ambitions. To quickly open up the market, Jiajia Food did something that no soy sauce company had done before—advertising. Jiajia found the newspaper with the largest circulation in Hunan at the time and ran a "suspense advertisement" asking "Wheat + Soybean = ?" for several consecutive issues. After whetting people's appetites, "Jiajia" was revealed, greatly increasing its brand awareness. The year after the company was founded, Jiajia soy sauce's annual revenue reached 13 million yuan. By 2003, the founder of Jiajia Food invested all accumulated profits and won the "bid king" for two months of prime-time advertising on CCTV with 48 million yuan. In the following two months, Jiajia's advertisements appeared on time every day at 7:00 pm on CCTV-1 and at the end of the 7:30 pm News Broadcast, appearing in front of national audiences. △Jiajia soy sauce advertisement This all-or-nothing marketing brought Jiajia Food tremendous success, with its market share once rising to second only to Haitian Weiye and Meiweixian. A series of impressive moves, including innovative bottle caps, unique bottle designs, newspaper ads, and CCTV ads, propelled Jiajia to a successful listing in 2012. But after listing, Jiajia did not continue its strong performance as everyone expected; instead, it faced numerous problems and stagnation. On December 23, 2020, during an institutional research activity, Jiajia Food's founder Yang Zhen admitted: "The slow development after listing was mainly because since 2013, my personal investments have been trapped, leading to a vicious cycle of continuous investment without focusing on the main business, thus missing development opportunities. I am duty-bound for this." It is not easy for Yang Zhen to have such reflection, because only by facing mistakes directly can problems be solved. So, what detours has Jiajia taken over the years? They can be mainly divided into four aspects. 01 Blind Expansion into Sidelines The primary issue is the "continuous investment leading to a vicious cycle" that Yang Zhen publicly mentioned. According to Qichacha, since Jiajia's listing, Yang Zhen has made a series of investments with cross-industry characteristics, involving real estate, the internet, internet finance, and other fields, mostly ending in failure. In 2013, he invested 98.5 million yuan in Zhengzhou Jiajia for a 30,000-ton vinegar project, which was eventually canceled for various reasons. In May 2015, Jiajia Food invested 50 million yuan in Yunchu E-commerce, obtaining 51% equity, and began fresh meat and chilled meat distribution and daily necessities retail, but it never became profitable. Eventually, in December 2017, it transferred the 51% equity for 0 yuan. In April 2017, Jiajia Food planned to acquire 100% equity of Lameizi Food Co., Ltd., but after six months of negotiation, the deal fell through due to differing interests of the parties involved. In March 2018, Jiajia Food planned to acquire 100% equity of Dalian Ocean Fishery Tuna Fishing Co., Ltd. for 4.71 billion yuan, but more than two years later, this acquisition was also terminated for various reasons. These investment plans wasted a lot of the company's energy and financial resources. It is not wrong for companies to invest in sidelines to improve competitiveness and add security. But Jiajia's failure lies in blindly expanding into sidelines before perfecting its main business. Consumers have diverse product needs, and it is unrealistic to satisfy all consumers; a wider business scope is not necessarily better. To establish a firm foothold, a company needs to refine and strengthen its main products, occupy consumers' minds, and then expand after stabilization. If it rushes, it often backfires. Now Jiajia has realized that blind investment is not feasible, has suspended investment in sidelines, and has begun to focus on developing its main business. 02 Channel Stagnation After Jiajia became famous on CCTV, it had a certain brand awareness. If it had continued to expand channels so that consumers nationwide could buy its products anytime and anywhere, Jiajia's sales would have been far more than they are. However, Jiajia, mired in investment, could not spare energy for channel expansion. At the time of its listing in 2012, Jiajia Food had nearly 1,200 distributors. In the 2019 annual report, it still said "developed more than a thousand general distributors," without disclosing specific data. In contrast, Haitian Weiye had more than 2,100 distributors at the time of listing. By the end of 2019, it had 5,806 distributors, with its distribution network covering 100% of prefecture-level and above cities in China, and sales exceeding 100 million yuan in 90% of inland provinces. Qianhe Weiye had only 354 distributors in 2015, but by 2020, the number reached 1,404. Zhongju Hi-Tech had 864 distributors in 2018, reaching 1,702 by 2021. Although the numbers vary, they are all on an upward trend. By 2020, Jiajia seemed to wake up and began to pay attention to channel development. On the basis of intensively cultivating traditional advantageous channels, it established supermarket channels, catering channels, e-commerce channels, and welfare material channels, forming a three-dimensional marketing pattern of "multi-channel development, online and offline integration." As of the end of 2021, Jiajia's number of distributors increased to 1,525. 03 Loss of Positioning At a telephone conference on December 13, 2021, Jiajia Food stated that the company initially positioned itself as mid-to-high-end, but gradually deviated from this positioning during development, while product quality and packaging have always adhered to high standards, resulting in relatively high production costs. Jiajia deviated from the mid-to-high-end route because it could not withstand competitive pressure, joined the price war to boost sales, and finally fell into the quagmire of the price war and could not extricate itself. But is it not profitable to do mid-to-low-end products? Not necessarily! Haitian, which focuses on cost-effectiveness, sticks to the mid-to-low-end camp, not only ranking first in revenue in the industry but also being a leader in gross margin. Haitian uses intensive production to minimize costs. And is the claim of "deviating from the mid-to-high-end route to increase sales" because high-end products cannot compete with low-end products in sales? Not necessarily! Take Qianhe Weiye, which follows the mid-to-high-end route. Its healthy condiments are deeply loved by consumers, and its revenue has grown steadily every year since listing. Why can Qianhe Weiye's products win people's hearts while also following the mid-to-high-end route? We must understand that it is not that high-priced products are so-called high-end products; consumers also weigh whether it is worth it. Qianhe Weiye's concept of zero additives is enough to support its high-end image. In contrast, Jiajia has not launched products with competitive barriers, so consumers naturally do not buy it. Currently, Jiajia intends to return to the high-end track. How it will develop in the future is unknown, but whether it is the high-end or low-end track, there are winners and losers, and no track is smooth sailing. Therefore, companies should stick to their planned development direction, solve problems when they arise, and not avoid them. 04 Chaotic Internal Management Jiajia's internal management issues have long been criticized by the outside world. In addition to frequent violations, its high management expenses are also staggering. In 2012, Jiajia Food's management expense ratio was 3.72%, which was low in the industry. But in 2019, it reached 7.57%, an increase of 103% compared to the year of listing, far higher than the industry's -20% increase for Haitian Weiye and 45% for Qianhe Weiye. However, the continuous rise in management expenses did not bring profit growth. In September 2019, Jiajia received a penalty notice from the Hunan Regulatory Bureau of the CSRC for failing to disclose the controlling shareholder's non-operating fund occupation, failing to disclose transactions with the controlling shareholder's related parties as required, and failing to disclose guarantees provided for the controlling shareholder in a timely manner. Problems such as blind expansion into sidelines, channel stagnation, loss of positioning, and chaotic internal management have combined to make Jiajia's current situation difficult. Jiajia Food's high opening and low walk is regrettable, and the difficulties it faces at this stage were not caused overnight. Like a rotten apple, it never rots suddenly. Jiajia Food has a history of 26 years since its establishment, and all problems have gradually grown. It is normal for companies to take detours during development. As long as they discover and adjust to the right track in time, there will likely be no problems. Jiajia's problem is that it has deviated from the right track for too long. The business world is like a battlefield. Temporary failure is not terrible. As long as you learn to reflect and summarize, you can gain unexpected rewards. Just as the outcome of a war is important, summarizing the lessons of war is even more valuable. We can fall, but we must never fall in the same place repeatedly. Fortunately, Jiajia, after many setbacks, has gradually awakened. Since 2020, it has hoped to save itself through comprehensive channel expansion, cost reduction, and returning to the main business to focus on high-end products. But so far, the effect is minimal. These require long-term persistence, and there are no shortcuts. Whether Jiajia will regain its former glory in the future, let us wait and see. Although internal factors account for a large proportion of the Jiajia incident, it is also worth reflecting on. Growth is always the primary need of enterprises, and how to grow is a common problem faced by all enterprises. From July 12 to 14, the (7th) China FMCG Channel Innovation Conference will be grandly held in Chengdu. This conference will bring together thousands of marketing experts, brand executives, digital service companies, and distributor bosses in Chengdu to discuss how to seize the "opportunity," stabilize the "market," and achieve growth. If you are facing this confusion, this conference is an opportunity you cannot miss! Good article! Must like, watch, and share.