Following its acquisition of actual control over Jiugui Liquor, COFCO Group has finally taken the first step in integration. Recently, Hao Gang, director and deputy general manager of Jiugui Liquor Co., Ltd. and general manager of Jiugui Liquor Supply and Marketing Co., Ltd., confirmed his resignation, signaling COFCO's full takeover. "With Hao Gang's resignation, this may mean that COFCO's full takeover of Jiugui Liquor will accelerate. COFCO has rich industrialization experience and talent reserves, and in the long run, COFCO Group's takeover of Jiugui Liquor indeed has the vision and resources to expand the industry, which can endorse Jiugui Liquor. But in the short term, the磨合 between the two sides will be key." The massive COFCO Group has a complex business structure, and after taking over Jiugui Liquor, it will inevitably face challenges in resource integration. At the same time, Jiugui Liquor's current development is not as good as in previous years. For the ill-fated Jiugui Liquor, whether COFCO can turn over a new leaf remains to be seen. COFCO's Layout in Baijiu Business In November 2014, China Huafu Trade Development Group was wholly incorporated into COFCO Group, becoming a wholly-owned subsidiary, and COFCO indirectly took control of Jiugui Liquor. That is, Jiugui Liquor also came under COFCO Group's ownership. On October 7 this year, Jiugui Liquor issued a board announcement stating that COFCO Group is its actual controller. Subsequently, media reported that Jiugui Liquor was directly placed under COFCO's secondary management center, managed by Hong Kong-listed China Foods. On December 15, a person in charge of China Foods told reporters that it has not yet been determined whether China Foods will take over Jiugui Liquor. Regarding the successor and future layout in the baijiu industry, reporters sent an interview request to China Foods, which responded that all matters are subject to company announcements. However, according to previous media reports, China Foods has indeed taken over the company's operations and management. Currently, China Foods owns brands such as Great Wall Wine and Fortune Rice Bran Oil. COFCO Group, which has transformed from a trading company to a full-industry-chain group enterprise, has always focused on the alcoholic beverages sector. To date, COFCO already has Great Wall Wine and some imported wine businesses, but in the baijiu field, although it had previously contacted and attempted to acquire Du Kang, Gujing Gong, and Tuopai, it ultimately did not succeed. An industry insider said that in the past 10 years, the lack of a baijiu brand under COFCO was a major strategic mistake. Domestic wine consumption has not become mainstream, and the scale and profitability of wine are somewhat behind baijiu. "Currently, whether it is Jiugui Liquor's brand influence or its production capacity and other qualifications, it has the strategic consideration as a major enterprise in COFCO's baijiu sector. COFCO's controlling stake in Jiugui Liquor is also to fill the short board in the baijiu field." At present, COFCO Group has begun to arrange human resources. Although it has not yet chosen who will manage Jiugui Liquor, COFCO will definitely select a suitable operator from within. "This personnel change means that COFCO is making changes to Jiugui Liquor. COFCO's controlling stake in Jiugui Liquor is a normal personnel change. As a major shareholder, COFCO hopes that positions such as chairman and general manager will be taken over by COFCO personnel," said Wang Chuancai, a baijiu marketing expert. Jiugui Liquor's Business Model Is Outdated After China Sugar Group took control of Jiugui Liquor in 2007, Jiugui Liquor went from being heavily indebted and on the verge of bankruptcy to becoming a dark horse in the baijiu industry in recent years. In 2010, Jiugui Liquor's main business revenue was only 560 million yuan, but it was also from that year that the marketing model reform led by Hao Gang began. That year, Jiugui Liquor Supply and Marketing Company and key distributors in Hunan Province jointly established "Jiugui Liquor Hunan Sales Co., Ltd." By 2012, sales reached 1.652 billion yuan, with net profit of 495 million yuan. However, the plasticizer incident at the end of 2012 plunged Jiugui Liquor into a trough. In 2013, Jiugui Liquor lost 36.68 million yuan; in 2014, it continued to lose 97.47 million yuan. The company's stock was given a special treatment label, and if it failed to turn around in 2015, it faced the risk of delisting. According to Jiugui Liquor's financial data, in the first half of 2015, Jiugui Liquor's main business revenue was 306 million yuan, and net profit was 39.49 million yuan, turning around from losses in the previous two years. At Jiugui Liquor's new product launch on November 26, Long Lihui, deputy general manager of its supply and marketing company, revealed that this year's annual tasks had been overfulfilled. To learn more details, reporters called Jiugui Liquor's board secretary, but no one answered. Now that the baijiu industry is beginning to bottom out and rebound, coupled with COFCO's support, this is a good opportunity for Jiugui Liquor to return to the first tier. However, whether it can maintain sustained profitability and achieve a major reversal remains to be seen over time. Liang Mingxuan, a food industry researcher at China Investment Consulting, believes that Jiugui Liquor's turnaround in the first three quarters of 2015 was not only due to the recovery of the baijiu market but also mainly due to the transformation and upgrading of the company's sales model. "Hao Gang has done his best. He is highly capable and dedicated to his career, and he has brought Jiugui Liquor to its limit," Xiao Zhuqing commented. Hao Gang promoted the peak of Jiugui Liquor's golden 10 years, especially the cellar-aged liquor, which achieved good development in Jiugui's high-end segment. Since 2013, Hao Gang has also begun to adjust Jiugui Liquor's product structure, channel structure, and market layout, especially in 2014 when he proposed the strategy of "focusing on Hunan, deeply cultivating, and aiming to be the King of Hunan" in the Hunan market. In Wang Chuancai's view, the business system built by Hao Gang is successful but not very healthy. "Hao Gang made some changes but did not change Jiugui Liquor's profit model and channel structure. Jiugui Liquor's OEM model is already relatively backward. Currently, the baijiu industry's marketing pays more attention to deep distribution and flattening, but Jiugui Liquor has not made changes in these aspects. If the new operator cannot make major adjustments to the enterprise's channels, Jiugui Liquor's future path will be very difficult." May Be Difficult to Grow Bigger and Stronger Now COFCO has frequently made efforts in the baijiu field. Earlier this year, COFCO stated that its imported wine division would cooperate with baijiu manufacturers with strong channel capabilities to jointly build an operation platform. "In the long run, it is beneficial for both sides. COFCO has the vision and resources to expand the industry, whether it is Great Wall Wine, Coca-Cola, or Mengniu, all have sufficient human resource reserves. But in the short term, I am worried about how long the磨合 will take. COFCO's tradition is professional manager management, which requires reporting to senior management. The baijiu industry requires rapid response and adaptation to local conditions, people, and times, so COFCO's standardized management may not be suitable for the baijiu industry," Xiao Zhuqing said. Although Jiugui Liquor is still a landmark brand in Hunan, Hubei, Jiangxi, and other places, its scale is relatively small and cannot be compared with Moutai or Luzhou Laojiao. The plasticizer incident dealt a severe blow to the company's image. In the years following the incident, Jiugui Liquor's development was somewhat sluggish, and until the beginning of this year, Jiugui Liquor had been in a loss-making state. In Xiao Zhuqing's view, this year Jiugui Liquor has turned losses into profits, but at the cost of lowering its brand value positioning, and it may face embarrassment in the future. "The future baijiu landscape is that first-tier brands are only Moutai and Wuliangye, and they will share the market with local brands. Previously, national brands have withdrawn their battle lines to focus on regional markets. Now Jiugui Liquor has also withdrawn to regional operations." In fact, Jiugui Liquor is not the only one facing such an awkward situation. All second-tier national baijiu brands face this challenge: they cannot compete with Moutai and Wuliangye in the high-end, and they cannot attract consumers in terms of cost performance, leaving the brands in a dilemma. A person familiar with the matter told reporters that Jiugui Liquor's system has major problems. Government officials become consultants after retirement, and there are a large number of shadow shareholders in the local government. There are also people behind the scenes interfering with Jiugui Liquor's normal operations, from personnel appointments to promotional policies. This is also an important reason why Jiugui Liquor has not grown bigger and stronger. Although COFCO's full takeover of Jiugui Liquor is of positive significance for expanding COFCO's liquor business scale and enhancing its strength, Jiugui Liquor's development in the past two years has not been outstanding in the baijiu industry. How to maximize Jiugui Liquor's creativity and advantages is also a challenge for COFCO. COFCO, which aspires to become a world liquor giant, uses Jiugui Liquor as a breakthrough in the baijiu industry. Its future fate remains uncertain. 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