The beverage sales peak season has arrived, a time when companies typically prepare for the beverage war. However, news of "Uni-President forcing employees to leave and closing factories" has exposed the awkward status of Uni-President's beverage business: declining performance and factory shutdowns.

Since July 6, this news has spread in the FMCG circle, including the closure of two factories in Xuzhou and Shijiazhuang, as well as labor arbitration and legal proceedings with a small number of employees who experienced "disguised resignation."

The reporter contacted five Uni-President employees from Guangzhou, Haikou, Nanning, and other places. These employees all stated that at different times since 2016, they received verbal notices (some without any notice) from their respective superiors, mostly regarding demotion, salary reduction, or job transfer.

A person in charge at the Shanghai headquarters replied via email that employee job transfers are a normal part of company operations. Regarding employees involved in lawsuits, Uni-President confirmed that such cases exist, but since the litigation results are not yet out, they cannot disclose more information.

Frequent personnel turnover in the FMCG industry is normal, but the frequent labor arbitration applications by employees over the past year may be related to Uni-President's previous personnel changes and management reforms.

In June 2016, Uni-President announced major personnel changes: Chairman Lo Chih-cheng announced he would step down as General Manager, with Hou Jung-lung, General Manager of Uni-President China, taking over. After Hou left, Liu Xinhua succeeded as General Manager. In other words, Hou returned to the parent company in Taiwan, and Liu Xinhua took over as General Manager in mainland China. Liu brought new management reforms, including "zero-based budgeting, channel reform, and food and beverage integration", which were interpreted as Liu's "three fires" upon taking office.

Inevitably, these "three fires" burned employees across various regions. Due to the merger of beverage and instant noodle teams, the sales team was flattened from a four-level system to three levels, leading to staff reductions in various regions and departments, with some employees directly demoted. For example, an employee at the Hainan Uni-President factory said that because the factory planned to reduce the management-to-staff ratio from 1:5 to 1:8, many managers, including himself, were demoted and had salaries reduced.

If we look at Uni-President's recent performance, it is not difficult to understand why the company is eager to reform.

Uni-President's Xiao Ming Tong Xue (Little Ming Classmate) once became a classic marketing case, but despite such popular categories, it still cannot hide the embarrassment of a significant decline in juice beverages overall. The traditional beverage industry is indeed sluggish, with fierce competition and new products emerging. Many of Uni-President's subsequent new products did not perform as well as Xiao Ming Tong Xue.

According to Uni-President's 2016 annual report, through the transformation to mid-to-high-end product lines, Uni-President's instant noodle business revenue increased by 8.6% year-on-year to 8.221 billion yuan. However, beverage business revenue fell from 14.05 billion yuan the previous year to 12.18 billion yuan, a decline of about 13%, with juice business dropping nearly 42%. At the same time, the pre-tax profit of Uni-President's beverage business also declined from 1.105 billion yuan in 2015 to 890 million yuan in 2016, a drop of about 20%.

Uni-President's measures to merge beverage and instant noodle teams and flatten the organization appear to be cost-reduction initiatives.

Currently, Uni-President seems not to have reversed the decline in beverages. According to the first-quarter results of Uni-President's subsidiaries this year, four subsidiaries in Xuzhou, Shijiazhuang, Shaanxi, and Harbin are all in a loss-making state. Another 14 subsidiaries have profits, but compared to the same period in 2016, they almost all declined.

Among the four loss-making subsidiaries, according to leave notices provided by some employees, the factories in Xuzhou and Shijiazhuang were put on leave in January and April respectively, and they are still not in production. The leave notices also mentioned the possibility of "negotiating termination of labor contracts if production does not resume after the leave."

Among them, the Shijiazhuang factory mainly produces Hai Zhi Yan (Sea Salt) and tea beverages.

An employee at the Haikou factory told reporters that the factory is currently producing at a loss, mainly producing Hai Zhi Yan series products. A person from Guangzhou Uni-President revealed that new products like "Li Lai Wu San" (Pear Mist) are only scheduled for production once in a long while, with a shelf life of two years. He is not optimistic about this product launched last winter.

A person in charge at Uni-President headquarters believes that the entire FMCG industry is indeed on a downward trend, and Uni-President hopes to rise against the trend. However, instant noodles and beverages each have their own peak and off seasons. Factories perform equipment maintenance during off-seasons and may give employees leave during production gaps. "Uni-President's production bases are also expanding. One production base will be put into operation this year, and another new factory will be put into operation next year, bringing the total to 36."

However, now that the sales peak season has arrived, the factories are still not in production, indicating that product sales are not as ideal. If the decline in beverage sales cannot be reversed, Uni-President's adjustments and reforms are likely to continue.

Uni-President Shijiazhuang factory leave notice Xuzhou factory leave notice

Source: Jiemian, Reporter: Zhao Xiaojuan -END-