Click on the image for details Text | Food Business Observer (FBC) reporter Fang Huiyun Shanghai Golden Monkey Group is set to buy back Shanghai Golden Monkey Food Co., Ltd. (hereinafter referred to as "Golden Monkey") from Hershey! Food Business Observer (FBC) has learned from multiple sources that about two months ago, Golden Monkey Group began negotiations with Hershey, and the buyback is currently under discussion. A Golden Monkey dealer told Food Business Observer (FBC) that most Golden Monkey dealers hope the group can successfully buy back Golden Monkey, "Hershey has lost the people's hearts." Regarding the buyback negotiations, an industry insider told Food Business Observer (FBC) that price will be the key point and point of contention in the negotiations. For Hershey, it has invested a large amount of money in Golden Monkey; from Golden Monkey's perspective, after the acquisition, performance has been dismal, and now facing a mess, it also needs to invest a lot of effort and money. The Pain of the Merger An invitation letter for a product exhibition jointly held by Golden Monkey Group and Henan Weiqun Salt Industry Company shows that this exhibition is the first large-scale promotional event after the cooperation between Golden Monkey Group and Weiqun Salt. The main products include Golden Monkey cylindrical milk candy, Mylikes, and baked goods (currently our company is in buyback negotiations with Hershey, and these products will be supplied after the buyback is completed). Public information shows that after Golden Monkey Group chairman Zhao Qisan sold Golden Monkey for 3.5 billion yuan, he crossed over into the salt industry. According to the National Enterprise Credit Information Publicity System, in October 2016, Zhao Qisan and Henan Weiqun Multi-species Salt Co., Ltd. invested 10.2 million yuan and 9.8 million yuan respectively as registered capital, becoming investors in Zhoukou Sanshengwang Food Co., Ltd., located in Zhao Qisan's hometown—Shenqiu County, Henan. In July 2016, Zhoukou Sanshengwang Food Co., Ltd. changed its main business scope to include salt business. An industry insider told Food Business Observer (FBC) that this buyback is the intention of both Golden Monkey Group and Hershey. After Hershey acquired Golden Monkey, its performance has been poor, and there have been many conflicts and disputes with Golden Monkey's original dealers. On the other hand, Golden Monkey Group, under external pressure, also wants to recover its original channels and customers. A Golden Monkey dealer said that the reason for the buyback may be that Golden Monkey Group is dissatisfied with Golden Monkey's market performance in recent years. At the same time, Hershey's performance in the Chinese market has not met its expectations. According to foreign media reports, in the fourth quarter of 2016, Hershey's sales in China fell by about 11% year-on-year. Hershey executives said in the quarterly earnings conference call that Hershey's channels in China still face challenges. In addition, in the second quarter of 2015, Hershey's operating losses in international and other markets expanded to $44.5 million. Hershey said the decline was mainly due to the impact of declining net sales of chocolate in the Chinese market and the dilution effect of Shanghai Golden Monkey. It all originated from the cross-border merger in September 2014. At that time, Hershey announced the completion of the delivery and acquisition of 80% of the equity of Shanghai Golden Monkey Food Co., Ltd., with the total amount expected to reach 3.5 billion yuan after the full acquisition. Shortly after the merger, Golden Monkey Group chairman Zhao Qisan crossed over into the salt industry, and the board seats of Golden Monkey Food were all replaced by foreign investors. Conflict Intensifies In May this year, more than 130 former Golden Monkey office directors and over 1,000 dealers collectively submitted a joint letter to Hershey, pointing out that Hershey owed bonuses and commissions to former Golden Monkey employees and refused to reimburse dealers for expenses. The joint letter mentioned that in April 2016, Hershey, under the guise of company integration, "forced the majority of office directors, business personnel, and frontline production workers nationwide to sign resignation agreements. To date, the number of dismissed employees nationwide has exceeded 3,000." It also stated that Hershey has successively sued dealers and office directors nationwide to recover debts, with more than 60 dealers and office directors being sued. (Photo of loan contract shown by former Golden Monkey employees)******** According to the joint letter, the conflicts between Hershey and Golden Monkey dealers mainly include four items: 1. Compensation for some personnel has not been paid to date; 2. The market was not handed over according to procedures, making it impossible to verify accounts and recover some debts; 3. The company owes office directors nationwide commissions of up to 60 million yuan and secondary logistics distribution fees of about 10 million yuan, which have not been paid; 4. Legacy issues are not resolved, mainly dealer inventory (now expired) of about 100 million yuan and market advance expenses of about 100 million yuan. It is worth noting that after acquiring Golden Monkey, Hershey carried out drastic reforms: first, it laid off a large number of Golden Monkey employees; second, it closed several factories; third, it sued Golden Monkey dealers and former office directors nationwide to demand repayment. Public information shows that currently, most of Golden Monkey's factories in China have been closed, with only a small factory in a town in Zhoukou producing in small batches, and operations are bleak. Marketing System Not Adapted to Local Conditions? Some industry insiders analyzed that Hershey's purpose in acquiring Golden Monkey was to expand its market share in China, to enter third- and fourth-tier cities, and to increase its brand layout and channel control in China by acquiring local brands. However, from the actual situation, this acquisition did not achieve Hershey's previous expectations, and Hershey's marketing system was "not adapted to local conditions" in China. Public information shows that at the time, Golden Monkey was one of the three largest candy manufacturers in the country, with five production bases in Shenqiu County, Henan, subordinate counties and cities of Shenqiu, Xianyang, Shenyang, and Inner Mongolia. It produced Golden Monkey milk candy, Chan Zui Hou dried tofu, chocolate substitutes, snack foods (green beans, broad beans, peanuts, rice crackers, etc.), jelly, etc., with a market share of over 10% in similar products. Before being acquired by Hershey, Golden Monkey's sales system was roughly divided into four levels: chairman, marketing director, regional manager, and office director. Golden Monkey adopted a regional responsibility system, where the person in charge of a region was fully responsible for the market, marketing, customers, supermarkets, etc., and each prefecture-level city had two or three salespeople. Hershey's acquisition completely broke Golden Monkey's original system. A Golden Monkey dealer introduced that Hershey divided the country into four major business regions, with every one or two provinces divided into a smaller business region, and eliminated the original regional managers and office directors, with almost no business handover during this process. In addition, before the acquisition, Golden Monkey dealers reached loan agreements with the company to purchase goods, and signed notarized documents. In actual execution, dealers borrowed money from Golden Monkey Company, but the company did not pay cash; instead, it directly sent goods to dealers. After the acquisition, Hershey used the IOUs and notarized documents to sue Golden Monkey dealers nationwide, demanding repayment, and mostly won the lawsuits. Source: Food Business Observer (ID: fbc180) -END-