In an unexpected move, the well-known "national brand" Huiyuan Juice has finally sold itself, and the deal is somewhat disheartening! According to Food Headlines, last night Huiyuan Juice "officially announced" through a notice: the company will sign an investment cooperation framework agreement with its wholly-owned subsidiary Beijing Huiyuan, Tiandi No.1, and Guangzhou Hezhi Investment Management Co., Ltd. to establish a joint venture to expand the juice beverage market. In the joint venture, Huiyuan will hold 40% and inject 2.4 billion yuan in assets, including the registered trademark of the "Huiyuan" brand, while Tiandi No.1 and Guangzhou Hezhi will inject 3.6 billion yuan in cash and hold 60% equity. After the joint venture is established, it will purchase from Huiyuan the assets, equity, and channels needed for juice beverage operations at a cost of 3 billion yuan. At the same time, Huiyuan will provide pulp, concentrated juice, and contract processing services to the joint venture. If the transaction plan is ultimately implemented, "the joint venture will essentially take over Huiyuan's original brand operation and market sales assets. This means that Huiyuan will no longer bear the pressure of market sales, especially capital investment, transforming from a full-industry beverage company into a raw material supplier." said Shen Meng, executive director of Chanson Capital. Public information shows that Tiandi No.1 mainly engages in the R&D, production, and sales of vinegar beverages; Guangzhou Hezhi is an investment institution focusing on agriculture, food, and catering. Regarding this "cooperation," Huiyuan actively participated and listed three major "benefits." It believes that it can achieve complementary advantages with Tiandi No.1 in product categories, marketing regions, and sales channels; at the same time, it will help the group better expand and develop its juice beverage business; given the long-term cooperation plan, Huiyuan will be able to obtain stable business orders and continuous operating cash flow, which is conducive to the steady development of the business. Why sell? At 27 years old, Huiyuan Juice should be in its prime, but it already shows signs of decline. From "national juice" to "delisting concerns" to the successive departures of senior executives, this company that has witnessed the development history of China's private enterprises has fallen into an unprecedented defeat. However, success is not a coincidence, and failure is not accidental; everything happens for a reason. In fact, after Huiyuan suspended trading on April 3, 2018, it was exposed to news of "debt pressure of over 10 billion yuan, and the capital chain may break." Data shows that Huiyuan's liabilities exceed 11.5 billion yuan, and its internal chaos and personnel changes have not been just for a day or two. "Establishing a joint venture is one way to escape the 'chaos,'" said an industry insider. "Moreover, if the joint venture plan is finalized, Huiyuan Chairman Zhu Xinli can peacefully focus on his upstream industry, which is what he has always wanted." Zhu Xinli, who calls himself a farmer, has long been obsessed with the upstream industry. If Coca-Cola's acquisition of Huiyuan had succeeded back then, his plan was to develop upstream in the juice industry, operating orchards and fruit processing. Perhaps this is a new way out for Huiyuan under the shadow of debt and executive "flight," but whether this path can achieve Huiyuan's "self-rescue" and solve its current predicament remains to be seen.
Debt of over 10 billion, facing delisting
How was Huiyuan Juice "squeezed dry"?
** 1** Aftermath of the failed Coca-Cola acquisition When talking about Huiyuan, one cannot avoid the Coca-Cola acquisition case from over a decade ago. In 2008, Coca-Cola launched an acquisition of Huiyuan Juice, but it ultimately failed due to antitrust investigation. According to reports at the time, in August 2008, the Anti-Monopoly Law just came into effect. Huiyuan ran head-on into the inexperienced Anti-Monopoly Bureau of the Ministry of Commerce. In early 2009, Lin Zheying, deputy director of the Foreign Investment Management Department of the Ministry of Commerce, shared her views on the case: the acquisition might face three difficulties. First, excessive media hype caused some interference to the Ministry of Commerce; second, an assessment of the acquisition's impact on the Huiyuan national brand was still needed; third, an assessment from the perspective of healthy industry development was required. As a result, Huiyuan became the first case not approved since the implementation of China's Anti-Monopoly Law in August 2008. The "national brand" was saved, but after that, Huiyuan was in a slump, with stagnant performance. The failure of this acquisition had a long-term impact on Huiyuan Juice, and its stock price began to decline continuously. During the negotiation process, Huiyuan Juice almost dismantled all its juice production and sales channels. After that, Huiyuan Juice had to re-lay out offline sales channels and build new factories. According to Huiyuan Juice's 2016 annual report, the company's sales system covers distributors, sales offices, direct-sales companies, and also special channels such as e-commerce, aviation, fruit industry, and key account direct sales. The distributor-led offline channels cover over 90% of prefecture-level cities and over 50% of county-level cities nationwide, with about 3 million sales points. Despite the heavy asset layout, although the company's operating income increased, the asset-liability ratio remained high, and the net profit after deducting non-recurring items was loss-making for six consecutive years. ** 2** Internal resistance to transformation Huiyuan Juice's "family-style management" has long been criticized by the outside world. An industry insider once described Huiyuan: "If more than half of a company's employees and management are from the boss's hometown, it will cause many problems, especially for professional managers, because it means encountering an impenetrable interest camp." In 2013, Su Yingfu, former CEO of Lee Kum Kee Sauce Group, became the CEO. Zhu Xinli once said firmly: "Even if Huiyuan is messed up by the new people I recruit, I will accept it." After Su took office, he initiated radical reforms and laid off many old employees, but only a year later, Su Yingfu resigned. In April 2014, Liang Jiaxiang, former vice president of beverage operations for PepsiCo Greater China, became senior vice president of Huiyuan Juice, fully responsible for production and operations. In September of the same year, former executive vice president Yu Hongli was appointed executive president. In 2017, Cui Xianguo took over as executive president, but in June this year, Cui Xianguo quietly left. Zhu Xinli is accustomed to calling himself a farmer and prefers to appoint people by kinship in corporate management. For a long time, Zhu Xinli's son, daughter, brothers, son-in-law, and many other relatives have held important positions in Huiyuan. In 2018, Huiyuan Juice welcomed a new CEO, Wu Xiaopeng, who "parachuted in to save the day." Wu, who is good at finance, was chosen as CEO at that time, reportedly to help Huiyuan get rid of its debt and financing crisis. However, since 2019, six core executives, including Wu Xiaopeng and Yan Yan, have successively resigned and left Huiyuan. Clearly, the internal problems of Huiyuan Juice have reached a critical point. ** 3** Declining market share and aging products According to the 2017 interim report, Huiyuan's operating income mainly comes from three major product categories: 100% juice, medium-concentration fruit and vegetable juice, and juice drinks. Among them, 100% juice revenue accounted for 37% of the group's total revenue, reaching 1.036 billion yuan, a year-on-year increase of 2.9%; medium-concentration fruit and vegetable juice revenue accounted for 27.5% of total revenue, reaching 770 million yuan, a year-on-year increase of 6.1%; juice drink revenue accounted for 14.1% of total revenue, reaching 394 million yuan, a year-on-year decrease of 9.1%. The main business growth was weak. The above business also faces fierce competition from beverage manufacturers such as Master Kong, Uni-President, and Wahaha. As dairy products and functional beverages are strongly competing for the beverage market, the market share of the juice category where Huiyuan Juice operates is being eroded. Although the company has continuously launched new drinks in the juice product line, including Bingtang Hulu Juice, Bailiwa, mixed juices, and other new products, and has also ventured into cocktails, Pu'er tea, and other fields, the market response has been lukewarm. Why is it disheartening? Once upon a time, mentioning "Huiyuan Juice" was known to everyone; it was a must-have drink on the table during festivals and when entertaining guests. In its heyday, it attracted olive branches from French Danone, Coca-Cola, PepsiCo, and Taiwan's Uni-President. And the king of juice, Zhu Xinli, has always had a big agricultural dream: to develop upstream in the juice industry, operating orchards and fruit processing. To this end, he has repeatedly hoped to sell Huiyuan Juice to obtain funds, allowing him to withdraw from the fiercely competitive juice finished product market, shrink the front, and turn to the upstream raw material market to realize his big agricultural dream. However, after the failed acquisitions by Uni-President, Danone, and Coca-Cola, Zhu Xinli had to suspend the upstream orchard business and take up the sales responsibility of Huiyuan again. But from 2008 to 2018, Huiyuan's development got worse year by year, and Huiyuan went further and further down the wrong path. Now, Huiyuan has finally "sold" itself, but the result is inevitably lamentable. Data shows that in 2016, Huiyuan's performance was 5.741 billion yuan (2017 and 2018 financial reports were not disclosed); in 2018, Tiandi No.1 achieved sales of 2.117 billion yuan. In comparison, Tiandi No.1 and Huiyuan differ greatly in scale. Besides performance, Tiandi No.1 still faces problems such as internal personnel loss and immature national sales channels. It is uncertain whether it can shoulder the banner of saving Huiyuan. As for why Huiyuan chose to cooperate with Tiandi No.1 this time, we have not yet learned. We can only wait for responses from both parties and their next moves. This article is compiled and edited by Tips will be paid 400-2000 yuan once adopted China FMCG + Internet Professional New Media Committed to FMCG manufacturers' transformation, upgrading, and channel digitalization solutions