Coca-Cola later realized that its acquisition price for Huiyuan was indeed too high. If not for Chinese public opposition, Coca-Cola might have gone through with the deal. With its listing status revoked, Huiyuan Juice, once the 'Juice King', exited the capital stage. On January 18, Huiyuan was officially delisted. Zhu Xinli, plagued by lawsuits, also faces huge debts. As of now, he is still listed as a dishonest person subject to enforcement and has been repeatedly restricted from high consumption by courts. The 2008 Coca-Cola acquisition is considered a key turning point in Huiyuan's decline. That year, Coca-Cola offered a high price of 15 billion yuan. If the acquisition had succeeded, Zhu Xinli would have cashed out 7.4 billion Hong Kong dollars directly. The case was later halted by the Ministry of Commerce for violating the newly enacted Anti-Monopoly Law. After the dust settled, Coca-Cola and Huiyuan went their separate ways. However, Huiyuan fell into a quagmire of losses due to the chain reactions from massive expansion and sales team cuts, coupled with subsequent strategic transformation failures. The acquisition of Huiyuan was internally called 'Project Maggie' at Coca-Cola. Insider Chen Qian told Sohu Finance about the ups and downs of this 'century acquisition'. Chen Qian mentioned that Huiyuan's failure was not only a strategic mistake by Zhu Xinli but also reflected the rapid transformation of China's beverage industry in a special era. -01- Coca-Cola headquarters was determined, but Greater China was not optimistic about the acquisition According to Chen Qian's recollection, the acquisition of Huiyuan was mainly led by then-CEO of Coca-Cola headquarters, Muhtar Kent. Public information shows that Muhtar Kent is a Turkish-American who joined Coca-Cola in Atlanta in 1978 and held positions including CEO, President, and Chairman. In 2008, he was appointed CEO, became Chairman in 2009, and resigned as CEO in May 2017. He officially retired in April 2019, having led Coca-Cola for 11 years. The announcement of the Huiyuan acquisition was made in 2008. Former Coca-Cola CEO Muhtar Kent On September 3, 2008, Coca-Cola announced plans to acquire Huiyuan Juice for approximately $2.4 billion in cash. The transaction still required approval from relevant Chinese authorities. If completed, Huiyuan Juice would be delisted from the Hong Kong Stock Exchange. Coca-Cola proposed an acquisition offer of HK$12.20 per share, with an equivalent offer for outstanding convertible bonds and options. This price represented a premium of about 192% over Huiyuan's closing price of HK$4.14 on the trading day before the suspension. "It was mainly Muhtar Kent who wanted to acquire Huiyuan. In fact, the entire China region of Coca-Cola at the time did not think it was a good target," Chen Qian mentioned. At that time, China's beverage companies and market conditions were not as developed as they are now, and the Greater China region believed Huiyuan was overvalued. Coca-Cola went public in 1919 and entered China in 1978. In 2008, Coca-Cola's global revenue was about $31.9 billion, with net income of $8.4 billion. That year, Coca-Cola China's standard case volume grew by 19%, second only to France. In its financial report, Coca-Cola mentioned that Nielsen called Coca-Cola the most recognizable and effective sponsor of the Beijing Olympics. In 2008, Huiyuan Juice's revenue was 2.82 billion yuan, with net profit of 88.9 million yuan. It held a 42.10% share of the 100% juice market and a 43.60% share of the medium-concentration juice market, firmly ranking first. Chen Qian stated that Coca-Cola had already launched Minute Maid juice drinks and planned to develop full juice products. Acquisition was indeed the fastest method. Muhtar Kent had been planning to acquire Huiyuan as early as a year before, so even though Zhu Xinli raised new conditions after the negotiation was basically confirmed, Coca-Cola still accepted them. "Later we recalled that Muhtar Kent came to China and watched the Olympic opening ceremony with Zhu Xinli. In fact, the negotiation had already been concluded," Chen Qian said. The news of Coca-Cola's acquisition of Huiyuan immediately caused an uproar. China's Anti-Monopoly Law also came into effect on August 1 of that year, making the acquisition of Huiyuan the first international case. According to China's Anti-Monopoly Law, this merger had to be reviewed and approved by the Ministry of Commerce. On December 5, 2008, the Ministry of Commerce publicly stated for the first time that it had accepted the application for review of Coca-Cola's acquisition of Huiyuan. After the announcement, the deal faced widespread opposition from netizens. "Coca-Cola was initially confident that relevant authorities would not oppose it," Chen Qian mentioned. The relevant authorities later proposed a condition that Coca-Cola could not accept: after acquiring Huiyuan, it could not have full control and had to leave some shares for Zhu Xinli or a Chinese company. Chen Qian recalled that although they had a premonition that the authorities might reject it, most people at Coca-Cola thought that acquiring a juice company was not a big deal and there was no reason for the authorities to disapprove. The situation became more uncertain. When Coca-Cola sensed that the authorities' attitude was not optimistic, it immediately sent a letter to the relevant authorities. In the letter, Coca-Cola stated that it agreed to all conditions proposed by the authorities. "On the afternoon the letter was sent, the authorities announced the rejection." That day was March 18, 2009. Chen Qian wondered if the outcome would have been different if the letter had been sent earlier. "It still lost to public opinion." Chen Qian mentioned that besides the anti-monopoly reasons stated in the document, it was mainly influenced by public opinion at the time. -02- Coca-Cola walked away unscathed, while Zhu Xinli 'forged ahead' The failure of the acquisition was quite regrettable for Coca-Cola headquarters. "Coca-Cola headquarters was actually quite annoyed and even hired McKinsey at a high price to conduct an investigation," Chen Qian revealed. McKinsey's main conclusion was that the rejection reflected the attitude of senior government officials, but it did not mean that Coca-Cola was unwelcome in China. On the contrary, its positive reputation was very good. Chen Qian mentioned that Muhtar Kent later realized that the acquisition price for Huiyuan was indeed too high. Although Coca-Cola walked away unscathed, it did not create its own flagship product in the full juice segment. "Coca-Cola's sales managers at the time were under great pressure. Promoting new products was difficult for meeting performance targets; Coca-Cola and Sprite were easier to push." Chen Qian analyzed that Coca-Cola is a company with strong cash flow. The simplest and most direct method would have been acquisition, but it did not do well in that regard either. Huiyuan founder Zhu Xinli For Huiyuan, the acquisition led Zhu Xinli down a path of 'adventure'. During the six months waiting for Ministry of Commerce approval, Zhu Xinli, in order to increase the asset valuation, successively built three fruit production and processing bases in Hubei Zhongxiang, Anhui Dangshan, and Shandong Leling, investing nearly 2 billion yuan within two months. At the same time, to meet Coca-Cola's acquisition conditions, Huiyuan Juice cut the sales system built over 16 years. The number of employees decreased from 9,722 at the end of 2007 to 4,935 at the end of 2008, and sales personnel were reduced from 3,926 to only 1,160. After the failure of the Coca-Cola century acquisition, Huiyuan Group faced tight cash flow, laying hidden dangers for its subsequent huge debts. "Huiyuan's current situation is related to Zhu Xinli's aggressiveness," Chen Qian mentioned. After the acquisition failed, Zhu Xinli immediately launched fruit-flavored soda, aiming to make carbonated drinks. Many Chinese entrepreneurs care about scale. If Zhu Xinli had focused on the juice field, he might still be the leader in China's juice industry. At the same time, after the acquisition fell through, Huiyuan had to re-recruit channel partners and rebuild its sales system and team. Zhu Xinli did not stop his dream of 'big agriculture' and continued to increase upstream investment, establishing factories in more than 20 provinces and municipalities directly under the central government and more than 30 cities and counties, which continuously eroded Huiyuan's profits and cash flow. In 2014, Huiyuan Juice recorded its first loss, with a net loss of 126 million yuan. In 2015, the loss expanded to 229 million yuan. Data shows that starting in 2013, Huiyuan Juice began selling factories to alleviate financial difficulties. From 2013 to 2015, it accumulated over 3.3 billion yuan through asset disposals. In April 2014, Zhu Xinli invested 3 billion yuan to participate in the mixed-ownership reform of Sinopec Sales Company. However, in November 2015, Deyuan Capital pledged its 24,000 shares of Sinopec Sales Company to China Merchants Bank. The actual controller of Deyuan Capital was Zhu Xinli himself. In 2017, Huiyuan Juice's liabilities reached as high as 11.4 billion yuan, with bank borrowings close to 7 billion yuan. Due to the failure to disclose related-party loans of 4.282 billion yuan in compliance, Huiyuan Juice suspended trading on the Stock Exchange on April 3, 2018, which later automatically turned into a suspension. Huiyuan's liabilities increased day by day until the debt crisis fully erupted in 2019. In 2019, Huiyuan was exposed to a scandal of owing 4 million yuan to an online lending platform and repaying with juice. In December of the same year, Deyuan Capital was seized by the court, and 4.1 billion yuan in assets were frozen. While Huiyuan was mired in debt, the times did not give it a chance to catch its breath. With the rise of Uni-President and Nongfu Spring in the juice sector, Huiyuan's market share was gradually eroded. "In 2008, Coca-Cola was a hot company imitated by local enterprises. It was easy for Coca-Cola managers to find director positions in other domestic companies," Chen Qian lamented. Over the past decade or so, China's beverage industry has advanced rapidly. "In terms of production standards and salary levels in the beverage industry, Chinese companies and international companies are now not much different." (In the article, 'Chen Qian' is a pseudonym) Source: Ryan Capital, Author: Li Wenxian, Gu Zitong Tips will be paid 400-2000 yuan upon adoption.