---
title: "Is VV Soy Milk Failing? How Did the Former Prince of the Soy Milk Industry Fall to a Diversified Loser..."
description: "This article, originally from Chuang Daily by author Yin Taibai, examines VV Group's 16-year diversification strategy that yielded no profits and nearly bankrupted the company. Once a dominant player in the soy milk market, VV's ventures into dairy, liquor, real estate, and other industries led to its decline, losing its market leadership to competitors like Lulu and failing to regain its former glory."
author: "尹太白"
publisher: "New Distribution"
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published: "2017-01-07"
language: "en"
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# Is VV Soy Milk Failing? How Did the Former Prince of the Soy Milk Industry Fall to a Diversified Loser...

> This article, originally from Chuang Daily by author Yin Taibai, examines VV Group's 16-year diversification strategy that yielded no profits and nearly bankrupted the company. Once a dominant player in the soy milk market, VV's ventures into dairy, liquor, real estate, and other industries led to its decline, losing its market leadership to competitors like Lulu and failing to regain its former glory.

Article/Chuang Daily, Author/Yin Taibai
Recently, cross-industry ventures are trendy, such as talent show singers becoming storytellers, athletes becoming internet celebrities, actors trying comedy, etc. Today, Chuang Ge will talk about a company that is also a master of cross-industry ventures, but after 16 years of struggle, it hasn't made a penny and nearly killed itself.
This cross-industry king is
**VV Group**
****▼****
****VV Group Building
Its VV Soy Milk is probably a standard drink for the childhood of the 80s and 90s generations.
**▼**
So why is VV considered a master of cross-industry ventures?
Let's first show a picture compiled by Chuang Ge for everyone to feel it.
The blue circles are the holding companies VV has acquired through cross-industry ventures.
**▼**
Are you already dazzled?
Actually, when VV first went public, it was very impressive.
It held the top position in the soy milk industry for over a decade.
Annual sales approached 2 billion yuan.
It even expanded into overseas markets.
**▼**
However, after going public, VV began to neglect its core business.
It sold beverages, mined coal, sold tea, pressed oil, brewed liquor,
Even dabbled in real estate, steel, finance, and logistics.
It even touched furniture and biopharmaceuticals, which are completely unrelated.
If it could make money, VV would do it.
**▼**
Although VV's market value is now 11.2 billion yuan,
Excluding the acquired liquor business,
The market value is only about 6 billion yuan,
Even lower than 16 years ago.
How did the former prince of the soy milk industry fall to a diversified loser? Although it's all tears, Chuang Ge will still dig into VV's 16-year experience.
## **Once a government favorite, its taxes alone accounted for half of the government's tax revenue**
The predecessor of VV Group was a rice processing factory. In October 1992, VV Group was established in Tongshan District, Xuzhou, Jiangsu.
From its inception, VV was a star enterprise in the local area. The government treated it like a biological son, giving it whatever it wanted. VV also lived up to expectations, achieving revenue of 1.3 billion yuan as early as 1997.
**▼**
Even under the influence of the Asian financial crisis, VV's net profit maintained rapid growth. By the time the company went public in 2000, VV's market value reached 6.6 billion yuan, and net profit stabilized at over 100 million yuan.
Moreover, VV's annual tax payments accounted for more than half of the total tax revenue in Tongshan District. If VV didn't pay taxes, the local government couldn't even maintain normal expenses.
Shortly after going public, VV launched extensive advertising campaigns. Its veteran business, VV Soy Milk, became popular across China. It even sent its food experts to American university laboratories to focus on developing new products. With strong government support, it successfully opened overseas markets in Singapore, Japan, Germany, etc. It was indeed proud and glorious.
## **Failed in the aggressive push into the dairy industry, losing its leading position in the soy milk powder industry**
Although VV didn't suffer a major impact during the financial crisis, it heightened the management's sense of crisis. They clearly realized that the ceiling of the soy milk market could be reached at any time. If they relied solely on this single category, VV would find it difficult to withstand sudden impacts again. Developing another main business was urgent.
In 2001, VV began to aggressively enter the dairy industry. To be honest, VV's management played it relatively conservatively because soy milk and dairy are highly related, and the market space was large enough. This was perfect for VV.
However, VV didn't notice that Mengniu and Yili, hiding in the corner, had already bared their fangs and were coldly watching all this.
But before the two dairy giants could make a move, VV Dairy managed to half-kill itself. Why?
**First, blindly increasing investment led to overcapacity**
To enter the dairy industry, VV first registered the brand "Tianshan Snow," invested 160 million yuan to establish Xi'an VV Dairy Co., Ltd. Perhaps feeling it wasn't flashy enough, it invested over 40 million yuan to build two dairy farms capable of housing thousands of cows, and also acquired the largest dairy farm in the northwest region, which could accommodate up to ten thousand cows.
**▼**
Such large-scale investment led to high investment costs. Coupled with the rapid expansion of Mengniu and Yili, VV Dairy soon faced overcapacity, sluggish business, and a severe imbalance between input and output, almost losing everything.
**Second, there was a serious shortcoming in logistics and transportation**
Although VV's announcement to enter the dairy industry in 2001 wasn't a particularly bad timing, it made a big mistake in choosing the milk source.
**▼**
VV Dairy didn't choose to compete for the best milk sources in Inner Mongolia but concentrated its milk sources in Xinjiang and the northwest region. However, the dairy industry has a fatal weakness: the shelf life issue. If transportation takes too long, the milk may spoil.
Moreover, the main consumer group for milk is mostly in the eastern coastal areas. Even today, logistics in Xinjiang and the northwest region are still slow, so logistics largely limited the development of VV Dairy.
**▼**
By 2005, before Mengniu and Yili truly exerted their strength, VV Dairy had already failed completely. Management announced that they would refocus on the soy milk field.
However! It was too late! Another competitor had already put a knife to the neck of VV Soy Milk.
**▼**
In the soy milk field, Chengde Lulu is a similar competitor to VV Soy Milk. Lulu took advantage of VV Soy Milk's distraction and advanced rapidly. From 2007 to 2015, Lulu's net profit soared from 1.3 billion to 2.7 billion yuan, while VV Group continued to decline. Naturally, VV Soy Milk didn't need to be mentioned.
**▼**
In 2015, Lulu's total revenue was only 80% of VV Group's, but its net profit was 450% of VV's. This contrast not only slapped VV Soy Milk in the face but also lost its only advantageous business that could have turned things around. Who's to blame?
## **Cross-industry ventures went too far, wanting diversified development but repeatedly failing**
From 2000 to 2010 was the golden decade for the liquor industry. During these 10 years, the huge profits in the liquor industry drove almost everyone crazy, and VV was no exception.
**▼**
Zhijiang under VV's control
In the second half of 2006, VV, which had failed in the dairy industry, continued to bury its head in the sand and announced its entry into the liquor industry, investing 116 million yuan to take control of Shuanggou Liquor. Three years later, VV sold it for 398 million yuan. In less than three years, it had an investment return of more than three times. This made VV feel it had found the direction for diversification.
So, VV then made a series of dazzling liquor layouts, but from then on, it lost money on every investment. Not convinced, VV aggressively entered the real estate industry, but the 60-plus foreign-style houses developed by VV are still unoccupied to this day.
**▼**
VV-developed property, Viking Mansion
At this point, Chuang Ge has something to say. Today, the market has entered an era of intense competition. With the continuous expansion and increase of categories and brands, consumers have more categories or brands to choose from. One of the characteristics of consumer psychology is aversion to confusion; confusion easily loses focus.
For example, Goubuli = baozi, Quanjude = roast duck, Dezhou = braised chicken. So improving brand recognition becomes the key breakthrough point to occupy consumer minds.
VV obviously didn't realize this. Although its old business was being carved up, VV didn't stop its diversification efforts. By 2015, VV had established a diversified enterprise involving six major industries: beverages, liquor, edible oil, real estate, trade, and tea.
If positioning is not focused, the following conversation might occur:
> A: Do you remember VV Soy Milk?
>
> B: What? Isn't VV selling liquor?
>
> C: Nonsense, VV sells tea. I've been drinking VV tea.
>
> D: Damn, I dare not buy the buildings built by VV.
In recent years, VV, which wanted to regain the soy milk market, suddenly realized a new emerging market—milk tea.
VV saw that Xiangpiaopiao milk tea achieved revenue of 2 billion yuan in just 5 years, so it was tempted again and launched VV milk tea. However, behind Xiangpiaopiao were brands like Youlemei and Nestlé. As a result, VV milk tea was just launched and drowned in the milk tea wave, disappearing without a trace.
**▼**
At this time, Liu Ge He Tao and Lulu had already divided up the soy milk market. VV's diversified empire built over 16 years not only failed to defeat its competitors but also turned itself from a prince into a loser.
**If it's not easy in your original business,**
**Why should you definitely win in a new industry?**
**Blind diversification not only fails to spread risk,**
**But actually increases risk.**
**This lesson is indeed profound.**
-END-
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