Click to read the original article for details The COFCO investment in JDB, once interpreted by outsiders as "fuel in the snow," has suddenly hit turbulence today. Because JDB failed to fulfill the trademark injection agreement as contracted, COFCO Packaging Investment has filed an arbitration application with the Hong Kong International Arbitration Centre against Wanglaoji Company, Zhishou Limited (the shareholder of Qingyuan JDB Herbal), and Qingyuan JDB Herbal, and stated that it will make timely announcements regarding the progress of the application. Image source: VCG COFCO Packaging (00906.HK) announced on the evening of the 6th that its subsidiary, COFCO Packaging Investment, had filed an arbitration application with the Hong Kong International Arbitration Centre on the 6th against Wanglaoji Company, Zhishou Limited (the shareholder of Qingyuan JDB Herbal), and Qingyuan JDB Herbal. As for the reason for the arbitration, COFCO Packaging stated that Wanglaoji Company had not fulfilled its commitment to inject the JDB trademark as an in-kind contribution to Qingyuan JDB Herbal as per the capital increase agreement. In October last year, COFCO Packaging announced that its indirect wholly-owned subsidiary, COFCO Packaging Investment, had signed a capital increase agreement with Wanglaoji Company, Qingyuan JDB Herbal, and its existing shareholders. According to the agreement, COFCO Packaging Investment would inject RMB 2 billion into Qingyuan JDB Herbal, thereby holding a 30.58% stake in the company. At the same time, the company holding the JDB trademark would inject the relevant JDB trademark. However, according to the announcement on the evening of the 6th, Wanglaoji Company did not fulfill the trademark injection agreement as scheduled. Regarding the reason for the non-fulfillment, a reporter called the relevant person in the brand department of JDB Group, but the call was not answered as of press time. JDB trademark injection failed to meet the deadline Qingyuan JDB Herbal Plant Technology Co., Ltd. was established in 2011. Although it has not been established for long, it is the only factory in the JDB group that specializes in the production of concentrated juice. This means that although COFCO only acquired a 30% stake in the Qingyuan JDB factory, it is equivalent to holding the lifeline of JDB. A source close to the transaction revealed that the acquisition has been completed, and COFCO is currently sorting out JDB's financial data and assets. "COFCO will conduct a two-year inspection of JDB, and after the inspection period, COFCO will consider whether to continue holding or expand its stake in JDB." The transaction was also once interpreted as COFCO providing "fuel in the snow" to JDB. An analyst pointed out that since 2012, after losing the Wanglaoji brand and changing packaging, the "war" between JDB and Guangyao Wanglaoji has never ceased, but whether in marketing or litigation, JDB has suffered a comprehensive defeat. "In this process, JDB was severely weakened, with repeated rumors of production cuts and layoffs. Although COFCO's investment in JDB was also driven by its interest in JDB's two-piece can supply share, overall, for JDB at that time, this cooperation was undoubtedly fuel in the snow." According to the capital increase agreement disclosed by COFCO Packaging on October 30, 2017, Wanglaoji Company, the holder of the JDB trademark, would inject the JDB trademark into Qingyuan JDB Herbal. The agreement stipulated that Wanglaoji Company should pay its in-kind contribution no later than 6 months after the signing of the capital increase agreement. That is, within 6 months after the agreement was signed, it should obtain the trademark approval certificate from the Trademark Office of the State Administration for Industry and Commerce, confirming that the "JDB" trademark had been transferred from Wanglaoji Company to Qingyuan JDB Herbal. According to COFCO Packaging Investment's capital increase plan for Qingyuan JDB Herbal, RMB 1 billion of the investment would be paid in cash. The other RMB 1 billion would be paid in the form of evaluated aluminum two-piece beverage cans produced by COFCO Packaging, i.e., through the JDB aluminum packaging cans produced by COFCO Packaging. Through this capital increase cooperation, COFCO Packaging's supply share of two-piece cans to the JDB Group increased to over 70%. COFCO Packaging officially became a shareholder of Qingyuan JDB Herbal, took control of JDB Group's packaging business, and became an important shareholder of the JDB brand. With COFCO Packaging's entry, JDB Group also gained the endorsement of a state-owned enterprise. However, this seemingly win-win cooperation suddenly changed today. Regarding COFCO Packaging's announcement, a reporter attempted to contact JDB's senior management and media relations personnel today but was told that JDB had undergone a "major reshuffle" at the beginning of this year, and the department responsible for media relations had been abolished, with all relevant personnel having left. Due to the failure to fulfill the trademark injection agreement, COFCO Packaging Investment has filed an arbitration application with the Hong Kong International Arbitration Centre against Wanglaoji Company, Zhishou Limited (the shareholder of Qingyuan JDB Herbal), and Qingyuan JDB Herbal, and stated that it will make timely announcements regarding the progress of the application. COFCO Packaging's investment alleviates JDB's financial difficulties JDB Group announced on March 21 this year that it had launched an IPO plan to achieve further leapfrog development. At the same time, JDB's new group president, Li Chunlin, announced that the company would achieve a successful listing within three years and would lead the group to further expand overseas business. It is understood that between 2015 and 2017, JDB Group experienced frequent changes in senior management. At the end of 2015, Yang Aixing, former vice president of JDB Group, resigned and was replaced by Wang Qiang, whose main task upon taking office was to maintain the stability of JDB's distribution team. In 2017, just 7 months after Wang Qiang was officially elected president, news broke that he had been removed from his position. The frequent personnel changes in JDB Group may be related to its declining performance in recent years. In this regard, some industry insiders believe that China's beverage industry has encountered a bottleneck period, and sluggish growth has become an industry-wide problem, while the slowdown in the herbal tea industry has become an indisputable fact. Regarding the dispute between COFCO and JDB, Zhu Danpeng, a researcher at the China Brand Research Institute, said that before COFCO invested in JDB last year, JDB's capital chain was very tight and it was unable to pay its supplier COFCO Packaging for goods, which led to the subsequent capital increase and share acquisition. However, JDB, which has now recovered, may be dissatisfied with the terms of the agreement. "If the two sides have reached the point of arbitration, it shows that the conflict has intensified to the point where it cannot be resolved internally." In Zhu Danpeng's view, JDB's cooperation with the Changde municipal government on an industrial park project may have shown JDB another means of financing, and it is not difficult to see that JDB was still hesitant about cooperating with COFCO. "It is still difficult to judge the future development of this matter, but what is certain is that falling out with COFCO is definitely not a good thing for JDB." Against the backdrop of declining sales, JDB, troubled by funding issues, welcomed the investment from COFCO Packaging Investment in 2017, which not only alleviated JDB Group's urgent needs but also stabilized market and distributor sentiment. However, will the current arbitration between COFCO Packaging Investment and Qingyuan JDB Herbal affect further cooperation between JDB Group and COFCO Packaging? Source: Compiled from NetEase Finance and Daily Economic News, etc. -END-