JDB's market share has fallen to less than 30%, and distributors' advance payments are hard to reimburse! It has been exposed as insolvent, and if no one comes to the rescue, it may not survive until next year!

Recently, Zhonghong Co., Ltd. issued an announcement declaring that it had signed a "Debt Restructuring and Management Trusteeship Agreement" with JDB and Qianhai Yinyi. What attracted industry attention was that the announcement disclosed JDB's financial data in recent years, including a net loss of 583 million yuan in 2017. Subsequently, JDB quickly denied the above agreement and financial data, distancing itself from Zhonghong.

As the two sides each stuck to their own versions, this debt restructuring "Rashomon" drew two inquiry letters from the Shenzhen Stock Exchange. After Zhonghong repeatedly clarified and explained, the matter was hastily concluded, but many doubts remain.

What is the real performance of JDB? The announcement did not explain. Last week, a reporter from Changjiang Business Daily sent an interview request to JDB regarding this matter, but received no reply before the deadline.

Meanwhile, COFCO Packaging suspended can supply to JDB and filed a lawsuit with the court.

In recent years, JDB's performance has been poor, with constant internal personnel changes, ongoing legal disputes with Wong Lo Kat this year, and pressure from partners ORG and COFCO. JDB is facing both internal and external troubles. Sun Wei, a brand researcher at Tsinghua University, told Changjiang Business Daily: "In fact, both JDB and Wong Lo Kat have poor profit structures. Since Wong Lo Kat's health business is listed, diversification has shared the risk of declining herbal tea profits. JDB, on the other hand, operates as a single entity, with increasing risks; capital shortage is a fact. JDB needs to redesign its top-level structure to improve its business and profit structures to win the market."

Disclosed Net Loss of 583 Million Yuan

The sales data disclosed in Zhonghong's agreement made JDB uneasy: from 2015 to 2017, JDB's main business revenue was 10.041 billion yuan, 10.634 billion yuan, and 7.002 billion yuan respectively, the latter far from the 20 billion yuan claimed by company executives.

More surprisingly, the agreement showed that JDB suffered losses twice in three years. From 2015 to 2017, the company's net profits were -189 million yuan, 1.489 billion yuan, and -583 million yuan, while liabilities rose year by year, from 7.814 billion yuan in 2015 to 13.168 billion yuan last year.

In addition, the agreement showed that JDB's total assets were 12.715 billion yuan, liabilities were 13.168 billion yuan, and debts exceeded total assets by 345 million yuan. This means JDB is currently insolvent.

In response to the above data, JDB immediately publicly denied it, saying it had never signed any "Management Trusteeship and Debt Restructuring Agreement" with Zhonghong and other companies, and was completely unaware of the content described in the agreement. It also said it had "never issued any authorization to Mr. Huang Weiqing," and that the operating conditions and financial data in the agreement "are seriously inconsistent with the actual situation." However, as of now, JDB has not disclosed its true performance and operating conditions to the outside world.

Subsequently, Zhonghong counterattacked, saying it "deeply regrets and feels helpless about JDB Group's unilateral statement without communicating with the company."

Product Distribution Lagging, Market Being Eroded

Although the farce has ended, JDB's days are not easy.

During this period, JDB fell out with COFCO Packaging (00906.HK), which joined forces with the company's second-largest shareholder, ORG (002701.HK), to "pressure" JDB. Some industry experts publicly believe that JDB's "fight" with ORG, especially COFCO Packaging, is not a wise move.

Zhu Danpeng, a researcher at the China Brand Research Institute, told Changjiang Business Daily: "After Li Chunlin came up in 2018, JDB has not improved much; instead, many problems have appeared in the top-level design. Including the fight with COFCO and the falling out with ORG, these disputes show that JDB is now in internal and external trouble."

In fact, the strong distributor system that JDB has built over the years is being weakened. Some distributors have defected to rival Wong Lo Kat, and the rest have lost confidence due to the impact of e-commerce.

On June 15, JDB relaunched its red-can product with great ambition. To this end, Li Chunlin issued a public mobilization order for all employees to work hard for 45 days to ensure that wherever there is herbal tea, there must be JDB, and wherever there is JDB, there must be red and gold cans.

Nearly three months have passed since the mobilization order, but the distribution of red-can JDB is not satisfactory. Apart from being visible online, there has been no large-scale offline distribution.

A reporter from Changjiang Business Daily did not see red-can JDB in many food retail stores in Wuhan. An unnamed insider told the media that JDB's red-can product encountered significant obstacles in its relaunch, mainly because the inventory of the previous gold-can product was large and not yet digested, and the red-can product required a new deposit, so distributors lacked motivation.

Zhu Danpeng believes that JDB's failure to ship in time after receiving advance payments for red cans from some distributors is an important reason for the lag in red-can distribution. Especially, some distributors' advance payments are difficult to reimburse, and JDB's distribution system is on the verge of collapse.

As the herbal tea war continues, JDB is gradually at a disadvantage. Data released by the China Brand Research Institute in mid-2017 showed that in the canned herbal tea field, Wong Lo Kat's market share was close to 70%. Adding other herbal tea brands like Heqizheng, JDB's market share is less than 30%.

Recently, the Supreme People's Court ruled on the red-can packaging and decoration case between Guangdong JDB Beverage and Food Co., Ltd. and Guangzhou Pharmaceutical Group Co., Ltd., rejecting Guangzhou Pharmaceutical's retrial application. This means JDB and Wong Lo Kat will continue to share the red-can packaging.

Although the Supreme Court's rejection of the retrial application laid a foundation for JDB to revive its market, Zhu Danpeng believes: "From the perspective of industry, channels, and consumers, JDB is now in a state of insolvency," and someone should come to its rescue. Otherwise, it will be difficult to survive until next year.

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