Facing market fragmentation by emerging brands and after repaying 1.5 billion yuan in debt, JDB needs to 'recover' before re-entering the fray. Three years ago, JDB's president Li Chunlin set a goal: to complete an IPO by 2021. Recent reports indicate JDB is accelerating its Hong Kong IPO, aiming to raise at least $300 million. Once relying on the slogan 'Afraid of getting heaty? Drink Wanglaoji,' JDB's predecessor achieved great success, reaching the pinnacle of China's beverage industry with annual sales exceeding 20 billion yuan, becoming the nation's 'No.1 herbal tea brand.' However, this also became the trigger for a prolonged brand dispute with Guangzhou Pharmaceutical Group (GPG). Now that herbal tea's glory has faded, why is JDB actively preparing for a Hong Kong listing? Is it a last-ditch effort amid internal and external troubles, or does it truly have the confidence to return to the market spotlight through the IPO process?
-01- Two Disputes Resolved, JDB's Hong Kong IPO Accelerates In 2018, after shedding the burden of the 'Wanglaoji red can' dispute with GPG, JDB focused on resolving internal issues and planning for an IPO three years later. However, during this process, JDB encountered an equity dispute with COFCO Group. JDB's cooperation with COFCO Group was primarily through its packaging-listed company, COFCO Packaging. The two parties reached an agreement on October 31, 2017, where COFCO Packaging announced a 2 billion yuan capital increase in Qingyuan JDB Herbal Plant Technology Co., Ltd., holding 30.58% of its shares. Later, COFCO Packaging filed for arbitration, claiming JDB failed to fulfill its promise to inject the JDB trademark as a capital contribution, demanding compensation for investment losses and interest. Subsequently, the two sides engaged in a series of negotiations over share buybacks and return of capital. The market once worried that the long-term partnership between JDB and COFCO might end on bad terms. It wasn't until April 2020 that COFCO Packaging and JDB reached a buyback agreement, with JDB taking eight months to fulfill the buyback commitment. On December 1, JDB Group announced on its official WeChat account that it had repaid the 1.5 billion yuan owed to COFCO Packaging for the buyback of the concentrate plant's equity, and the two parties signed a new five-year cooperation agreement. This move cleared the biggest obstacle to JDB's IPO. Notably, CICC, which successfully facilitated Nongfu Spring's Hong Kong listing, recently sent a professional team to JDB for inspection and exchange. Additionally, JDB secured support from China Merchants Bank and COFCO Group for its listing and equity investment. The brand dispute between JDB and GPG lasted 10 years, severely draining resources, and the herbal tea market is still in recovery with an uncertain future. At this point, JDB accelerating its IPO process may be driven by two considerations: On one hand, it's about the capital market. Years of litigation and prolonged advertising, verbal, and price wars directly reduced profits for distributors of both JDB and Wanglaoji brands. In 2018, JDB also faced internal issues such as employee strikes over unpaid wages, a wave of departures from the founding team, and negative annual sales profits. Going public is a way to boost confidence among JDB's own people. On the other hand, the current market environment is at a financing peak for emerging consumer brands, and the secondary market has opened its doors to consumer companies. Old and new brands like Weilong, Dongshengbeverage, and Nai Xue's Tea have also announced plans to go public in Hong Kong this year. Given JDB's brand value and influence, going public is not unreasonable. But times have changed. Can JDB's herbal tea still be a lever to move the market?
-02- Recovery: How Will JDB Compete with the Younger Generation? JDB, no longer in its prime, now faces a world where herbal tea is no longer king. Years of dealing with GPG lawsuits, mired in advertising, price, and verbal wars, reduced distributor profits and missed the golden decade of development. The market has been carved up by a batch of new internet-famous brands, such as milk tea brands represented by Heytea and Nai Xue's Tea; low-alcohol drinks like Berry Sweetie and Miki Rice Wine; new-flavor sodas and fruit juices like Hankou No.2 Factory and Wang Shan Zha; and sparkling water and sparkling wine brands represented by Genki Forest, which are nibbling away at the market bit by bit. Consumers have found that herbal tea is no longer the only choice for hotpot, barbecue, staying up late, or hiking. Facing such a brutal competitive landscape, how can JDB win back its dominant position from the younger generation? Compared with the rapidly growing internet-famous new brands, what advantages does JDB still have, and what strategic adjustments will it make? We cannot avoid the three stages of JDB's brand development:
1. Growth to Maturity: From 0-1 and 1-10 In an era dominated by traditional marketing, as long as a company had deep pockets and was willing to spend heavily on TV ads, market feedback would meet expectations. JDB did exactly that. Public records show: During the Daoguang period of the Qing Dynasty, Wang Zebang of the Imperial Medical Academy retired and opened a herbal tea shop in his hometown in Guangdong, naming his herbal tea 'Wanglaoji.' He saved countless lives during an epidemic and was hailed as the 'King of Herbal Tea.' Due to historical reasons, in the 1950s, Wang Zebang's descendants, who held the Wanglaoji brand and formula, split into two groups: one moved to Hong Kong and overseas, while the other stayed on the mainland. The Wanglaoji brand and formula that remained on the mainland were nationalized and placed under GPG. From an insider's perspective, JDB Group Chairman Chen Hongdao purchased the Wanglaoji formula and overseas trademark rights from Wang Jianyi, a descendant of Wang Zebang in Hong Kong. It is fair to say that JDB is also a holder of a national brand, but its usage rights do not cover the mainland. This explains why JDB's boss Chen Hongdao signed an agreement with GPG for mainland trademark usage rights to develop the domestic market. Starting in 2003, JDB redefined the brand concept. The slogan 'Afraid of getting heaty? Drink Wanglaoji' resonated nationwide, achieving the leap of red-can herbal tea from 0-1 and 1-10. This is also regarded as one of China's most classic marketing cases.
2. Brotherly Conflict: JDB Dethroned From the perspective of the Wanglaoji herbal tea brand alone, JDB Group and GPG are practically brothers, born from the same mother. Chen Hongdao's business acumen and shrewdness made Wanglaoji immensely popular in the mainland market. By 2011, JDB's red-can Wanglaoji sales exceeded 15 billion yuan, surpassing Coca-Cola across the board. GPG's green-box Wanglaoji sales also grew to nearly 2 billion yuan. GPG, realizing the potential, was unwilling to let its brand be a medium for others to reap huge profits, nor was it satisfied with the annual trademark rental fee of only a few million yuan it received from JDB. Since 2011, JDB has been embroiled in a series of lawsuits with GPG over trademarks, advertising, packaging, and formulas. Financial, material, time, and market resources were almost exhausted. They are from the same root! Both ignored that market changes and brand evolution do not stop due to the disputes of two giants. Eventually, even onlookers lost patience and interest in the two major brands, turning their attention to the 'fresh meat' of the new generation. In 2018, when both JDB and Wanglaoji showed fatigue, sales began to decline, and they gradually lost public favor, Genki Forest emerged with its 'sugar-free' and 'no weight gain' health concept, launching flavored sparkling water.
3. Second Entrepreneurship: Can JDB Reshape Its 'Golden Body'? Since the three-year IPO plan was proposed, JDB has been determined to undertake a 'second entrepreneurship' and has taken action. First, in 2019, it launched the JDB fine gold can packaging, and its high-end water brand Kunlunshan also crossed over to launch a moisturizing spray. Earlier, it invested in establishing a logistics company. JDB Chairman Wang Jinchang once told CICC, 'JDB has a highly execution-capable marketing team, adept at integrating resources and expanding markets; it also has very loyal partners and a complete sales network. Despite the impact of the pandemic in the first half of 2020, we still achieved good operating results in the face of fierce market competition throughout the year.' Therefore, JDB is confident about the market. During the 2021 Spring Festival, JDB launched the 'Spring Festival Battle' Douyin challenge, with topic views exceeding 1.23 billion. According to insiders, 'The impact of the JDB and Wanglaoji lawsuits is gradually dissipating, and the pressure on capital and supply chains has eased with the reconciliation with COFCO Packaging. During this Spring Festival, JDB completed sales of over 2 billion yuan, clearing annual inventory, and even experienced stockouts.' In 2018, JDB's operations team experienced a personnel earthquake. Now, JDB is again recruiting aggressively nationwide, focusing on building a young team. On March 9, JDB's HR posted spring recruitment information online, with a poster reading 'Youth, join us,' targeting 2021 graduates. Positions included marketing, production, and functional roles. Recruitment cities were 'nationwide, with nearby assignment.' As the saying goes, 'A lean camel is still bigger than a horse.' JDB's brand value and channel influence should not be underestimated. An insider close to JDB's senior management once told the media that the 1.5 billion yuan JDB used to buy back COFCO shares mainly came from distributor payments. JDB raised funds specifically from distributors, with a minimum investment threshold of 20 million yuan. Some major channel distributors were very positive about this move, believing that they had made money with JDB over the years, had a foundation of trust, and remained optimistic about JDB's future.
-03- An Outdated Internet Celebrity: How Can JDB Win Over 'Gen Z'? The market today is not like ten years ago, where whatever I shouted, you would come and buy. Instead, it's about what consumers want, and brands sell that. Especially in a market where young people seek novelty and diverse tastes, JDB herbal tea has had few eye-catching advertising campaigns since 2015. In contrast, GPG's Wanglaoji has been continuously innovating with new products. If JDB still relies on one formula, one flavor, and one slogan, it will be difficult to resonate with young people. Looking at international beverage giants like Coca-Cola and Pepsi, which have a century-long foundation, their success comes not only from a solid brand base built through traditional marketing but also from keeping pace with the times, continuous innovation, and efforts to get closer to market consumers' psychology. Today, for JDB to win over young people, first, it needs to reposition and redefine its brand. JDB's operations to promote Wanglaoji herbal tea nationwide defined the concept as a 'functional healthy beverage,' which still fits well in the current context of the broader health environment. Currently, many emerging brands are also innovating with functional beverages, such as Mengniu's 'Huojun Pop' and Qingquan Chushan's 'Sleepy Tea,' which still fall within the functional beverage category that JDB established. Second, the brand effect from JDB's long-standing confrontation with GPG means that herbal tea, to some extent, has a more mature and stable market compared to other beverage brands. We cannot deny JDB's brand foundation and full industry chain capabilities, which emerging consumer brands lack. With JDB's strength, a change of thinking could still create internet-famous new products that appeal to young people. Besides herbal tea, JDB also has its Kunlunshan mineral water, which provides imagination for the listing. But this is only a temporary solution, not a fundamental one. In the future, they must rely on a 'rebirth'; otherwise, this bowl of herbal tea might really go cold.
Source: Whale Business (ID: bizwhale) Author: Zhang Weiwei Tips will be paid 400-2000 yuan upon adoption.