---
title: "Lulu's Move to Beijing: Stock Down 70% in 8 Years, 300 Days a Year Fighting Fakes, Brothers Turn Against Each Other"
description: "Lulu, a 68-year-old plant-based beverage brand, has seen its stock price fall from 44 yuan to under 10 yuan over the past eight years, while its revenue has been overtaken by rival 'Six Walnuts'. The company is now moving some headquarters departments to Beijing to seek new growth, amid ongoing legal disputes with its former subsidiary Shantou Lulu."
author: "财天作者"
publisher: "New Distribution"
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published: "2018-11-27"
language: "en"
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# Lulu's Move to Beijing: Stock Down 70% in 8 Years, 300 Days a Year Fighting Fakes, Brothers Turn Against Each Other

> Lulu, a 68-year-old plant-based beverage brand, has seen its stock price fall from 44 yuan to under 10 yuan over the past eight years, while its revenue has been overtaken by rival 'Six Walnuts'. The company is now moving some headquarters departments to Beijing to seek new growth, amid ongoing legal disputes with its former subsidiary Shantou Lulu.

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This article is authorized to be republished from Finance World Weekly (ID: cjtxzk)
Text | Wu Xiaoyu
**In the plant protein field, there was a saying: 'South Coconut Tree, North Lulu.' It can be said that Lulu is undoubtedly one of the industry's dominant players.**
In the plant protein field, there was a saying: 'South Coconut Tree, North Lulu.' It can be said that Lulu is undoubtedly one of the industry's dominant players.
But over the past 13 years, the 68-year-old beverage brand Lulu has gradually been defeated by the newcomer 'Six Walnuts'. Financial reports show that **in 2017, Chengde Lulu achieved revenue of 2.111 billion yuan, while Six Walnuts' revenue was 7.7 billion yuan, 3.6 times that of Lulu.**
The less-than-impressive performance is also reflected in the capital market, as Chengde Lulu's stock price has fallen from its 'pedestal'. From a high of 44 yuan per share in 2010, it has dropped to less than 10 yuan now.
Perhaps to explore new paths, on November 21, Chengde Lulu stated that it is planning to move some headquarters departments, such as R&D and marketing, to Beijing.
**Lulu Moves South to Beijing**
Recently, Chengde Lulu Co., Ltd. ("Chengde Lulu") told the media that it is planning to move some headquarters departments to Beijing to provide sustainable human resources for the company's development.
A Chengde Lulu official responded to the media, saying that Chengde Lulu is planning to first move its R&D, brand, marketing, and online sales departments to Beijing. Chengde will mainly serve as a production base, but whether the headquarters will move to Beijing has not been determined.
Before this, the subsidiary Beijing Lulu also had new developments. On November 20, Chengde Lulu announced that it had completed industrial and commercial changes for its wholly-owned subsidiary "Beijing Lulu Co., Ltd.", including renaming it, changing its business scope, and increasing its capital by 43.98 million yuan.
According to the announcement and Qichacha, the subsidiary was renamed from "Beijing Lulu Co., Ltd." to "Lulu (Beijing) Co., Ltd."; its registered capital increased from 10.05 million yuan to 100 million yuan; its operating period extended from 20 years to 50 years; and its business scope, in addition to the original production of food, commissioned production of beverages, and sales of packaged beverages, added real estate development, leasing of commercial and office premises.
In addition, the legal representative of Beijing Lulu changed from Wang Xuchang to Lu Yongming. Public information shows that Wang Xuchang previously served as deputy general manager of the parent company Hebei Chengde Lulu Co., Ltd.; Lu Yongming is the chairman, general manager, and financial officer of the parent company Chengde Lulu, and is a member of the family of Lu Guanqiu, chairman of Wanxiang Group. Wanxiang Sannong Group is the controlling shareholder of Chengde Lulu.
Chengde Lulu's 2017 annual report shows that **the company has three subsidiaries: Beijing Lulu, Langfang Lulu, and Zhengzhou Lulu, all mainly engaged in beverage production and sales.**
Among them, Beijing Lulu had the worst performance, with 2017 revenue of 948,000 yuan, operating profit of -5.478 million yuan, and net profit of -5.194 million yuan. The best performer was Zhengzhou Lulu, with 2017 revenue of 639 million yuan, operating profit of 167 million yuan, and net profit of 123 million yuan.
**68-Year-Old Lulu Shows Its Age**
Chengde Lulu's move of some departments to Beijing may also be to boost performance.
Chengde Lulu's third-quarter report released on October 20 shows that **in the first three quarters of 2018, its revenue was 1.67 billion yuan, a year-on-year increase of 7.3%; net profit was 350 million yuan, a year-on-year increase of 9.6%.**
Meanwhile, its Hebei neighbor, the new plant beverage industry player "Six Walnuts", achieved revenue of 5.7 billion yuan in the first three quarters, a year-on-year increase of 5.4%; net profit was 1.74 billion yuan, a year-on-year increase of 11%. That is, Six Walnuts has come from behind, with revenue scale more than three times that of the industry veteran Lulu.
In fact, Chengde Lulu has shown its age in recent years. Since 2015, Chengde Lulu has seen both revenue and net profit decline for two consecutive years. Financial reports show that from 2015 to 2017, Chengde Lulu's revenue was 2.706 billion yuan, 2.520 billion yuan, and 2.111 billion yuan, respectively. In 2016 and 2017, revenue decreased by 6.85% and 16.23% year-on-year.
Horizontally, in 2017, Six Walnuts achieved revenue of 7.7 billion yuan, and Coconut Tree Group achieved revenue of 3.9 billion yuan, both ahead of Chengde Lulu.
At the same time, Chengde Lulu also faces the problem of declining sales volume while inventory rises. The 2017 financial report shows that its sales volume was 241,000 tons, a decrease of 21.59% from 2016; inventory was 36,200 tons, an increase of 20.31% year-on-year.
The less-than-impressive performance is also reflected in the capital market. **Chengde Lulu's stock price has fallen from its 'pedestal'. From a high of 44 yuan per share in 2010, it has dropped to less than 10 yuan now. As of the close on November 23, it was quoted at 7.83 yuan per share, down 3.34%.**
In fact, 68 years ago, Lulu Group was the undisputed pioneer of plant protein beverages, and its birth came from the entrustment of General Wang Zhen.
Chengde Lulu's predecessor was the Chengde Canned Food Factory, established in 1950. According to China Economic Net, in 1974, General Wang Zhen, then Minister of the State Farms and Land Reclamation, visited Hebei for inspection. Seeing that a large number of almonds were being shipped out, he asked and learned that these almonds would be exported to Japan. The old general frowned: "When I visited Japan, I drank a beverage made from almonds. It tasted great. Japanese officials said it was made from Chinese almonds. Why don't we in Hebei develop this instead of just selling raw materials?"
After listening to General Wang Zhen's instructions, the Hebei Provincial Party Committee and Provincial Government immediately decided to entrust this major task to the then Chengde Canned Food Factory. In June 1975, China's first bottle of almond milk was born. **In November 1997, Chengde Lulu was listed on the Shenzhen Stock Exchange. After that, Lulu became the representative of the northern school in plant protein beverages, occupying the saying 'South Coconut Tree, North Lulu'.**
In the field of almond milk, Lulu Group is the undisputed industry leader. Compared with the 2017 output of 277,200 tons, 11 years earlier in 2006, Chengde Lulu's production capacity had already exceeded 300,000 tons, with a market share as high as 90%.
In 2008, Lulu's invisible opponent, milk, also a plant protein beverage, was hit by the melamine scandal. The fall of milk gave Lulu a great opportunity to occupy people's dining tables. At the same time, Dazhai Walnut Milk entered a bottleneck period.
However, Lulu may not have expected that the industry's tailwind also brought a strong competitor - "Six Walnuts".
**The Battle with Six Walnuts**
In 2005, when Chengde Lulu was 55 years old, "Six Walnuts" was born in Hengshui, Hebei.
Before that, the company behind Six Walnuts was Hebei Yangyuan ZhiHui Beverage Co., Ltd., whose predecessor was a health product company, Hebei Yuanyuan. It was on the verge of bankruptcy, changed hands twice, and was then merged by the state-owned enterprise Hengshui Laobaigan in 1999, but Hengshui Laobaigan failed to reverse its decline.
The turning point came in 2004 when the company was bought by 58 employees and became a private enterprise. Yao Kuizhang, as general manager, became the helm of the new company with 30.01% of the shares. In 2005, Yao Kuizhang and the employees created a new product - walnut milk - and named it "Six Walnuts". In fact, at that time, Chengde Lulu also had walnut milk drinks. According to Entrepreneur magazine, "Although the difference is only one word, the meaning is different. 'Lu' (dew) reminds people of 'beauty and skincare', while 'ru' (milk) reminds people of 'breast milk'. Milk is more nutritious than dew."
In the early days of Six Walnuts, Chengde Lulu was the champion in Hebei, and it was difficult for Six Walnuts to break into the market head-on. To build channels, Six Walnuts had to find other ways. The company's vice president in charge of sales, Fan Zhaolin, had previously been a manager at the Hengshui Laobaigan sales branch, so Six Walnuts used the liquor sales channels to distribute in restaurants. Surprisingly, consumers who tasted Six Walnuts in restaurants would go to supermarkets and small shops to look for it, which in turn boosted orders from these channel merchants.
**In 2009, Six Walnuts changed its slogan to "Use your brain often, drink more Six Walnuts", simply and crudely targeting students, parents, and white-collar workers.** In August 2010, Six Walnuts invested hundreds of millions of yuan in advertising, signed host Chen Luyu, and marched into the national market.
In terms of distributor profits, in May 2016, Securities Market Weekly made a comparison: **Chengde Lulu's distributor profit was 1-2 yuan per box, and terminal profit was 2-3 yuan; while "Six Walnuts" distributor profit was 5-6 yuan per box, and terminal profit could reach 7-8 yuan. Distributors are a group that prioritizes profit, so they naturally push "Six Walnuts".**
Beijing Business Today reported in 2017 after visiting restaurants: "Chengde Lulu's supply channels are fine; as long as restaurants place orders, suppliers can deliver. But compared with Six Walnuts, Lulu's price is higher, and Six Walnuts has a lot of advertising, so many people switch to brands like Six Walnuts." Mr. Li said, "For a box of 24 cans, Six Walnuts sells for about 70 yuan, while Chengde Lulu is about 80 yuan."
However, although marketing is not as good as Six Walnuts, Chengde Lulu invests more in R&D. Yangyuan ZhiHui's prospectus shows that from 2014 to the first half of 2017, Yangyuan ZhiHui's R&D expenses were 2.4689 million yuan, 5.4461 million yuan, 7.8453 million yuan, and 3.4387 million yuan, accounting for 0.03%, 0.06%, 0.088%, and 0.094% of revenue, respectively. In contrast, Chengde Lulu's R&D expenses in 2017 were 11.4715 million yuan, accounting for 0.5% of revenue.
**The "newcomer" Six Walnuts took 13 years to overtake the 68-year-old "veteran" Chengde Lulu on a curve.** The prospectus shows that from 2014 to 2017, Yangyuan Beverage's revenue was 8.3 billion yuan, 9.1 billion yuan, 8.9 billion yuan, and 7.741 billion yuan; net profit was 1.8 billion yuan, 2.6 billion yuan, 2.7 billion yuan, and 2.310 billion yuan. During the same period, walnut milk sales accounted for 94.90%, 95.41%, 97.03%, and 98.19% of the company's main business revenue. That is, Six Walnuts' net profit alone is equivalent to Chengde Lulu's total revenue.
In February 2018, Six Walnuts was listed. Notably, 13 years ago, in the 2005 restructuring, two workshop workers who invested a minimum of 1,000 yuan and held 0.03% of shares became millionaires due to Six Walnuts' listing. Each held 132,200 shares, and at a price of 78.73 yuan per share, their market value exceeded 10.41 million yuan.
However, in addition to competition from major brands, counterfeit foods also staged "imitation shows" and occupied rural markets, causing headaches for both companies.
It is understood that Six Walnuts' counterfeit manufacturers include "Six Pure Walnuts", "Six Jian Walnuts", "Six He Walnuts", etc.; the counterfeit almond milk bottle spokesperson Xu Qing became "Xu Qian". In 2009, Chengde Lulu stated that the company spends no less than 300 days a year fighting counterfeits.
**The North-South Lulu Dispute**
Over the past 20 years, Chengde Lulu and Shantou Lulu have been producing Lulu-brand almond milk with the same formula and similar packaging.
Both North and South Lulu originated from the former state-owned Lulu Group. In 1996, Lulu Group, to open the southern market, jointly established Shantou Lulu with Hong Kong Feida Enterprise. In 1997, during the restructuring of state-owned enterprises, Lulu Group established the listed company Chengde Lulu. It is understood that to facilitate the listing of Chengde Lulu, Lulu Group injected 51% of Shantou Lulu as high-quality assets into it. Thus, Shantou Lulu became a subsidiary of Chengde Lulu. Later, Lulu Group changed its name to Linlin Group.
According to China Business Network, before 2000, all parties, including Shantou Lulu, produced almond milk in three-piece tinplate cans. In 2000, for the then-advanced Tetra Pak products, Chengde Lulu, considering the huge investment and risk, did not dare to introduce them, and instead had the joint venture Shantou Lulu introduce them. Shantou Lulu invested heavily and bore huge investment risks.
At the same time, Shantou Lulu issued a statement saying that under such circumstances, if Shantou Lulu remained in the listed company, it would directly affect the listed company's financial reports and be detrimental to its refinancing. Hong Kong Feida Company and Shantou Lulu, prioritizing the overall interests of the "Lulu" brand, fully cooperated and agreed to temporarily withdraw from the listed company at the request of Chengde Lulu, and all parties agreed that Shantou Lulu would return to the listed company when its performance improved.
The independent investment in Tetra Pak products and withdrawal from the listed company brought great uncertainty to Shantou Lulu. At the end of 2001 and the beginning of 2002, Lulu Group, Chengde Lulu, Shantou Lulu, and Hong Kong Feida successively signed the "Memorandum" and "Supplementary Memorandum" in Shantou.
According to multiple media reports, the "Memorandum" and "Supplementary Memorandum" detailed agreements based on the facts existing at the time, regarding Shantou Lulu's use of "Lulu"-related trademarks, patents, and trade names, product and sales market division, and usage fees. It stipulated that Shantou Lulu would continue to use the registered trademarks and patented technology for a fee, and that the usage rights would remain valid in the event of any transfer of the registered trademarks and patented technology.
After that, North and South Lulu developed along their own paths. After the 2006 restructuring, the controlling shareholder of the listed company Chengde Lulu became Wanxiang Sannong Group. Lulu Group withdrew from the listed company, and the enterprise nature changed from state-owned to private, and transferred trademark and patent ownership to Chengde Lulu for 301 million yuan. In 2010, to draw a clear line, Lulu Group changed its name to Linlin Group. However, Chengde Lulu never objected to Shantou Lulu's use of "Lulu"-related trademarks, patents, and exclusive production rights for Tetra Pak.
**Starting in 2015, North and South Lulu officially turned hostile.**
Chengde Lulu has repeatedly sued Shantou Lulu, claiming it has no right to produce Lulu almond milk. It issued an announcement saying it does not recognize the signing procedure of the memorandum, believing that the signing of the memorandum did not fulfill any legal procedures. At the same time, the content of the memorandum includes both suspected illegal acts of market division with unfair competition nature and suspected illegal acts of monopolistic operations, causing serious defects in the company's intangible assets such as trademarks and patents, hindering the company's future development.
On August 10 this year, Shantou Lulu filed a lawsuit against Chengde Lulu, requesting the court to order Chengde Lulu to continue fulfilling its obligations under the trademark licensing contract, and to compensate the plaintiff for economic losses of 500,000 yuan due to its breach of contract.
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Event time: December 10-13
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Event process:
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