He came from a peasant family, with a tough character and extraordinary boldness. He made a fortune overnight by trading wall calendars, then stumbled into the lactic acid bacteria beverage industry, building a nationally renowned "business empire." At the peak of his career, he made a "bet" with three major international investment banks, including Goldman Sachs, and lost control of his "empire." Unfortunately, lacking a bit of timing,地利, and popular support, he ended up in prison and has been unable to recover since. He is Li Tuchun, founder of Prince Milk (太子奶). A stubborn Hunan native, known as the "Milk Marshal." Li Tuchun's experience is a microcosm of China's first generation of private entrepreneurs after the reform and opening up.
Sunrise in Jiangnan
In 1960, Li Tuchun was born in Linxiang, Hunan. Less than three months after birth, a tooth grew in his mouth. His grandfather thought it was inauspicious, but no matter how his father tried, he couldn't pry open Li Tuchun's little mouth. His grandfather muttered to himself, "This one will be a stubborn one." Indeed, as soon as Li Tuchun started elementary school, he became fascinated with "The Legend of Li Shimin," and from then on, he was addicted to military strategy books, reading "The Thirty-Six Stratagems" and "The Art of War" one after another. At 17, Li Tuchun desperately wanted to join the army, but due to his family's poor class background, he had to attend Zhuzhou Normal School instead. After graduating in 1982, he was assigned to a grain and oil company in Zhuzhou. In his first year, he was sent to a dumpling restaurant for a temporary post. While over ten other classmates just went through the motions, Li Tuchun seriously learned to make dumplings from the master chef in the kitchen. Within three months, he mastered the skill: "Ground pork with cabbage, mixed with scallion, ginger, and sesame oil, tasted superb." Seeing Li Tuchun's enthusiasm at the grassroots level, the head office let him be. Over the next eight years, Li Tuchun moved from one dumpling restaurant to another noodle shop, but his position remained unchanged—"still a nobody." In 1990, an era of passionate "going south" (to seek opportunities in Shenzhen). At the age of 30, Li Tuchun, on a business trip, read Yue Fei's poem at Yue Fei's temple near West Lake in Hangzhou: "Thirty years of fame and dust, eight thousand miles of clouds and moon." Feeling sad, he wandered into the temple, knelt before Yue Fei's statue for two hours, and cried for two hours. So upon returning home, he immediately quit his job, took 300 yuan and a sack of books, and with the worst-case plan of "selling hard labor or sweeping streets," took a train to Shenzhen to create his own "fame and fortune." However, the job he found was still his old trade—selling grain and oil. In the spring of 1993, at the grain and oil wholesale market, Li Tuchun noticed that many shops were displaying beautiful women's wall calendars, which were very popular: "People hadn't seen them before, so they bought them as gifts." "It's a great opportunity to make money," so in June of that year, Li Tuchun took his savings of 20,000 yuan and returned to Zhuzhou to rent a small shop "specializing in beautiful women's wall calendars." 1993 coincided with the centenary of Chairman Mao's birth. The Chairman's poetry stele forest, Shaoshan Martyrs' Cemetery, and Chairman's bronze statue square were all completed. In September, Li Tuchun took his family to Shaoshan for a trip, and a thought suddenly struck him: "Why not sell Chairman Mao calendars in Shaoshan?" This guy was indeed decisive. Back in Zhuzhou, he mortgaged his house to the bank for a loan of 100,000 yuan. Three days later, he printed 100,000 sets of commemorative calendars for the 100th anniversary of Chairman Mao's birth and shipped them to Shaoshan. At first, business was mediocre. But on December 26, the day of the bronze statue's unveiling, an anomaly occurred at Shaofeng: "Within a radius of nine li, red azaleas bloomed overnight, covering the mountains in fiery red." At 10 a.m., the sun and moon appeared simultaneously above the statue. Li Tuchun sensed the calendars would sell like hotcakes, so he raised the price "from 5 yuan directly to 25 yuan." Sure enough, he sold 10,000 copies on the first day. During the period around Chairman Mao's birthday, Shaoshan attracted an astonishing 2 million visitors, and Li Tuchun became a millionaire overnight. After his sudden wealth, Li Tuchun felt triumphant and began to expand in all directions: he opened bookstores, hotels, video halls, and became an agent for Playboy magazine. Unfortunately, these projects not only failed to make money but also left him heavily in debt to the bank. In 1996, penniless, Li Tuchun went south again to Shenzhen to seek a turnaround. The turnaround came quickly. One day, he drank a lactic acid bacteria beverage called "Huo Li Bao" (活力宝), which tasted good. He contacted the manufacturer to discuss cooperation, hoping to become the agent in Hunan or build a factory together. But the cooperation fell through because he couldn't come up with the funds they required. After being rejected, Li Tuchun didn't give up. At that time, French company Danone was heavily investing in Wahaha, which made him believe the beverage industry was a goldmine, and he had to get in. After that, he changed his approach: instead of negotiating with the manufacturer, he directly poached the technical director who held the formula for "Huo Li Bao." Initially, the technical director didn't want to switch jobs, so Li Tuchun spread rumors to the boss of "Huo Li Bao" that the director had already signed with him, forcing the director to jump ship. With the formula in hand, he still needed capital. Back in Hunan, Li Tuchun went to the bank he owed money to and told them: either continue investing so he could open a factory and repay the debt, or wait for the original loan to become bad debt. The bank manager had no choice but to accept. In September of that year, Li Tuchun founded Zhuzhou Sunrise Jiangnan Industrial Group (later renamed Hunan Prince Milk Biotechnology Co., Ltd., abbreviated as "Prince Milk") in his hometown, starting production of lactic acid bacteria beverages. He gave the drink a grand name: "Sunrise Brand" Prince Milk.
Melodious Years
Like Zong Qinghou in his early days, Li Tuchun initially learned from Boss Zong, pushing a cart and hawking on the streets. But his eloquence was no match for Zong's, so naturally, he sold only a few bottles in a month. So in early 1997, Li Tuchun decided to target restaurants. At that time, the master chef from the dumpling restaurant had already opened over ten branches in Zhuzhou. When he heard his young apprentice was making yogurt drinks, he immediately ordered 200 boxes. After meals, the master chef gave each customer a free bottle of Prince Milk. Within just half a month, customers with children were lining up at the door, "specifically asking for Prince Milk." Soon, major restaurants in Zhuzhou began to order from Li Tuchun. That year, Prince Milk sales exceeded 10 million yuan. By November 1997, sales had reached 30 million yuan. At the end of 1997, the company expanded production, and Li Tuchun was determined to push Prince Milk into the national market. The most direct way was advertising. So Li Tuchun gritted his teeth, took 200,000 yuan borrowed from friends, and rushed to Beijing's Media Center, "to compete with big companies with annual sales of billions for prime-time CCTV advertising slots." At the bidding site, Li Tuchun frequently raised his paddle. Others increased bids by 100,000 at a time, but Li Tuchun would raise by 500,000. In the end, the unknown Prince Milk won the CCTV "bid king" title with a bid of 88.88 million yuan. However, right after the Beijing bidding ended, the financial director in Zhuzhou called: "The company's total assets are not even that much." Li Tuchun boomed, "Only with the conviction to die can we survive." Indeed, as soon as Li Tuchun returned to Zhuzhou, he became a guest of the municipal government, and four or five banks were chasing after him to offer loans. CCTV was CCTV. After the 5-second Prince Milk ad aired after the news broadcast, Li Tuchun's mobile phone never stopped ringing—call after call, until 1:30 a.m. In January 1998 alone, Li Tuchun received orders worth 100 million yuan. From February, trucks waiting to pick up goods at the Zhuzhou Prince Milk factory formed a queue three kilometers long: "It took at least half a month, sometimes a month, to get goods." At that time, Prince Milk had only one production line with an annual output of 5 million units. Li Tuchun regretted deeply: "I should have borrowed several hundred million more from the bank and built three production lines." Afterwards, Li Tuchun formulated extremely favorable distribution and agency policies, quickly establishing a nationwide marketing network, and thereby securing Prince Milk's leading position in the lactic acid bacteria beverage industry. Li Tuchun was also called "the father of China's lactic acid bacteria industry." From 2002, China's dairy industry entered a turbulent era. Li Tuchun invested heavily to build five lactic acid bacteria production and R&D bases simultaneously in Zhuzhou (Hunan), Miyun (Beijing), Huanggang (Hubei), Kunshan (Jiangsu), and Chengdu (Sichuan), forming a national strategic layout covering east, west, north, south, and center. During rapid expansion, Prince Milk's sales peaked at 3 billion yuan in 2007, doubling for six consecutive years. Prince Milk's high growth attracted the attention of international investment banks such as Morgan Stanley, Goldman Sachs, and Actis. Persuaded by Hu Zuliu, Li Tuchun signed a $73 million investment agreement with the three major investment banks and obtained a 500 million yuan "unsecured, unguaranteed" low-interest three-year credit loan from Citibank and other banks. Prince Milk also sounded the horn for overseas listing amid the clamor.
A Drama in Three Acts
Just when Li Tuchun thought everything was ready, even the east wind had come, a more violent tornado blew the seemingly thriving Prince Milk to pieces. At the end of 2007, the global financial tsunami hit major investment banks and international financial institutions hard. At the same time, Prince Milk, which was propped up by these banks and institutions, was thrown from its peak into the abyss. Citibank's "irregular" early loan recovery caused Prince Milk, which had invested almost all its liquidity in expansion, to bleed profusely: In March 2008, Citibank demanded a 30% increase in interest on the original rate; in May, it demanded additional guarantees; and after the financial crisis broke out, it demanded early repayment. Initially, Li Tuchun took a tolerant attitude toward Citibank's pressure, agreeing to a 20% interest increase and providing new guarantees. But when asked for early repayment, he sued Citibank, calling it "malicious loan recovery." He feared that if he gave in, other banks and investment banks would follow suit. However, it wasn't long before Li Tuchun lost control of the situation. In October, the three investment banks—Actis, Morgan Stanley, and Goldman Sachs—forced Li Tuchun to sign an "irrevocable agreement" stipulating that if he couldn't find a strategic investor to take over within a month, the three banks would activate the previous "bet agreement" and swallow Li Tuchun's equity. A month later, Li Tuchun found no white knight, so the three banks decided to lease Prince Milk to the government. In January 2009, the Zhuzhou municipal government invested 100 million yuan to establish Gaoke Dairy, which began "trusteeship" of Prince Milk. "If I could choose again, I might not have accepted the temptations and loans from these international economic killers, but instead developed the lactic acid bacteria business step by step." To this day, Li Tuchun still believes this was a "strangulation" of Prince Milk and Chinese private enterprises by foreign investment banks. The road ahead is always a one-way street. Under the debt collection pressure from international investment banks and banking groups, the badly wounded Prince Milk turned to local governments, hoping they could stop the bleeding and heal the wounds. Facts proved this was wishful thinking.
Prison Ordeal
Under the management of Gaoke Dairy, established by the Zhuzhou municipal government, a series of events pushed the precarious Prince Milk toward bankruptcy reorganization. Just as Li Tuchun had petitioned the Zhuzhou municipal government and the Hunan provincial government five times, hoping to regain control of Prince Milk and save the collapsing building, Li Tuchun and his family were dealt a heavy blow. In June 2010, local authorities arrested Li Tuchun, his relatives, and company executives—19 people in total. Li Tuchun himself not only lost his position as founder and major shareholder but was also detained for a year and a half. By the time he was acquitted and released on January 20, 2012, the dairy industry had changed drastically. "Many private business owners get arrested when they grow big; going public is like going to prison." After being acquitted, Li Tuchun often used this phrase to protest his 15 months of wrongful imprisonment. Before his release, his adversary—Wen Dibo, the SOE executive who managed Prince Milk under trusteeship—was placed under "double designation" (party and government disciplinary review) and later sentenced to nine years in prison for corruption and dereliction of duty. As the founder and actual controller of Prince Milk, after the bankruptcy reorganization, Li Tuchun not only received no shares, but his declared claims of over one billion yuan were not confirmed, and he was burdened with nearly 1.2 billion yuan in personal unlimited joint liability guarantees. After his release, Li Tuchun suffered from illness, was penniless, and heavily in debt. Despite this, Li Tuchun still believes in society and that a fair conclusion will be given to him.
Real-Name Report
Today, Li Tuchun is financially strained and in poor health, but he has dyed his graying hair black again. He has repeatedly stated that he has decided not to run any more businesses, but he still wants to seek justice for his past enterprise. Two years after his release, he began to take practical action—filing a real-name report against Xiao Wenwei, former deputy mayor of Zhuzhou, now transferred to the position of deputy director of the Hunan Provincial Department of Transportation. He accused Xiao of holding three positions simultaneously: head of the Zhuzhou government's trusteeship group for Prince Milk, head of the bankruptcy group, and head of the special case team against Li Tuchun. Xiao allegedly openly helped Wen Dibo seize Prince Milk: first, he used his authority to issue documents stamped with the Zhuzhou municipal government's seal, transferring Prince Milk five times; then he directly approved the bankruptcy of Prince Milk, drafted a list of 43 people to be arrested, and directly approved the arrest of 19 people without evidence, deliberately fabricating the Prince Milk case. According to insiders, after Prince Milk's troubles, Li Tuchun was burdened with over one billion yuan in debt, which remains unresolved. "He wants to use the report to finally shake off these debts, but his main purpose is to defend his rights." The former "Milk Marshal" is no longer what he used to be. Due to unresolved huge guarantee debts, his life is not affluent, and his health is not good. He once considered entering the red tourism industry, but the industry's development was not ideal, and he is still far from his envisioned "comeback." From Li Tuchun's personal experience, it is clear that the relationship between government and business is an unavoidable issue for Chinese private enterprises. In the process of trying to obtain resources including capital, due to the lack of an open, fair, and just platform, competing to "get close" to the government becomes an unavoidable path. This wrong path has destroyed countless enterprises with growth potential and swallowed up many who should have been called entrepreneurs.
"In some parts of our country, depriving private capital in the name of public power remains a powerful and unquestionable 'iron law.' Li Tuchun's release was merely a fluke—his 'innocence' was precisely based on the premise that his opponent was 'guilty.' For both sides, it was a cruel game of 'misplaced law and crime.' In terms of capital ownership, contractual relations, and legal principles, no one has given Li Tuchun justice."
— Wu Xiaobo, renowned financial writer
This article is from BOSS Business Wisdom. -END-