---
title: "Offend Anyone but the Supply Chain! Red Bull Finds True Friendship in Adversity, While JDB Seems to Fall from Grace"
description: "Red Bull and JDB are currently the 'miserable siblings' in the beverage market, both plagued by brand disputes and unprecedented market pressure. At this time, the supply chain's attitude and actions towards them have become the 'bottom line of life and death.' ORG, a leading food packaging company, with three-piece cans (mainly for Red Bull) and two-piece cans (mainly for Tsingtao and JDB) as its main business, went public in October 2012. According to ORG's financial report, the company's accounts receivable were 2.342 billion yuan, of which 11 customers had overdue credit periods, and after multiple collection attempts, bad debt provisions reached 204 million yuan due to uncollectible amounts or deteriorating customer operations."
author: "New Distribution"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2018-09-02"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/zO5WzmdGo2stMxK2Syx4rQ"
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---

# Offend Anyone but the Supply Chain! Red Bull Finds True Friendship in Adversity, While JDB Seems to Fall from Grace

> Red Bull and JDB are currently the 'miserable siblings' in the beverage market, both plagued by brand disputes and unprecedented market pressure. At this time, the supply chain's attitude and actions towards them have become the 'bottom line of life and death.' ORG, a leading food packaging company, with three-piece cans (mainly for Red Bull) and two-piece cans (mainly for Tsingtao and JDB) as its main business, went public in October 2012. According to ORG's financial report, the company's accounts receivable were 2.342 billion yuan, of which 11 customers had overdue credit periods, and after multiple collection attempts, bad debt provisions reached 204 million yuan due to uncollectible amounts or deteriorating customer operations.

Red Bull and JDB are indeed the 'miserable siblings' in the current beverage market, both troubled by brand disputes and facing unprecedented market pressure. At this time, the supply chain's attitude and actions towards them have become the 'bottom line of life and death.'

ORG, as a leading food packaging company, with three-piece cans (mainly for Red Bull) and two-piece cans (mainly for Tsingtao and JDB) as its main business, went public in October 2012. According to ORG's financial report, the company's accounts receivable were 2.342 billion yuan, of which 11 customers had overdue credit periods, and after multiple collection attempts, bad debt provisions reached 204 million yuan due to uncollectible amounts or deteriorating customer operations.

**This inevitably reminds one of ORG's good friend 'Huabin Red Bull' and the currently embattled 'JDB'.**

**Expanding New Customers Without Forgetting Old Friends**

For a long time, ORG's vigorous development has been closely linked to Red Bull. Statistics show that from 2012 to 2016, ORG's net profit soared from 405 million yuan to 1.154 billion yuan last year. During these five years, the highest year-on-year growth was 51.65%, and the lowest was 13.47%.

More importantly, from 2008 to 2016, Red Bull's purchases from ORG increased from 771 million yuan to 4.975 billion yuan in 2016, a 6.5-fold surge. It cannot be overstated how important Red Bull is to ORG.

In this financial report, ORG reiterated that the company still faces the risk of high customer concentration. "The dispute between the company's main customer, China Red Bull, and its partner, Thailand's TCP Group, over trademark licensing is still in the process of resolution. Since the company's sales to China Red Bull account for a large proportion of total revenue, China Red Bull has a significant impact on the company's business and poses potential risks to future operations."

In this regard, **ORG stated in the financial report that the company will normally fulfill its strategic cooperation agreement with China Red Bull and continue to provide good service to it.** At the same time, it will closely monitor the resolution process of the above disputes and actively participate in any plans conducive to the healthy development of the client's brand; it will further increase market development efforts, optimize and adjust product and customer structures, promote the rapid scaling of strategic cooperation with important new customers, and continue to promote the development of smart packaging business to reduce dependence on a single customer.

In fact, as early as 2012, when it was about to go public, ORG was aware of the risk of high customer concentration. The company stated, "We have formed long-term stable cooperative relationships with major customers including Red Bull, but if major customers experience a significant decline in demand for our products due to their own reasons or major adverse changes in the end-consumer market, our operating results will be materially adversely affected."

In its 2016 annual report summary, ORG publicly disclosed that Red Bull contributed revenue of 4.975 billion yuan and operating profit of 971 million yuan, accounting for over 60% of the company's revenue and profit. By the first half of 2017, ORG's revenue fell 3.21% and net profit fell 32.35%, attributing this to changes in customer demand. At that time, there were reports that Red Bull had suspended production for a period, which might be an important reason for ORG's performance decline.

Meanwhile, according to ORG's 2017 annual report, the largest customer accounted for 59.68% of annual sales, and the top five customers accounted for 76%. Although ORG did not disclose customer names, given its cooperation with Red Bull, JDB, Want Want, Lulu, and many other star beverage companies, one can guess.

Even amid the Red Bull trademark dispute, despite Thailand's TCP demanding 30 million yuan in compensation, ORG still confidently stated that it would continue to produce and supply empty cans for China Red Bull according to the agreement.

At the same time, according to ORG's announcement, Zhanma (Beijing) Beverage Co., Ltd., a company whose legal representative was a supervisor of ORG in the past twelve months, ORG also sold finished products worth 48.1815 million yuan to it.

Although Huabin's Red Bull is in turmoil, it should be grateful to have found a reliable 'old friend.' **But another beverage giant, JDB, is not so lucky.**

**JDB 'Offends' Two Major Packaging Suppliers**

JDB is currently in a series of arbitration disputes with COFCO Packaging and ORG. In October last year, JDB announced a marriage with COFCO Packaging, which planned to invest 2 billion yuan in JDB's core asset, Qingyuan JDB. However, cracks suddenly appeared in their cooperation.

On July 6 this year, COFCO Packaging 'exposed' that JDB had not fulfilled its commitment to inject JDB as in-kind capital into Qingyuan JDB according to the capital increase agreement, and had already filed arbitration applications against Qingyuan JDB and others.

On July 9, ORG issued another announcement stating that it had the right to use its claims of 503 million yuan against JDB China and its affiliates, plus interest at an annual rate of 6% until the conversion date, to exchange for part of the equity of the proposed listing entity after JDB Group's restructuring or Qingyuan JDB Herbal, and the company had the right to choose the final invested entity. However, to date, JDB China and Qingyuan JDB Herbal have not fulfilled the preliminary matters agreed in the Letter of Intent on time.

The reason for the shift from marriage to litigation between JDB and COFCO Packaging is that JDB did not fulfill its commitments after COFCO's capital injection. JDB's trademark is the core asset of the brand. COFCO provided real money, but Hong Kong JDB had not yet provided the JDB trademark for COFCO to take a stake, so COFCO Packaging chose to sue. ORG, which holds 22.93% of COFCO Packaging and is also a major packaging supplier to JDB, hopes to exchange its 503 million yuan debt for JDB equity.

**COFCO Packaging Directly 'Cuts Supply' - JDB's Prospects Uncertain**

COFCO Packaging's pressure on JDB does not stop there.

Recently, according to COFCO Packaging's 2018 interim results announcement, affected by the failure of other partners in the Qingyuan JDB equity project to fulfill their capital increase obligations on time, COFCO Packaging **suspended the supply of two-piece cans to JDB Group from the second quarter of 2018.**

As upstream suppliers to JDB, both COFCO and ORG have conflicts with JDB, which has a huge impact on JDB's market. Since June 2018, JDB has experienced supply shortages, and its red cans have not been massively distributed to the market. In June this year, JDB 'grandly' announced the relaunch of red-can JDB to fully ignite peak-season sales. Now it seems JDB's summer has 'cooled down.'

"If the confrontation is not effectively resolved, upstream supply issues will eventually affect terminal sales. When terminals have no goods to sell, JDB's overall revenue this year will undoubtedly continue to decline," said an industry insider. On the 28th, Zhonghong Co., Ltd. released a set of JDB's marketing data for the past three years, whose authenticity is questionable: **As of December 31, 2017, JDB Group was insolvent, with net assets of -340 million yuan; 2017 operating revenue was only 7.002 billion yuan, and net profit was a loss of 583 million yuan.**

This set of operating data differs greatly from what most industry insiders had previously estimated. Pang Zhenguo, Party Secretary of JDB Group, said in an interview with Jiemian News in March 2017 that JDB's sales in 2015 were around 25 billion yuan; in 2016, operating revenue was 24 billion yuan, an increase of about 10%. JDB's total sales revenue in 2017 was expected to be around 15 billion yuan.

Under multiple pressures, JDB's weak terminal market performance and Wang Laoji's pursuit are evident. According to China Business Journal, a JDB distributor revealed that JDB's channel working capital is very weak. After JDB President Li Chunlin took office, JDB lowered purchase prices and tried to reduce the intensity of distributors' self-advanced sales expenses, which won praise from distributors.

But after the red-can JDB was announced to be launched, JDB required distributors to pay deposits, effectively taking back the concessions through deposits. "In the channel market, JDB has lost its advantage over Wang Laoji."

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