Recently, JDB seems to be in troubled waters. A few days ago, media reported that JDB was facing supply shortages during the peak season, and yesterday, a statement from JDB sparked industry-wide discussion.
Last night, Zhonghong Holdings announced that its controlling shareholder had signed a "Debt Restructuring and Operation Trusteeship Agreement" with JDB and Yinyi Capital, and also disclosed JDB's performance over the past few years, showing a net loss of 582 million yuan in 2017. However, overnight, JDB issued a statement directly refuting Zhonghong Holdings, claiming it was unaware of the agreement and that the disclosed performance figures were seriously inconsistent with reality.
The promised debt restructuring turned out to be a false alarm overnight.
1. JDB Disclosed to Have Lost 582 Million Yuan in 2017
On the evening of August 27, Zhonghong Holdings, a real estate company in debt crisis, issued an announcement stating that its controlling shareholder had signed a "Debt Restructuring and Operation Trusteeship Agreement" with JDB and Yinyi Capital, and also disclosed JDB's performance.
△ Zhonghong Holdings Discloses JDB's Performance
The announcement showed that JDB's unaudited main business revenue for 2015-2017 was 10.04 billion yuan, 10.63 billion yuan, and 7.002 billion yuan, respectively; net profits were -189 million yuan, 1.48 billion yuan, and -582 million yuan; and liabilities were 7.81 billion yuan, 8.76 billion yuan, and 13.17 billion yuan, respectively. Clearly, in 2017, JDB's revenue and net profit declined significantly, with a loss of 582 million yuan.
It is worth noting that this significantly differs from previous media reports that JDB's sales for 2015-2017 were approximately 25 billion yuan, 24 billion yuan, and 15 billion yuan, respectively.
On the morning of August 28, JDB issued a statement saying that the operating conditions and financial data of the JDB Group described in Zhonghong Holdings' announcement were seriously inconsistent with the actual situation, and it would pursue legal liability. However, in this statement, JDB did not disclose its "true" performance.
2. JDB Denies Agreement, "Clashes" with Zhonghong Holdings
Furthermore, although Zhonghong Holdings' announcement provided a detailed introduction to the cooperation method with JDB and Yinyi Capital, JDB denied it.
In its statement, JDB said it had never participated in the signing of the "Operation Trusteeship and Debt Restructuring Agreement" by Zhonghong Holdings Co., Ltd., Zhonghong Zhuoye Group Co., Ltd., and Shenzhen Qianhai Yinyi Capital Co., Ltd., and was completely unaware of the content described in the agreement.
In addition, JDB stated that it had never issued any authorization to Huang Weiqing, and JDB would investigate the matter through legal procedures and pursue legal liability for the relevant parties.
As of the time of writing, Zhonghong Holdings had not yet issued a statement in response to JDB's statement, and its shares were temporarily suspended on August 28.
3. Frontline Market Voices: Supply Crisis
Recently, according to multiple distributors, since June this year, JDB provided a batch of red-can JDB to distributors and then stopped supplying. Although most distributors had prepaid for goods to JDB's local branches, JDB still failed to deliver.
A distributor in the area under JDB's Wuhan branch told reporters that he received the first batch of red-can JDB in May and a second batch after the red-can launch event, totaling over 5,000 cases. After entering the sales peak season, the two batches of red-can JDB quickly sold out. Since then, the distributor repeatedly reported supply shortages in the terminal market to the local JDB company, but no solution was provided.
"Cooperation with JDB uses prepayment; now the payment has long been given to JDB, but the goods have not arrived. After multiple communications with JDB staff, the grassroots staff only said to wait, saying something happened at the top," the distributor told reporters. So far, JDB's supply cut-off has lasted nearly two months. Similarly, a distributor in Shandong also reported a supply cut-off of over a month.
After the supply cut-off in June, many local distributors have run out of stock. "Now we can only find inventory from other regions through various channels, mostly leftover from last year. For example, I heard recently that there are still 100,000 cases of inventory in Hangzhou, so many distributors go there to find goods. Conventional channels can no longer get goods; we can only contact online to see which regions still have surplus inventory."
Regarding JDB's supply cut-off, distributors have gone from understanding to confusion. "When running the market, we clearly feel that JDB sales have been declining since last year. After the red can was launched this year, there was a sudden supply cut-off. We assumed JDB wanted to clear gold can inventory to promote the red can during the July-August sales peak. But the current supply cut-off without any explanation is incomprehensible, and there is no mention of how to handle the prepaid payments."
"Although JDB is not as good as before, the market size still exists, and market demand remains significant. JDB's terminal and channel prices have never collapsed, so distributors can still make a profit selling JDB. But the current situation really worries us. On one hand, we face the pressure of having no goods to sell; on the other hand, a significant amount of payment is still in JDB's hands, making us feel uneasy," a distributor under JDB's Wuhan branch told reporters.
Distributors have repeatedly tried to contact JDB staff for solutions, and some even hoped to urge JDB to supply by continuing to pay. However, according to distributors, JDB's grassroots staff advised them not to make payments for now, saying there were issues at the senior level.
An insider told reporters that the supply of red cans was not rolled out nationwide but only briefly distributed in some regions. Could the red can supply cut-off be due to packaging supply issues? Reporters contacted COFCO Packaging and ORG, and COFCO Packaging said it would release its mid-year financial report soon, which would explain JDB-related issues, and it was not convenient to disclose details at the moment.
4. Red Can Return Falls Through, JDB Mired in Trouble
Now it seems that JDB's slogan of completing red can distribution in 45 days has become a gimmick. After some distributors self-reported supply cut-offs, the gold can remains JDB's main circulating product. According to multiple media reports, in first-tier markets like Beijing, red-can JDB has never been seen on sale.
The industry generally believes that JDB's return to the red can is of great significance. "In public perception, the red can represents the herbal tea brand, just as the red bottle represents cola and the green bottle represents Sprite. It has become a common consumer perception. JDB's return to the red can is of great positive significance. JDB's decision-makers also saw this and made a big deal about the red can's comeback, but problems in its internal execution system and upstream and downstream supply chain have prevented this decision from being implemented," said Feng Qi, an FMCG marketing expert.
On June 15, JDB Group President Li Chunlin stated in a "Mobilization Order" to employees: "Fight 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, fully igniting JDB's peak season sales, achieving this year's double-digit sales growth target, and achieving a double harvest of sales volume and profit."
It is worth noting that the aforementioned distributor from the Wuhan branch also told reporters that he originally belonged to the Wuhan branch, but there had been a situation where distributors were required to pay prepayments to the Inner Mongolia branch.
Gao Jianfeng pointed out to reporters that JDB's current decision-making positioning has deviated, with significant inventory pressure in first- and second-tier markets. The overall environment has caused the beverage market to become more segmented, leading to diversion, so big single products in first- and second-tier markets have generally declined, while third- and fourth-tier markets, due to a certain lag, are far from saturation. This has caused severe unsold inventory in markets JDB values more, and supply shortages in markets it values less. "Returning to the red can, the most important thing is for JDB to target the market's growth points, rather than blindly treating it as a gimmick."
As of the time of writing, JDB has still not provided distributors with a reasonable solution to the supply shortage, and when distributors will receive goods for their prepayments remains unknown. But what is certain is that JDB has already missed this beverage peak season. We will continue to follow up on the subsequent developments.
Compiled from Green Squirrel and China Business Journal
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