---
title: "Renaming, Repackaging, Restructuring... JDB's Five-Year Commercial War 'Rivers of Blood'"
description: "Li Chunlin, the new president of JDB who took office in March this year, stated in an exclusive interview with Yicai that since May, the two sides have ceased price wars, marking the end of the five-year herbal tea price war. After regaining the red can and completing a review, JDB, which has faced challenges, intends to reverse its decline."
author: "栾立"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2018-11-29"
language: "en"
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---

# Renaming, Repackaging, Restructuring... JDB's Five-Year Commercial War 'Rivers of Blood'

> Li Chunlin, the new president of JDB who took office in March this year, stated in an exclusive interview with Yicai that since May, the two sides have ceased price wars, marking the end of the five-year herbal tea price war. After regaining the red can and completing a review, JDB, which has faced challenges, intends to reverse its decline.

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**Li Chunlin, the new president of JDB who took office in March this year, stated in an exclusive interview with Yicai that since May, the two sides have ceased price wars, marking the end of the five-year herbal tea price war.**
After regaining the red can and completing a review, JDB, which is in the spotlight, intends to reverse its decline.
In the past six months, after events such as the COFCO Packaging dispute, factory shutdowns, and Zhonghong data issues, the domestic herbal tea giant JDB has faced widespread skepticism. On November 27, Li Chunlin, who took office in March this year, said in an exclusive interview with Yicai that since May, the two sides have stopped engaging in price wars, ending the five-year herbal tea price war. JDB had indeed encountered financial difficulties, but with the end of the price war, JDB's situation has begun to improve.
Image source: Visual China
> ## **Reviewing the Bloody Herbal Tea War**
"This was a brutal battle, truly describable as 'rivers of blood.'" Li Chunlin, reviewing the previous herbal tea war, expressed such sentiments.
JDB's development has always been divided into two phases. The first phase, from the launch of the red can herbal tea in 1996 to May 2012, saw JDB dominate the herbal tea market. The second phase began with JDB's brand change in May 2012, which also marked the start of the previous herbal tea war.
Li Chunlin told Yicai reporters that the 2012 product renaming was well-prepared, and JDB's sales that year exceeded the target of 12 billion by 3.6 billion. However, the subsequent price war and the switch to gold cans became turning points in this battle.
In June 2012, Guangzhou Pharmaceutical's Wanglaoji herbal tea hit the market, and the price war began. At that time, JDB's wholesale price was 72 yuan per case, but a year later, it had dropped to around 40 yuan.
Li Chunlin told reporters that Wanglaoji initially adopted a buy-ten-get-one-free approach, which escalated to buy-ten-get-three-free. By August 2013, when Li Chunlin visited the catering channel in Chongqing, he felt a sense of losing control; in some places, it reached the point of buying 100 cases and getting 120 cases free.
Facing the escalating price war, JDB was forced to respond.
In the first two years of the price war, JDB still held an advantage, but the situation changed after the launch of the gold can packaging in May 2015.
Li Chunlin stated that because the renaming had gone smoothly, management believed consumers had accepted the JDB brand and predicted that the gold can could smoothly take over the red can's market.
However, Li Chunlin quickly discovered that consumers had a preconceived notion equating herbal tea with the red can, causing the gold can to be poorly received. In townships and some economically underdeveloped prefecture-level cities, product sales slowed, and Wanglaoji took the opportunity to expand its market. Competition became increasingly intense, and the price war escalated. JDB had to invest heavily in rebuilding its brand, establishing the gold can, and maintaining sales volume and market share through the price war.
Soon, JDB, which had once had substantial cash reserves, felt immense pressure. After 2015, JDB, which had previously not taken loans, had to start financing from banks. On the other hand, during the price war, JDB's relatively complete system became a burden, leading to high fixed costs. By the fifth year of the herbal tea war, JDB's liquidity had become very tight.
Li Chunlin told Yicai reporters that the renaming and repackaging used JDB's own funds without capital support, and with various factors combined, it was not surprising that the company faced liquidity issues.
Additionally, from an external perspective, JDB's setbacks in this round are closely linked to the personnel adjustments at the end of 2015.
Zhu Danpeng, a researcher at the China Brand Research Institute, stated that in this round of the herbal tea war, JDB's marketing was commendable, but the founder's inability to return and remote control left hidden dangers in internal management.
In response, Li Chunlin stated that the company is currently building a new team, and personnel adjustments will align with the next new strategy.
Image source: Visual China
> ## **End of the Herbal Tea Price War**
At the end of April 2018, JDB's distributors received a price adjustment notice stating that from May 1, 2018, a new price system would be adopted, with the ex-factory price for a case of 24 cans adjusted to 50 yuan and 44 yuan for 20 cans. Subsequently, Wanglaoji also adjusted its product prices, which is considered the official end of the first round of the herbal tea price war.
According to sources close to Wanglaoji, since 2016, Wanglaoji has been controlling costs and maintaining prices, not wanting to continue the price war, and future per-case costs will be increasingly lower.
Li Chunlin told Yicai reporters that after taking office in March, after careful consideration, he decided to stop the price war, lowering the national ex-factory price from 70 yuan to 50 yuan. Although it appears to be a price cut, given that the market wholesale price had previously dropped to around 40 yuan due to buy-one-get-one-free promotions, it is actually a price increase. On the other hand, the company prepays 8% to 10% of costs to distributors based on collected deposits.
Li Chunlin's approach aims to solve JDB's cash flow issues and also to reduce pressure and increase profits to win over distributors.
Previously, a case of products was sold at 70 yuan, but the actual selling price for distributors was only 45 yuan, with the difference covered by distributors and later reimbursed by JDB periodically. This required a large number of personnel for cost verification and supervision.
However, as JDB's capital chain tightened, the reimbursement process slowed, causing dissatisfaction among distributors.
Zhu Danpeng told Yicai reporters that at that time, in the catering channel, because JDB did not reimburse distributors in a timely manner, distributors were unwilling to advance costs, leading to a contraction in terminal sales outlets.
A large number of buy-one-get-one-free products had costs but no profits, placing a heavy burden on JDB.
Through the new strategy, Li Chunlin revealed that the current gross margin at 50 yuan is 15 percentage points higher than when sold at 70 yuan.
Without the price war, competition has shifted to internal capabilities.
Li Chunlin stated that after years of price war, raising prices benefits both sides, and the next step is to compete with Wanglaoji through price increases. If future prices are the same, the competition will be in marketing; if Guangzhou Pharmaceutical continues to price lower than JDB, then the competition will be in channel management and distributor profits.
The 2018 semi-annual report shows that Wanglaoji's parent company, Baiyunshan's big health segment, had revenue of 5.28 billion yuan, a year-on-year increase of 5.5%, with sales volume growth of 12.2% and a gross margin decrease of 3.7 percentage points, mainly due to increased sales discounts in the first half of the year, affecting revenue growth.
It is reported that all 18 JDB factories are currently producing red can JDB, preparing for a new round of competition with Wanglaoji during the Spring Festival. Plans are also in place to adjust the strategy for the existing red and gold can packaging products. Li Chunlin plans to continue using the red can to benchmark against Wanglaoji's red can, upgrade the gold can products, and increase investment in youth-oriented and internet marketing, but he did not disclose specific plans.
Chen Wei, senior partner at Levitt Consulting, told Yicai reporters that although JDB has declined in recent years, its channels and brand still offer opportunities.
Several industry insiders interviewed stated that it is rare for major brands to fight a price war to this extent. Both JDB and Wanglaoji have a need to stabilize prices, and reaching a consensus on price increases should not be difficult. However, due to the strong substitutability of their products and Guangzhou Pharmaceutical's increased marketing investment, the final market effect remains to be seen.
Image source: Visual China
> ## **Three-Year Listing Target Unchanged**
On March 21, 2018, JDB announced a new 2018-2020 mid-term development plan, with one goal being successful listing within three years. However, JDB was subsequently embroiled in disputes with COFCO Packaging, ORG, shutdowns, and Zhonghong data incidents.
On October 30, 2017, COFCO Packaging (0906.HK), under COFCO Group, announced an investment of 2 billion yuan in Qingyuan JDB, acquiring a 30.58% stake. Of this, 1 billion yuan would be paid in cash, and the remaining 1 billion yuan would be in the form of aluminum two-piece beverage cans produced by the company.
However, on the evening of July 6, COFCO Packaging suddenly announced that JDB had breached the agreement and filed for arbitration, with ORG also pressuring JDB.
Li Chunlin stated, **"The disputes with COFCO Packaging and ORG had a significant impact. In March this year, COFCO Packaging and ORG stopped supplying cans to JDB, and these two companies accounted for 90% of JDB's can supply, which hindered production from June to October. The two companies have cooperated for many years, and since they have resumed supplying cans, the differences are still under negotiation."**
Li Chunlin stated that despite some unexpected events, the three-year listing plan remains unchanged. Accounting firm KPMG has been stationed at the company since July this year, conducting sorting and report consolidation work.
Shen Meng, executive director of Chanson Capital, told Yicai reporters that JDB's main purpose for listing is still to solve its funding needs.
In Li Chunlin's view, JDB's listing aims to become a public company, gaining funds and support through the capital market, and also to obtain a fair competition opportunity with Wanglaoji. "If JDB had been a public listed company back then, perhaps it wouldn't have lost more than 20 lawsuits in those years."
Source: Yicai
**Tenth B-end E-commerce Inspection - "From Products to Scenes"**
Event Dates: December 10-13
Event Locations: Wuhu, Nanjing, Changsha
Event Schedule:
> Morning of December 10: Visit Three Squirrels Headquarters + Snack Store
>
> Afternoon of December 10: Visit Nanjing Squirrel Small Store
>
> Evening of December 10: Visit Nanjing Master Gao Beer Workshop
>
>
>
>
> Full day December 11: Nanjing-Changsha, or free arrangement
>
>
>
>
> Morning of December 12: Community Group Buying Exchange Salon
>
>
> Afternoon of December 12: Kaola Select Heroes League Launch Event
>
> Night of December 12 to Early Morning of December 13: On-site visit to Kaola Select Logistics Center - **This time period is the peak sorting period in the warehouse, allowing direct observation and learning of the backend operations of community group buying e-commerce**
**Distributor friends interested are welcome to join us for understanding and on-site inspection** :
**Organization Format**
************1. Expert Exchange Salon************************2. Company Visit
3. On-site Explanation
4. One-on-One Communication************************************5. Actual Market Case Visit************************
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