---
title: "'Restarting' JDB"
description: "Returning to an entrepreneurial mindset, JDB faces perhaps even more severe challenges than before. At JDB's Beijing factory, production lines are running, signaling that JDB has not halted production and that red-can JDB is back in production, with eased tensions with suppliers."
author: "阿茹汗"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2018-12-03"
language: "en"
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---

# 'Restarting' JDB

> Returning to an entrepreneurial mindset, JDB faces perhaps even more severe challenges than before. At JDB's Beijing factory, production lines are running, signaling that JDB has not halted production and that red-can JDB is back in production, with eased tensions with suppliers.

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**Returning to an entrepreneurial mindset, JDB faces perhaps even more severe challenges than before.**
At No. 21 Kangding Street, Yizhuang Economic and Technological Development Zone, Beijing, inside JDB's Beijing factory, two production lines are operating at full capacity. Cans of red-packaged herbal tea are being filled, packed, boxed, and shipped out of the factory.
This scene would have been unremarkable two years ago. But after more than a year of negative publicity, JDB's production sends a special signal: **JDB has not halted production, red-can JDB is back in production, and tensions between JDB and suppliers have eased...**
More than a year ago, JDB was plagued by troubles, causing this leading herbal tea company, which had created many legends in the FMCG market, to lose its luster: starting in 2017, news of factory shutdowns and layoffs kept coming, especially after suppliers COFCO Packaging and ORG Technology successively disclosed friction with JDB in listed company announcements, making JDB's predicament impossible to hide.
Facing the embattled JDB, newly appointed President Li Chunlin spoke candidly about many past issues. On November 27, in an interview with Economic Observer reporters, Li Chunlin admitted that JDB's second entrepreneurship goal is to promote the company's listing. "All reforms must revolve around this, removing all obstacles to help the company go public and become profitable. This is very firm and clear."
It should be said that Li Chunlin took over amid the turmoil. Shortly after moving from his position as President of Kunlunshan to President of JDB, he proposed JDB's second entrepreneurship, increasing revenue and reducing expenditure, integrating advantageous resources, and achieving successful listing within three years.
So, how will JDB fight its comeback battle? Through Li Chunlin's thinking, perhaps we can glimpse a bit of the future.
**Assigned at a Critical Moment**
In March 2018, Li Chunlin was appointed President of JDB at a critical moment. He said that when he took over, he was prepared to reset JDB to zero. But what happened later was perhaps even worse than he imagined.
"The biggest factors affecting JDB this year are, first, the problems in cooperation with COFCO Packaging. Second, being dragged into the Zhonghong Co., Ltd. restructuring incident. These two things were completely unexpected and brought us tremendous operational pressure," Li Chunlin said.
COFCO Packaging is JDB's supplier, providing 90% of JDB's packaging cans. Li Chunlin described it as JDB's "lifeblood." The cooperation had lasted about 20 years, but in the second quarter of this year, COFCO Packaging decided to stop supplying cans.
At that time, only about three months had passed since Li Chunlin proposed JDB's second entrepreneurship in March. The core of the second entrepreneurship was for JDB to once again use the classic red packaging cans. However, due to COFCO Packaging's supply halt, JDB had to reduce production. Red-can JDB could not be produced normally, leading to news of some JDB factories halting production and red-can JDB being hard to find in the market. "From June to October, we couldn't effectively organize production capacity. Once there's no capacity and no products, distributors certainly won't dare to pay, and JDB's business system will fall into a vicious cycle. So the supply halt was fatal for us," Li Chunlin lamented.
The matter dates back to July this year. COFCO Packaging issued an announcement stating that it had filed for arbitration with the Hong Kong International Arbitration Centre against Wanglaoji Company (JDB's Hong Kong-registered Wanglaoji Company, not Guangyao Wanglaoji), Qingyuan JDB Herbal Shareholder Zhishou Co., Ltd. (hereinafter "Zhishou"), and Qingyuan JDB Herbal (JDB's concentrate production company) regarding related matters, because Wanglaoji Company had not fulfilled its commitment to inject the trademark as in-kind capital contribution into Qingyuan JDB Herbal as per the capital increase agreement. The earlier plan signed by both parties was that COFCO Packaging would invest 2 billion yuan in Qingyuan JDB Herbal, thereby holding 30.58% of its shares.
Li Chunlin admitted that there were some misunderstandings in cooperation, but as partners of many years, they have now reached a consensus on packaging supply, which is why JDB can continue production. Li Chunlin said that the next step is for both sides to continue active negotiations.
However, JDB was suddenly dragged into the restructuring turmoil of Zhonghong Co., Ltd.
On the evening of August 27, Zhonghong Co., Ltd. announced that the company had signed a "Debt Restructuring and Operation Trusteeship Agreement" with JDB and Shenzhen Qianhai Yinyi Capital Co., Ltd. (hereinafter "Yinyi Capital"), under which JDB and Yinyi Capital would carry out debt restructuring for Zhonghong Co., Ltd. to resolve its current operational difficulties. After the announcement, JDB immediately denied it. But the consolidated financial statements of JDB published by Zhonghong Co., Ltd. pushed JDB into the spotlight again, because those figures were not very impressive.
"We never contacted them (referring to Zhonghong Co., Ltd.). JDB has never had consolidated statements domestically; each JDB entity is independently accounted. KPMG had just started consolidating JDB's domestic statements for three months, and we don't know where those numbers came from. However, after Zhonghong's announcement, banks put great pressure on us. All banks placed us on a high-concern list, and many loans were demanded for early repayment. Distributors were even more worried and dared not pay," Li Chunlin recalled. "At that time, the situation was very severe."
Li Chunlin's approach to solving this problem was to play the "relationship" card. From September to mid-October, Li Chunlin visited distributors, banks, and suppliers one by one. It turned out that Li Chunlin's visit strategy worked. Subsequently, distributors, banks, and suppliers eventually "forgave" JDB, and most became partners again.
**These Five Years**
"In 2012, JDB had a very large cash flow sitting in its accounts every day, and product circulation was very smooth. Before 2012, (JDB) had never borrowed from banks or dealt with financial institutions," Li Chunlin said. "It was too smooth back then."
Li Chunlin joined JDB at the end of 1997, starting from the grassroots, later serving as General Manager of JDB's Marketing Division, and from 2017 as President of Kunlunshan. Now, sitting in the position of JDB Group President, looking back at JDB's 23-year development history, he has a clearer understanding of the experiences and lessons. "JDB's first development stage was the first 17 years, from the actual launch of red-can Wanglaoji in 1996 (before 2012, JDB still had the right to use the 'Wanglaoji' trademark) to 2012. We started from Guangdong, moved northward, and turned a can of herbal tea into a product that quenches thirst in summer, prevents heatiness, and is the first choice for banquets and gifts during festivals. This is evident to everyone in the industry," Li Chunlin summarized. In this stage, JDB's core competitiveness was the brand. "We invested a lot of energy in building the brand."
In 2012, JDB entered the well-known stage of changing its name and packaging, and constant lawsuits with Wanglaoji. This was also the beginning of JDB's decline from glory.
In April 2011, Guangzhou Pharmaceutical Group filed for arbitration with the China International Economic and Trade Arbitration Commission, requesting that Hongdao Group (JDB's parent company) stop using the "Wanglaoji" trademark. On May 9 of the same year, the China International Economic and Trade Arbitration Commission issued an "Arbitration Award" ruling that Hongdao Group should stop using the "Wanglaoji" trademark. Subsequently, JDB began producing and selling herbal tea products with red-can packaging marked with "JDB" on both sides.
However, in Li Chunlin's view, the name change, which was seen by outsiders as a "fatal crisis," actually made JDB successful.
From 2010 to 2014, Li Chunlin was in charge of national sales. It was then that JDB successfully implemented the name change strategy in just over two years. Li Chunlin recalled that the name change work was meticulous and thorough. "Restaurant staff and mall personnel were all called to meetings for briefings, and all materials were replaced with new ones." As a result, even though JDB changed its name in 2012, its annual revenue exceeded the plan by 3.6 billion yuan.
However, JDB was not always able to turn misfortune into fortune. The packaging change in 2015 caught it off guard. Li Chunlin recalled that in response to the lawsuit from Guangzhou Pharmaceutical Group to stop using the red-can packaging, JDB responded in advance by launching the gold-can packaging. But this plan, seen as "more confident," encountered setbacks in the terminal market: the product was there, but you couldn't see it.
Li Chunlin said that management underestimated the status of the red-can packaging in consumers' minds, especially in prefecture-level cities and township markets where the red-can awareness was deeply rooted, and JDB's product turnover began to slow down. At the same time, competitor Wanglaoji's relentless pursuit also put pressure on JDB. The price war within the herbal tea industry also disrupted JDB's strategic rhythm. "We kept following the competitor, lowering prices when they lowered theirs, and we were always passive," Li Chunlin recalled.
Lawsuits to fight, gold cans to promote, competitor competition to respond to... In JDB's financing history, in 2012, 2013, and 2014, although there were many issues, the finances remained strong. Li Chunlin said: "From 2015, the real operational pressure began to show. We started seeking bank financing from 2015."
**New Strategy**
The weakness at the terminal and the passive change in pricing strategy first shook distributor confidence, and finally transmitted to operational data. Zhu Danpeng, an analyst in the food and beverage industry who has long tracked herbal tea companies, said that in just two or three years, JDB's market share eroded quickly, while rival Wanglaoji seized the opportunity and gained the upper hand in multiple channels.
JDB did not disclose current sales figures. Rival Wanglaoji's data, reflected in its parent company Guangzhou Baiyunshan's 2018 semi-annual report, showed that Wanglaoji's health segment revenue was 5.28 billion yuan, a year-on-year increase of 5.5%.
During the years JDB was consumed, the slowdown in herbal tea industry growth and intensified competition also became new challenges for the company. "In 2017, the overall herbal tea market lacked growth momentum and competition intensified," as stated in the financial report of Heqizheng, the third player in the herbal tea industry.
Returning to an entrepreneurial mindset, JDB faces perhaps even more severe challenges than before.
Li Chunlin emphasized that the core of the second entrepreneurship is to achieve the listing goal within three years. In the short term, the first priority is **externally stabilizing the distributor system; internally increasing revenue and reducing expenditure, and compressing costs.**
Li Chunlin said that starting from May 2018, JDB lowered the national ex-factory price from 70 yuan per case to 50 yuan. "In the past, when a case of product left the factory at 70 yuan, the actual retail selling price for distributors was only about 45 yuan. The difference was first advanced by distributors, and JDB would periodically reimburse them. In the middle, distributors had to advance a large amount of funds, and JDB also needed a lot of personnel to handle expense verification and supervise expense implementation."
In Li Chunlin's view, directly lowering the ex-factory price to 50 yuan eliminates the need for distributors to advance funds. On the other hand, JDB, on the basis of collecting deposits, prepays 8% to 10% of expenses to distributors, giving them more incentive to develop the market.
Zhu Danpeng's evaluation of this strategy is that its purpose is to win over distributors. "If JDB doesn't reimburse distributors for their advanced funds, they certainly won't play with JDB anymore. With this adjustment, distributors also have some room to operate."
Li Chunlin said that in the upcoming Spring Festival, the biggest change for JDB is the nationwide unification of product prices. "We want distributors to see JDB's determination. Pricing will not revert, and distributors will see an 8% gross margin at the 50 yuan price, so they have no worries."
Increasing profit means reducing costs. Internally, JDB is also conducting a "big cleanup," streamlining personnel and unnecessary links. Li Chunlin gave an example: "Previously, a work meal required signatures from nine people, showing how many intermediate steps there were. Now our management is more flat, and employees are pushed out of their comfort zones. Of course, there are many uncomfortable issues. Doing things when you have money is completely different from doing things when you don't, and it tests your ability and determination."
Li Chunlin provided a figure: after accounting for various costs, the gross profit per case at 50 yuan is 15 percentage points higher than at the 70 yuan ex-factory price.
In addition to a series of internal and external reforms, JDB also has new plans at the product level, such as differentiating the positioning of red cans and gold cans in the future, and striving to build brand value in the gift market.
In the capital market, Li Chunlin emphasized that the three-year listing goal remains unchanged. Accounting firm KPMG has been stationed at the company since July this year, conducting sorting and statement consolidation work. Li Chunlin hopes that JDB can become a public company in the future, opening up financing channels while also gaining the opportunity to compete fairly with Wanglaoji.
Interestingly, on November 29, Wanglaoji also released its ten-year development plan. Like JDB, strategies such as "raising prices," "maintaining scale and profits," and "seizing the gift market" were also mentioned multiple times by Wanglaoji.
Source: Economic Observer
**Tenth B-end E-commerce Inspection -- "From Products to Scenes"**
Event time: December 10-13
Event location: 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
>
>
>
>
> All day December 11: Nanjing-Changsha, or free arrangement
>
>
>
>
> Morning of December 12: Community group buying exchange salon
>
>
> Afternoon of December 12: Koala Selection Hero League launch event
>
> Evening of December 12 to early morning of December 13: Field visit to Koala Selection logistics center -- **This time period is the peak sorting period in the warehouse, allowing direct observation and learning of the backend operation process of community group buying e-commerce**
**Distributor friends who are interested are welcome to join us to learn and conduct field inspections** :
**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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