From a renowned entrepreneur known for responsibility to a 'deadbeat' repeatedly restricted from high consumption, the fate of Zhu Xinli, founder of Huiyuan Juice, has changed dramatically. Many attribute his current predicament to the failed Coca-Cola acquisition in 2008, but a closer look reveals this logic is flawed. This in-depth article traces Zhu's journey, exploring the chance and necessity behind his 'change of fortune'.

Zhu Xinli, who grew up in hunger and cold, might never have imagined that he would not only become one of the earliest '10,000-yuan households' in his locality but also a figure who created miracles in the old Yimeng revolutionary area.

In 1952, Zhu Xinli was born in Dongli East Village, Yiyuan County, Shandong Province. The area was extremely poor, and Zhu's childhood was filled with memories of hunger. As a teenager, Zhu was a sensible child; when his parents went out to work, he stayed home to care for his younger siblings and do housework. He was also a natural leader among children, enjoying the power games of giving orders from a young age. He said, "The advantage of being a leader is that you can unite the strength of those around you, exert your will, and realize your ideas."

Zhu Xinli had a keen business sense. From the second grade of elementary school, he no longer asked his family for tuition. Every summer vacation, he would go to the mountains to dig herbs, turn over rocks to catch scorpions, and climb trees to catch cicadas, selling them to the supply and marketing cooperative for a few yuan, enough to cover a year's tuition.

In his early twenties, already married, Zhu Xinli was unwilling to farm for life, so he went to Linyi Machinery Technical School to learn car repair. It didn't take him long to become thoroughly familiar with automobiles. "I could disassemble an entire tractor and then reassemble it part by part." Consequently, in the early 1980s, when the village acquired a Jiefang truck, Zhu Xinli naturally contracted it and quickly became wealthy.

Zhu Xinli used the truck to transport Shandong apples to Nanjing and Shanghai, earning several hundred yuan per trip in freight charges. In 1982, when '10,000-yuan households' were still rare, he netted over 50,000 yuan after paying the contract fee. The next year, he added two more Jiefang trucks and, with four apprentices, ran transport operations, earning over 200,000 yuan by year-end. He became the first person in the old Yimeng area to have a telephone installed at home.

In 1983, Zhu Xinli was elected village committee director. His family and relatives complained that he was giving up driving big trucks and putting his bright future in a poor mountain village. But Zhu felt that individual wealth was not enough; he wanted to lead everyone to prosperity together.

Upon taking office, Zhu Xinli immediately called on villagers to hand over the land that had been distributed to households under the household responsibility system, which they had barely warmed, to the village for centralized management. The village erupted in uproar. But Zhu's calculations were clear: an acre of corn yielded only one to two hundred yuan in income, while growing grapes could earn over five thousand. He used both carrot and stick, promising each villager 500 jin of flour per person per year if they switched to grape cultivation, and eventually succeeded in reclaiming the land.

After centralizing the land, he contracted it out to 40 specialized households. He led cadres to study grape cultivation techniques and market trends. A year later, the thousand-acre vineyard yielded a bountiful harvest, with villagers earning over 5,000 yuan per mu, which later grew to over 10,000. The village, which had relied on state relief grain in 1985, paid over one million yuan in taxes in 1986. Suddenly, more than 400 '10,000-yuan households' emerged, and every home had a telephone, making Dongli East Village the first telephone village in Shandong Province.

In addition to agriculture, during his three years as village director, Zhu Xinli successively established 27 village-run enterprises, including a flour mill, rubber factory, shoe factory, fur factory, brick and tile factory, and steel rolling mill. The village's welfare was so good that even city dwellers were envious: each villager received 500 jin of flour annually, those over 60 had pensions, and college students had their tuition covered by the village. In 1986, Zhu Xinli became a provincial model worker and outstanding Communist Party member in Shandong.

However, at the height of his success, Zhu Xinli soon received a heavy blow.

In the 1980s, economic policies were still being explored, and policies fluctuated. Just as Zhu Xinli was busy planting grapes and running factories, someone wrote a letter to the State Council accusing him. Beijing sent investigators, and the conclusion was: "Food is the priority for the people; farmers not farming is considered neglecting their proper duties." Zhu Xinli, who had just become a positive model, was criticized anonymously by the county, and his qualification as a candidate for the National People's Congress was revoked.

In 1987, Zhu Xinli integrated and reorganized the village enterprises to form the Shandong Province Yiyuan County Dongli Industrial Group.

In 1988, he was sent to the Shandong Provincial Economic Management Cadre Institute for three years of full-time study. "Study during economic downturns, start businesses during economic booms" was Zhu Xinli's original intention for entering the ivory tower. Zhu Xinli was very low-key and never flaunted his achievements. More than a year after enrollment, a leader friend visited him and found that he was living in an eight-person dormitory. Only after the school learned of Zhu Xinli's background did they move him to a two-person room.

After graduating, Zhu Xinli became deputy director of the Foreign Economic Relations and Trade Commission of Yiyuan County, responsible for attracting investment and export trade, living the "life he desired." In 1992, Deng Xiaoping's southern tour speeches stirred many hearts. At that time, a large wave of people within the system jumped into business, later known as the "92 generation." Unlike southerners who bought land and built houses, Zhu Xinli took a different path: he contracted a canned food factory...

-01- Establishing Huiyuan: Capital Wisdom Without Spending a Penny

Zhu Xinli had four large characters made at the factory gate: "Going Global," which at the time seemed like a joke to people.

The canned food factory Zhu Xinli took over was a complete mess, on the verge of bankruptcy with losses exceeding 10 million yuan, and he also had to bear 4.5 million yuan in debt. Moreover, the entire valuation process made Zhu Xinli look like a fool. The equipment appraised at over one million yuan was already outdated and was eventually sold as scrap iron for just over 20,000 yuan. The rows of brick-and-tile houses were dilapidated, and the only valuable land was not a bargain either. When the land was originally requisitioned, it was 5,000 yuan per mu, but it was transferred to Zhu Xinli at an appraised price of 50,000 yuan per mu.

Zhu Xinli was not stupid; the reason he dared to take over the enterprise was that during his time in government, he had discovered the huge demand in the foreign concentrated juice market and had already planned Huiyuan's development direction. Moreover, the so-called purchase of the factory actually cost Zhu Xinli nothing; he only promised to use the project to save the canned food factory and support the hundreds of original employees. In June 1992, Zibo Huiyuan Co., Ltd. was officially established.

Having learned that the canned food factory was on the verge of bankruptcy because it had not operated according to market economy principles during the planned economy era, Zhu Xinli began drastic reforms of the factory. He partnered with a Hong Kong enterprise by assuming liabilities, completing the property rights reform of Huiyuan and avoiding various sequelae of unclear property rights. Compared to many people's later MBOs, Zhu Xinli's move was very forward-thinking.

After Huiyuan was established, Zhu Xinli decided to switch to producing pulp beverages, but where the money would come from was a big problem. Because he had taken over a debt-laden factory, getting a bank loan was nearly impossible. Zhu Xinli went to the county government, but the leaders said the government had no money. Even if relatives and friends could lend money, it would be a drop in the bucket, and besides, they wouldn't throw their money away.

Through a Hong Kong friend, he learned about the "compensation trade" method, which meant importing production lines from abroad and then paying for the equipment over the years with the products produced. "Use foreigners' money to buy foreigners' equipment and then earn foreign exchange." This not only gave him advanced German technology and management experience but also solved the product sales and enterprise funding problems.

In this way, through clever resource integration, Zhu Xinli built China's first Tetra Pak packaging production line without spending a penny. When more than 20 German engineers and technicians came to the factory to debug the equipment, the entire Yiyuan county town was buzzing.

In October 1993, the factory officially went into production. How to ensure products met export standards? Zhu Xinli hired German food industry engineers to oversee the processes, laboratory, and testing. "One engineer's monthly salary was equivalent to the annual salary of all our factory employees. But at that time, our employees saw the shadow of the world for the first time," Zhu Xinli said. In 1993, the factory produced its first batch of concentrated apple juice, and by filling a market gap, the enterprise quickly grew.

In 1993, to find new sales channels, Zhu Xinli, who didn't speak foreign languages, went alone to an exhibition in Munich, carrying juice and Shandong pancakes, because he couldn't afford a translator's plane ticket. Fortunately, his daughter's teacher's child was in Germany, so he asked the child to serve as his interpreter. A Swiss company was interested in his product, conducted tests on over 200 indicators, and then sent a private plane to fly him to Lausanne, Switzerland, where he signed a contract worth approximately $5 million. Zhu Xinli earned his first pot of gold, and the enterprise was revitalized.

Afterwards, Zhu Xinli took Huiyuan to many foreign food exhibitions, selling concentrated juice to more than 30 countries and regions. But Zhu Xinli was not satisfied; compared to the thin profits of being an OEM, he wanted to build a brand. In 1994, Zhu Xinli wanted Huiyuan to grow even bigger, and so they left Shandong.

In 1994, Zhu Xinli led a team of 20 to Shunyi, Beijing, and founded Beijing Huiyuan Food and Beverage Co., Ltd. (hereinafter referred to as Huiyuan). But at that time, the market was dominated by soda drinks like Jianlibao and Coca-Cola, making it extremely difficult to develop the juice market.

Moreover, Shunyi was very desolate at that time, sparsely populated and littered with garbage. Many employees began to feel homesick and pessimistic. To stabilize morale, Zhu Xinli wrote a song to encourage employees: "We are Huiyuan people. What makes us different? Since leaving our hometown, we want to make something of ourselves."

Eventually, they held on in Beijing. Huiyuan's concentrated juice business relied mainly on the international market, which worried Zhu Xinli deeply. If international exports were blocked, it could affect the entire enterprise. So Zhu Xinli decided to walk on two legs—foreign and domestic—to develop the still-nonexistent domestic juice market. Under Zhu Xinli's insistence, in 1995, Huiyuan successfully launched and promoted 250ml 100% pure juice, and within less than six months, introduced 1L family-pack pure juice.

When Zhu Xinli decided to place advertisements on CCTV, many in the factory opposed it. In 1996, Huiyuan's annual profit was only 50-60 million yuan, but he bid 70 million yuan for a five-second prime-time slot during CCTV's "News Broadcast." However, Zhu Xinli's "stubbornness" indeed made Huiyuan a household name, and sales increased dozens of times.

From raw material control to export quality control, Huiyuan was a step ahead domestically. Moreover, unlike products like Xurisheng Iced Tea, Huiyuan was not afraid of being counterfeited. To imitate Huiyuan products required advanced aseptic cold-filling and cap-integrated equipment. Small enterprises lacking funds could hardly do it, and large enterprises would not risk penalties. So Huiyuan was never counterfeited for over a decade after listing, which provided a deep moat for its dominance in the domestic market.

Huiyuan's popularity made local governments, which had once looked down on it, invite him to set up factories in their localities with attractive conditions. Huiyuan successively built factories in Shanghai, Chongqing, Chengdu, Shandong, Henan, Hubei, Jiangxi, Hebei, and other regions. In 1998, its sales reached over 500 million yuan. Thereafter, Huiyuan grew at a rate of 100%-200% annually. By 2000, sales exceeded 1 billion yuan, with a market share of 23%, nearly ten times that of the second-place competitor.

Huiyuan's rapid expansion brought a need for funds, and thus Huiyuan encountered an enterprise that made him "love and hate"—Deloitte International Investment Holding Co., Ltd. (hereinafter referred to as Delong).

-02- Dancing with Delong: A Brief Marriage, Lifelong Impact

Holding the dream of a "big Huiyuan," Huiyuan needed funds to accelerate expansion. Zhu Xinli knew Delong could quickly make Huiyuan bigger. At that time, Delong, under Tang Wanxin, had just developed into a financial empire with assets exceeding 120 billion yuan. Tang was eager to use capital advantages to develop multiple industries through investment and mergers, completing his "big industry integration dream."

Seeing Delong's grand tomato planting areas in Xinjiang, Zhu Xinli was persuaded by Tang Wanxin. Initially, Delong wanted to bring Zhu Xinli into the Delong system, but Zhu Xinli only wanted to use Delong to make Huiyuan bigger and had no interest in Delong's business. Moreover, he was very blunt with Delong.

The joint venture company, Beijing Huiyuan Beverage and Food Group Co., Ltd. (hereinafter referred to as Huiyuan), had a registered capital of 833 million yuan. Originally, Delong only needed to contribute 425 million yuan to hold 51% of the new joint venture. Huiyuan Group contributed 408 million yuan in kind (including physical assets appraised by accounting firms and equity in one wholly-owned subsidiary and six holding companies), accounting for 49%.

However, Zhu Xinli felt that Delong's money was "too watery" compared to Huiyuan's development potential. To control the company, they had to pay more. So Delong had to use a 1.2:1 ratio, spending 510 million yuan in cash to convert 425 million yuan to obtain 51% of the shares. Additionally, although Zhu Xinli held a lower share, he did not want to lose control of the enterprise. He proposed that his presidency be a precondition for cooperation, to avoid future control disputes.

After joining hands with Delong in 1999, within two years, Huiyuan invested a cumulative 2 billion yuan and added 20 production bases nationwide. It also spent 660 million yuan to build Asia's largest juice production base in Chongqing. At that time, Huiyuan accounted for 11 of the 14 PET production lines in the country. Huiyuan's revenues in 2001 and 2002 were 1.5 billion and 2.23 billion yuan respectively, with market share rising to 30%.

Less than two years after the joint venture, Delong changed its behavior and began frequently borrowing money from Huiyuan. At first, it was 50 million, then 100 million, and later 200 million. Moreover, Delong's repayment cycles became shorter, from the initial three months to one month, and finally to one week. Zhu Xinli was initially relaxed because Delong's borrowing interest was as high as 15%-18%, which was much more profitable than selling juice. But when the borrowing reached 380 million yuan and the repayment prospects looked uncertain, Zhu Xinli sensed danger.

Furthermore, what disgusted Zhu Xinli was that Delong's focus was entirely on capital operations, losing interest in the real economy. He began to think about breaking away from Delong. He immediately sought someone to buy back Huiyuan from Delong, and found a Hong Kong businessman. But at that time, Huiyuan was at its peak, and Delong, already in a financial crisis, was also eager to fully acquire Huiyuan to boost its own stock price. They proposed to buy Zhu Xinli's 49% stake in Beijing Huiyuan at a price seven times Huiyuan's profits.

The two sides were deadlocked, and the acquisition decision and price changed repeatedly, causing Zhu Xinli great anxiety. The selling price for Delong's 51% stake changed from 600 million to 700 million yuan. When Delong reluctantly agreed to sell, SARS hit, and the Hong Kong businessman quickly withdrew from the acquisition tug-of-war. The acquisition that seemed about to be completed fell through, leaving Zhu Xinli stranded again.

Subsequently, Delong raised the price by another 100 million yuan. At that time, Huiyuan had just invested 2 billion yuan in building factories nationwide, leaving little cash on the books. It was impossible to come up with 800 million yuan, and Delong knew this very well. Delong proposed to prepay 50-100 million yuan in cash to Huiyuan, with the balance to be settled within three years, to buy Huiyuan. Some of Huiyuan's executives and lawyers thought it was a good deal; Zhu Xinli could use that money to pursue the concentrated juice business that was not included in the contract. But Zhu Xinli refused to hand over Huiyuan.

What led to the final break was the competition for the dairy market. As competition in the juice market intensified, dairy became a significant piece of the pie. Delong got there first, announcing plans to invest billions by 2008 to build 11 dairy cow breeding bases and 600 breeding communities.

Huiyuan was not to be outdone. In March 2003, Huiyuan milk was launched. Huiyuan announced an investment of 1 billion yuan to build the largest dairy base in the southwest and declared that the dairy business was Huiyuan's own affair, unrelated to others. With this turmoil, the rift between the two sides became irreparable.

To quickly rid himself of Delong as the major shareholder, Zhu Xinli devised a betting strategy. He set a "final week" deadline for both sides. "Either you buy me, or I buy you; whoever comes up with the money within a week buys." Because he was sure Huiyuan couldn't come up with the money, Tang Wanping, Tang Wanxin's second brother who was leading the negotiations, agreed to the plan. Zhu Xinli had already calculated the accounts. Delong had already borrowed 380 million yuan from the joint venture, and about 200 million of the promised 511 million acquisition funds had not yet arrived. Huiyuan only needed to raise 200 million to buy out the other side's shares.

Returning from the negotiation table in Shanghai to Beijing, Zhu Xinli went to the office of the Shunyi County Party Secretary. Having been in Shunyi for 10 years, he had accumulated rich connections in the government. He placed the betting agreement on the leader's desk, saying, "Huiyuan has a problem. Delong wants to buy Huiyuan, and I also want to buy Delong. Bank loans won't come in time." The next morning, 200 million yuan arrived.

More dramatically, after the negotiations, Tang Wanping, who had gone to Zhejiang to ostensibly raise funds, suffered a cerebral hemorrhage upon returning to Shanghai the next day. Seeing his brother's condition, Tang Wanxin finally let go, saying, "Forget it, sell Huiyuan to Old Zhu." Thus, Zhu Xinli became the absolute controller of Huiyuan.

In April 2003, Delong withdrew from Huiyuan. To avoid affecting Delong's stock price, they found an intermediary company to act as a white knight to complete the transaction. Two years later, Delong collapsed due to a broken capital chain. "I told Delong's boss that their diversification would cause problems. But it was too late by then. If Delong had had the funds to hold on until now, it would have been remarkable," Zhu Xinli said regretfully.

Delong, with its grand blueprint, fell, and many related companies in the Delong system were dragged down, but Huiyuan escaped unscathed. At that time, Huiyuan also declined other foreign capital involvement. Zhu Xinli explained that at that time, they didn't have the ability to negotiate terms. He compared Huiyuan to a girl of marriageable age: too early and she's not mature enough; too late and she's too old. So he wanted to wait for the right time.

Some people say Zhu Xinli was very cunning, while others call it his great wisdom. Being able to use Delong's capital to help Huiyuan through several years of rapid development and escape unscathed was Zhu Xinli's biggest gain. But few realized that during the three-year marriage with Delong, whether it was the understanding of Delong's empire vision or the taste of "fast money," after leaving Delong, Zhu Xinli unknowingly turned Huiyuan into a second Delong.

-03- Capital Competition: Zhu Xinli Is No Novice

Zhu Xinli always claimed to be a novice in capital operations, but in reality, he was a master. From the early use of deferred letters of credit for financing, to the sword dance with Delong, and subsequent rounds of capital cooperation, Huiyuan and its brands' control remained firmly in Zhu Xinli's hands. He still played the role of leader, using others to fulfill his dreams, just as he did in childhood.

In 2001, Uni-President Group's "Fresh Orange Duo" alone achieved sales of 1 billion yuan, surpassing Huiyuan that year. Uni-President's success attracted major beverage companies including Coca-Cola, Pepsi, Master Kong, and Wahaha, and competition in the juice market became unprecedentedly fierce.

At that time, Huiyuan was busy expanding production capacity and building a bigger Huiyuan, "too busy" to pay attention to market changes. A vendor setting up a stall outside Huiyuan's gate said that before 2000, during harvest season, there were long lines of trucks delivering fruit at Huiyuan's gate, but after 2000, that no longer happened.

With competitors rising rapidly and massive investment in factory construction, Huiyuan's capacity utilization was less than half. Huiyuan had high market share but low efficiency. Huiyuan's shortcomings in distribution channels were also obvious. In the early days, Huiyuan relied on CCTV advertising to dominate, so it didn't need to work hard on channels.

But as market competition intensified, extensive management became unsustainable; enterprises competed on comprehensive capabilities in product, channel, and marketing. However, Huiyuan was running too fast in the capital market to think about these trivial, even "low-level" matters. Huiyuan's almost unoriginal products and marketing, along with a chaotic marketing team, led to its lag in sales and left employees confused.

But Zhu Xinli easily changed the situation by turning Uni-President from an enemy into a friend with a contract. Zhu Xinli realized that hitching a ride on Uni-President's fast train could help Huiyuan quickly open the Southeast Asian market and avoid wasting capital competing with Uni-President.

In March 2005, Uni-President Group spent $30.3 million (approximately 250 million yuan) to buy 5% of Huiyuan's equity. Compared to the price Zhu Xinli paid to buy back from Delong, Huiyuan's value had increased fourfold. At this rate of profit, selling juice would take "forever."

Later, due to listing needs, the cooperation between Uni-President and Huiyuan ended. On July 3, 2006, Huiyuan announced that France's Danone, US Warburg Pincus, Netherlands Development Bank, and Hong Kong's Huili Fund jointly invested over $200 million for 35% of Huiyuan's shares.

In 2007, Huiyuan was successfully listed as the first stock of the Chinese New Year in Hong Kong, receiving enthusiastic追捧 from global investors, raising HK$2.4 billion. In 2007, Zhu Xinli ranked 91st on Forbes' China Rich List with assets of 6.13 billion yuan.

Domestic private enterprises often encounter funding bottlenecks after growing large. China's financial policies and capital environment have always provided limited support for private beverage companies. "Bank loans can be recalled at any time." But by introducing foreign strategic investors and overseas listing, Zhu Xinli achieved several leaps in Huiyuan's assets and his personal wealth within a few years.

Then came an even more exciting deal.

-04- Was the Rejection of the Acquisition the Reason for Zhu Xinli's Downfall?

In 2008, the sensational Coca-Cola acquisition of Huiyuan unfolded. After Huiyuan signaled it was "ready for marriage," Coca-Cola offered a high price of HK$17.9 billion to "marry" Huiyuan. This was a deal both sides desperately wanted. Coca-Cola, as a beverage giant, saw its carbonated business weakening and needed new growth points; Huiyuan, as the domestic leader with nearly half the market share, was naturally coveted by Coca-Cola. Huiyuan's shareholders, including Danone, also needed to cash out.

Although Zhu Xinli tried to project an indifferent attitude toward the acquisition, he was actually in dire need of the money. Perhaps it was the grand plantation vision of Delong that had inspired him, but he needed this large sum to pursue the ecological agriculture he had always dreamed of.

Looking at Yili's heavy investment in pastures, COFCO's investment in farms, and Shuanghui's foray into breeding, it's understandable to extend upstream in the industrial chain to gain market dominance or even raw material pricing power. But unlike Nongfu Spring's "small-scale" attempt to grow oranges in a specific area, Huiyuan's ecological agriculture was grand.

It included fruits, vegetables, tea, and many other categories, covering more than half of China's map, and integrating primary, secondary, and tertiary industries. Any single point could potentially crush a company, but Zhu Xinli wanted to take it all.

Zhu Xinli's calculations were "clear": by controlling these origins, he would be China's largest supply chain front-end, and all subsequent businesses would only be his downstream, including Coca-Cola if it acquired him. To this end, he even included a supply agreement in the contract with Coca-Cola. By selling Huiyuan, he could use the 10 billion yuan to leverage his grand Huiyuan agricultural dream, which seemed even more ambitious than Delong's.

The urgency for Zhu Xinli was also because "Huiyuan was getting too old to marry." On one hand, Zhu was already 60 and felt exhausted from dedicating himself to Huiyuan, but his son and daughter were unwilling to take over. On the other hand, Huiyuan's business had been declining; if he didn't sell quickly, the prosperity bubble might burst and it could become a burden. Additionally, Huiyuan had already undergone two major downsizings for this acquisition, reducing sales representatives from 3,926 to 2,520, and then to 700. There was no room for maneuver because Zhu Xinli had already started spending lavishly on his grand blueprint, scattering billions of yuan in real money ahead of time.

But unexpectedly, in 2008, with the Olympics, the Wenchuan earthquake, and the 30th anniversary of reform and opening-up, people's patriotic sentiments were exceptionally high. Moreover, the country's approach shifted from attracting foreign investment to promoting national brands. That year, the Anti-Monopoly Law was enacted, and the Coca-Cola acquisition of Huiyuan was the first case to violate this new law.

At that time, almost every top-five company in every industry in China was foreign-owned, and the government could not sit idly by. Moreover, Coca-Cola was so arrogant, offering to acquire 100% of Huiyuan's equity, appearing to challenge legal authority. And based on historical behavior, Coca-Cola was not friendly to national brands, and the tragedy of national brands being acquired could happen to Huiyuan. Amid unprecedented public opposition, the acquisition, which both sides were determined to complete, was rejected!

Zhu Xinli was stunned! Enterprises should be "raised like sons and sold like pigs," "Why can foreigners sell companies but I can't?" Zhu Xinli couldn't understand. Indeed, China's policy environment adds significant uncertainty to business operations, but Zhu Xinli also had his own problems.

With the intention of selling the pig, the breeder would not seek to train the pig to be agile and clever (scientific and lean management) or pursue the pig's longevity (business spirit of enduring legacy). Raising it big and selling at a good price was the priority; otherwise, if it got too old and died, it would all be a loss.

Facing the setback, Zhu Xinli still encouraged everyone's morale as usual, writing an internal letter to employees. But his disdain for the beverage industry itself was evident. With his grand blueprint in mind, Zhu Xinli looked down on the hard work of producing cans of beverages; it was too "low-end" and too slow.

The cooked duck flew away, but what about the promised projects? Worse, the 2008 financial crisis hit. Later, some buyers, such as COFCO, communicated with Huiyuan, but at a price of around 3 billion yuan, Zhu Xinli couldn't consider it.

What about the money already spent? Projects that had started continued to be supported; those that could be withdrawn were all withdrawn. Many local leaders were stunned. What about the crops farmers had planted for the next year? Zhu Xinli, who had promised to benefit farmers, inadvertently dug a pit for them. These started projects were like hungry wolves, leaving Zhu Xinli with no time for anything else.

-05- No Braking at the Cliff

Since they still had to sell beverages bottle by bottle, the laid-off workers had to be rehired. Zhu Xinli brought in a large number of veterans to rebuild the team he had cut. The harm of this blood transfusion to the company was self-evident; Huiyuan's business continued to decline, but the company's debt continued to rise.

From 2008 to 2016, Huiyuan Juice's return on net assets never exceeded 5%, and capacity utilization was only 30%. But Huiyuan was "not short of money"; they not only took out large bank loans but also used asset sales to keep Huiyuan alive, in addition to substantial government subsidies. In 2012, Huiyuan recorded its first loss but received 251 million yuan in government subsidies. Thereafter, Huiyuan's losses gradually expanded, and its practice of robbing Peter to pay Paul became more frequent.

Every year, Huiyuan had asset sales. In 2015, it sold nine companies, including Beijing Huiyuan and Jiangxi Huiyuan, for a total of 1.812 billion yuan. Undoubtedly, selling assets could achieve loss reduction. More importantly, the profits from these sold companies and high government subsidies brought Huiyuan the prosperity of "steady revenue, gross profit, and net profit growth, outperforming the market." In 2016, the company "earned" 13.28 million yuan, but excluding 145 million yuan in other net income and 38.493 million yuan in additional gains from selling subsidiaries, Huiyuan actually lost 303 million yuan.

With tight funds and capacity utilization at only 30%, Zhu Xinli didn't stop building factories. "The factories were built without orders, but they still built them. The reason is that there is logic for transferring funds during the construction process," analyzed senior investor Fang Lie. Although the method of fund transfer is unverifiable, Huiyuan's big spending is an indisputable fact.

Around 2010, to rebuild the sales system, Huiyuan's sales staff once surged to 17,000. In 2014, Huiyuan Juice launched the construction of business offices, building over a thousand offices nationwide in six months, competing with traditional distributors to sell goods. This made Huiyuan's already chaotic sales system even more confusing.

In 2014, Zhu Xinli also spent 3 billion yuan (originally planned 5 billion) to participate in Sinopec's sales business restructuring through Deyuan Capital. The new company's expected listing three years later did not materialize, and the shares were not redeemed, making Zhu Xinli's capital chain even tighter.

Subsequently, due to Deyuan Capital's equity pledge, Zhu Xinli faced asset freezes of 4.1 billion yuan. Besides these major collaborations, Zhu Xinli's diversification attempts never stopped, but few succeeded. Additionally, Huiyuan cooperated with a dumpling company, built e-commerce channels, participated in O2O, and even launched a mobile app called "Huiyuan Around You."

The 2017 interim report showed Huiyuan's total liabilities exceeded 11 billion yuan, of which nearly 10 billion was obtained through bank loans, finance leases, corporate bonds, etc., with heavy interest burdens. Huiyuan paid at least about 500 million yuan in interest to banks and other channels annually. Huiyuan's juice business was sluggish and didn't actually need that much money.

Moreover, to reduce expenses, Huiyuan Juice cut its workforce to 3,965 in 2017. But Zhu Xinli's "big agriculture" dream was a money-burning bottomless pit, and it held his high hopes. It was inevitable to transfer some funds from the listed company to complete his second growth curve in life.

Soon, things were confirmed, and Huiyuan was suspended from trading as a result. From August 2017 to March 2018, Huiyuan provided 4.275 billion yuan in short-term loans to another related company of Zhu Xinli. This loan exceeded 8% of Huiyuan's assets, but Huiyuan did not disclose it, and on April 3, 2018, Huiyuan was suspended.

This loan was not only undisclosed but also had no agreement and was not approved by the board of directors, silently transferring the listed company's money to a non-listed company. The Hong Kong Stock Exchange stipulated that if Huiyuan could not meet the resumption conditions by January 31, 2020, it would be delisted.

It was clear that Zhu Xinli was short of money, so Huiyuan once again revealed a new "buyer." In April 2019, Tiandi No.1 planned to invest 3.6 billion yuan for a 60% stake, with Huiyuan contributing 2.4 billion yuan in assets, including the Huiyuan Juice trademark, to establish a new company. But three months later, the plan fell through. "Huiyuan, due to debt issues, had distributed its trademark to many enterprises. For Tiandi No.1 to obtain the Huiyuan trademark, all companies holding the trademark would need to agree, which was too difficult."

In 2018, Zhu Xinli was still a billionaire on the Hurun Rich List with 3.5 billion yuan in assets, but in 2019, he became a "deadbeat" repeatedly restricted from high consumption. On September 20, 2019, due to the aforementioned equity pledge, China Merchants Bank applied to the court for pre-litigation property preservation, freezing Zhu Xinli's assets of 4.103 billion yuan, and Zhu Xinli was added to the list of dishonest persons. And the thorny issues didn't stop there.

Stranded projects across the country and creditors of all sizes had become a reality Zhu Xinli had to face. Suppliers of various kinds, including sapling merchants, were also shocked that Huiyuan would repay debts in a "toothpaste-squeezing" manner of 50,000 or 100,000 yuan at a time. In September 2019, an announcement from a P2P platform under Pioneer Group tore open Huiyuan's massive debt chain. Four companies under Zhu Xinli, unable to repay 4.185 million yuan in debts, planned to use Huiyuan juice series products to offset debts, with Huiyuan Group as the loan guarantor.

Zhu Xinli once said, "If the original plan had been followed, Huiyuan would probably have become a 100-billion-yuan company long ago and wouldn't have ended up where it is today." But if Huiyuan had been sold, with 10 billion yuan in cash, would Zhu Xinli have turned it into 100 billion in cash or 100 billion in losses? We don't know. But what is certain is that 10 billion yuan could not support Zhu Xinli's "big agriculture" dream.

-06- A One-Man Huiyuan

Amid the collapse of the Huiyuan empire, Huiyuan experienced its biggest personnel change in its 28-year history. On February 12, 2020, Zhu Xinli and his daughter both withdrew from Huiyuan. On February 14, Huiyuan was delisted. Huiyuan had always been Zhu Xinli's Huiyuan; without him, where would Huiyuan go?

From building Huiyuan from scratch, it's true that Zhu Xinli treated Huiyuan like a son. For Huiyuan, Zhu Xinli gave up almost all his hobbies, not singing or dancing, not playing cards or mahjong. To save time, he once crashed through a glass door in his office, and during the day he fell into a manhole over a meter deep. In the early days of entrepreneurship, he unloaded trucks and loaded goods with employees. He didn't want "hired employees"; he hoped employees would treat Huiyuan as their home, and thus he became the patriarch of Huiyuan.

Along the way, many of Zhu Xinli's decisions were incomprehensible to those around him. From his early days as village director to later spending huge sums on CCTV advertising, Zhu Xinli ultimately succeeded. Over a decade of success made it hard for Zhu Xinli not to continue insisting on his own opinions. In 2001, when the state introduced the Three Gorges resettlement policy, Zhu Xinli decided to invest heavily in building a citrus production base, but the saplings would take at least three years to grow, and idle production lines would be a huge waste of funds. Zhu Xinli overruled all objections, calculating his conscience and political accounts, because local farmers would only plant trees if they saw hope. Thus, the project was successfully implemented.

Family-style management indeed has many advantages in the early stages of enterprise development. But as the enterprise grows, if the organization and management mechanisms are not updated, problems will quickly emerge. In July 2008, a post titled "A Letter to Boss Zhu Xinli" appeared on Tianya Forum. The letter accused Huiyuan of complex nepotism, cronyism, exclusion of dissidents, and chaotic management.

For a long time, Zhu Xinli's son, daughter, brothers, son-in-law, and many other relatives held key positions in Huiyuan. Villagers complained that Huiyuan's employees were mostly brought by Zhu Xinli from his hometown in Shandong, doing little to boost local employment. Within the company, it was easy to exclude "outsiders" who were not from Shandong.

Since 2007, more than ten managers at the vice president level or above had left Huiyuan, and each professional manager who left took a group of people with them, causing severe talent drain. In 2008, Mao Tianci, a vice president seconded from Danone to Huiyuan, joked, "I am Huiyuan's chief model." The professional managers simply couldn't manage Zhu Xinli's relatives, fellow townsmen, and comrades-in-arms.

In September 2014, Zhu Xinli poached Su Yingfu, who had once "killed all bureaucrats." The outside world eagerly awaited the reform of the membership system. But Su Yingfu, who led a core team into Huiyuan, left after a year, and Huiyuan's "de-familization" failed again. Su Yingfu revealed: "When the company discusses any decision, family members just need to have dinner together on Sunday and basically reach a consensus."

Besides not giving professional managers room to operate, Zhu Xinli also didn't provide sufficient incentives. Unlike entrepreneurs like Ma Yun and Niu Gensheng, who created a batch of millionaires and billionaires during their companies' listings, Huiyuan's equity structure shows that after Huiyuan grew and listed, the real beneficiaries were still the Zhu Xinli family. Zhu Xinli always held the equity tightly, while Ma Yun's stake in Alibaba was only 5%. The famous saying "When people gather, wealth disperses; when wealth gathers, people disperse" also explains part of the reason for Huiyuan's talent drain.

Many say Huiyuan's products were too single and not diversified enough, but in fact, the fate of Huiyuan's product line is a true reflection of Huiyuan itself. In the early years, Zhu Xinli relied on his fast-moving approach to build the Huiyuan brand. But thereafter, Zhu Xinli was busy expanding, and there were no capable talents internally, so Huiyuan almost never had any innovative products again. The so-called new products were merely imitations following others. Huiyuan had as many as 80 product categories, but many were fleeting on the shelves.

Outdated new products reflected the fatigue of Huiyuan and its organization. Zhu Xinli was 60 years old; it was no longer possible for him to shoulder all production, supply, and sales. But Huiyuan had no second Zhu Xinli. While racing on the capital road, no one could stop him from continuously hollowing out the listed company to transfuse blood into his "big agriculture." Power not caged is terrifying, and it led Zhu Xinli into the abyss.

Zhu Xinli himself felt that if Huiyuan had been sold back then, he would have been a different person. Undoubtedly, such a possibility exists. But it must be warned that China has long passed the stage of extensive development. Under misguided thinking, having greater resources may bring greater disasters. Zhu Xinli unknowingly followed the path of Delong. Even if it had become a 100-billion-yuan company, what then? Delong still fell.

Source: Lishi Business Review (ID: libusiness), Author: Jin Mei