---
title: "Tianwo's Fallout: The Unconventional Downfall of a 3 Billion Yuan Distributor"
description: "A 3 billion yuan liquor distributor collapsed two years after its peak sales, due to 2.1 billion yuan in funds going missing. The company's disclosure of prepayments may be unrelated to the agreements, raising concerns about related-party transactions and governance failures."
author: "云酒"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2019-09-27"
categories: "Capital, Earnings & M&A"
language: "en"
canonical: "https://xinjignxiao.com/en/articles/tianwo-s-fallout-the-unconventional-downfall-of-a-3-billion-yuan-distrib-072ec732/"
markdown: "https://xinjignxiao.com/en/articles/tianwo-s-fallout-the-unconventional-downfall-of-a-3-billion-yuan-distrib-072ec732.md"
original_source: "https://mp.weixin.qq.com/s/qurwlJLuAc6sqotDbQEqFg"
translation: "https://xinjignxiao.com/zh/articles/%E5%A4%A9%E5%96%94%E7%88%86%E9%9B%B7%E5%90%8E%E7%BB%AD-30%E4%BA%BF%E5%A4%A7%E5%95%86%E5%8F%A6%E7%B1%BB%E5%9D%A0%E8%90%BD%E6%A0%B7%E6%9C%AC-072ec732.md"
attribution: "New Distribution — https://xinjignxiao.com/en/articles/tianwo-s-fallout-the-unconventional-downfall-of-a-3-billion-yuan-distrib-072ec732/"
citation: "云酒. “Tianwo's Fallout: The Unconventional Downfall of a 3 Billion Yuan Distributor.” New Distribution, 2019-09-27. https://xinjignxiao.com/en/articles/tianwo-s-fallout-the-unconventional-downfall-of-a-3-billion-yuan-distrib-072ec732/"
usage_policy: "https://xinjignxiao.com/ai-policy.txt"
---

# Tianwo's Fallout: The Unconventional Downfall of a 3 Billion Yuan Distributor

> A 3 billion yuan liquor distributor collapsed two years after its peak sales, due to 2.1 billion yuan in funds going missing. The company's disclosure of prepayments may be unrelated to the agreements, raising concerns about related-party transactions and governance failures.

Source: Yunjiu Toutiao (ID: YJTT2016) Author: Yunjiu Team

**What makes the fall of a 3 billion yuan distributor unique?**

In 2017, a major liquor distributor achieved sales of 3 billion yuan, but two years later, the company is on the brink of collapse due to 2.1 billion yuan in funds going missing.

On September 20, Hong Kong-listed Tianwo International announced that an independent forensic investigation's preliminary findings showed that the prepayment amount disclosed on August 17, 2018, may not be directly related to the prepayment agreements.

If this announcement is ultimately confirmed, **Tianwo International's disclosure of "prepayments of 1.685 billion yuan to partners without confirming receipt of any goods to be delivered" is likely to involve related-party benefit transfers or even violations of laws and regulations.** Lin Jianhua, former chairman, executive director, and CEO of Tianwo International, has become the focus of attention.

As a well-known major distributor in the domestic food and liquor industry, Lin Jianhua single-handedly built Nanpu Foods and Tianwo International. It is also because of him that the company has reached the brink of collapse. What makes the fall of this 3 billion yuan distributor unique?

**Financial Doubts**

On September 20, Tianwo International released preliminary results of an independent forensic investigation, involving matters such as a subsidiary providing financial support to a company held by Lin Jianhua.

In 2017, Lin Jianhua, on behalf of Tianwo Foods, a wholly-owned subsidiary of Tianwo International, signed a comprehensive credit contract with Ningbo Tongshang Bank, obtaining a loan facility of 450 million yuan. According to the credit contract, Ningbo Tongshang Bank has the right to directly recover all loans from Tianwo Foods, and can transfer funds without obtaining prior consent from Tianwo Foods. It has already transferred 336 million yuan.

However, **this transaction was not only undisclosed in the company's interim report, but several executive directors, non-executive directors, and independent non-executive directors all stated they were unaware of it.**

At the same time, Tianwo Foods also allowed Tiansheng Warehousing, a subsidiary of Nanpu (Hong Kong) Investment Company, in which Lin Jianhua holds a 30% stake, to use the credit facility.

The independent forensic investigation showed that based on interviews with certain Tianwo Foods personnel, the bank loan contracts were all negotiated personally by Lin Jianguo and/or Ms. LY (former executive deputy general manager of Tianwo Foods). The forensic accountants were unable to obtain internal approval documents related to the use of the company seal. According to interviews with group personnel, transfers between different bank accounts of the same company could be made under the instruction of Lin Jianhua or Ms. LY without internal approval.

Tianwo International also announced that **the matter of "prepayments of 1.685 billion yuan to partners without confirming receipt of any goods to be delivered" may be unrelated to the prepayment agreements.**

At the same time, Tianwo International stated that the forensic investigation conducted by the forensic accountants faced many limitations, such as failure to obtain certain corporate and financial information of the group, and failure to interview key personnel involved in these transactions.

In addition, the company's independent board committee is still reviewing the draft report of the forensic accountants and will discuss with them before the report is finalized (if necessary). The company will make further announcements at appropriate times regarding any significant developments and progress.

**The Resource "Shifting" Skills of a Major Distributor**

Public data shows that in 2014, Tianwo Group's liquor sales were 2.713 billion yuan, slightly decreasing to 2.332 billion yuan in 2015, and exceeding 3 billion yuan in 2017.

An industry insider analyzed: Around 2017, Zhejiang Shangyuan Group had sales of about 4 billion yuan, Guangdong Yueqiang Liquor had sales of 1.5 billion yuan, and Tianwo Group's liquor sales were 3 billion yuan. **Holding domestic and international well-known brands such as California Lot, Chivas, Martell, Hennessy, Moutai, and Wuliangye, Tianwo was definitely a major liquor distributor.**

Unlike most liquor merchants who rely on "price differences" for initial accumulation, Lin Jianhua, though also "grassroots," was definitely a master at integrating resources.

▲ Lin Jianhua (file photo)

In 1992, Lin Jianhua established Nanpu Foods in Shanghai with a registered capital of 500,000 yuan. The company was held 90% by Putian Huanan Subsidiary Foods and 10% by Shanghai Huangpu Grain and Oil Food Company. The latter, as a state-owned enterprise, undoubtedly provided a good endorsement for Nanpu's market expansion. After successively introducing international giants such as Nestlé, Lin Jianhua initially gained a firm foothold.

**Because food distribution companies had to pay manufacturers in cash and provide credit periods to retailers, Nanpu Foods often had tight funds. As of June 30, 2002, the company's total assets were 308.95 million yuan, total liabilities were 265.81 million yuan, and the debt-to-asset ratio was as high as 86.04%.**

In 2002, Shanghai First Food, controlled by the tobacco group, and Nanpu Foods' investors jointly increased capital and expanded shares in Nanpu Foods. First Food invested 98 million yuan and became the largest shareholder of the new company, with Nanpu Foods holding 34% equity in second place. After the 98 million yuan investment was in place, Nanpu Foods' capital increased to 140 million yuan, and the debt-to-asset ratio dropped to 65%.

In addition, First Food also provided multiple loan guarantees for Nanpu Foods. With the help of favorable winds, in 2002, Nanpu Foods' operating revenue was only over 1 billion yuan, but by 2007, it had reached over 3.5 billion yuan.

As Nanpu Foods grew, First Food's role as a "capital provider" gradually weakened. Subsequently, Nanpu Foods opened up multiple financing channels, such as bank loans and introducing strategic investments. **In 2013, the Tianwo Group founded by Lin Jianhua was listed in Hong Kong and held 49% of Nanpu Foods, fully demonstrating his financial skills of "borrowing a boat to go to sea."**

While fully demonstrating his financial skills, Lin Jianhua also seized the market dividends brought by international big brands during China's rapid economic growth period.

A Guangdong distributor said that Nanpu Foods once acted as the national agent for California Lot, achieving a record of 9 million bottles sold annually. However, it mainly focused on provincial capitals and KA and hypermarket channels, leaving many gaps in regional markets. In the later stage of operation, the company focused more on wholesale and did not intensively cultivate the market.

**Regarding Lin Jianhua's loss of contact and "assisting investigations," an industry insider analyzed that it is likely related to a case involving a former senior executive of a large state-owned food group in Shanghai.** In Nanpu Foods' equity structure, Shanghai Sugar, Tobacco, and Wine (Group) Co., Ltd. holds 51%, and it is a wholly-owned subsidiary of the aforementioned large state-owned food group in Shanghai.

Since starting his business in 1992, Lin Jianhua single-handedly built a large food and liquor distribution enterprise with annual sales exceeding 5 billion yuan. However, simply positioning him as a "distributor" is biased. In fact, he cleverly integrated various resources such as institutions, capital, and brands by seizing opportunities from social changes. But "success and failure are the same," and with his loss of contact and "assisting investigations," the business empire he built began to totter.

**What Lessons Does This Unconventional Fall Offer?**

In China's liquor distribution industry, liquor merchants may die due to poor management, broken capital chains, or market retreat... But it is rare for a company's survival to be affected because its actual controller loses contact and "assists investigations."

The aforementioned Guangdong distributor said, **Tianwo's success, among the three major elements of capital, brand, and market, relied more on leveraging capital and international brands.**

Tianwo had the most complete channels in central cities in East China centered on Shanghai, especially in KA and hypermarket channels, but in other regions and channels such as catering, tobacco and liquor stores, and group buying, it was basically operated by distributors, with limited terminal control. **It can be said that Tianwo was not a company mainly driven by market development.**

Tianwo's financial statements also show that the gross margin of its distributed agency brands was not high. In 2017, sales of non-self-owned brands were 2.537 billion yuan with a gross margin of 12.7%, including products such as foreign liquor, wine, white liquor, and beer.

An industry insider pointed out that a gross margin of 12.7% indicates that Tianwo was still largely a distributor relying on agency for well-known brands and making money by volume, even "big but not strong." Even if Lin Jianhua had not lost contact, the company should have transformed early. After Tianwo's collapse, its former agency brand California Lot has already changed hands, and other brands may also change, posing severe challenges for the company's future development.

In addition to being "big but not strong," many industry insiders told Yunjiu Toutiao that **the change in Tianwo fully demonstrates the importance of corporate governance structure.**

Due to the low entry barrier in liquor distribution, many major distributors started as family businesses, with relatives and friends occupying important positions, and the boss having the final say.

But for listed companies that have already entered the capital market, even the actual controller must comply with relevant laws and regulations. In September 2013, Tianwo International Holdings Limited was listed on the Main Board of the Hong Kong Stock Exchange, issuing 500 million shares at an issue price of HKD 3.15 per share, raising HKD 1.575 billion. With Tianwo's collapse, its stock price has fallen to around HKD 0.38, causing heavy losses for investors.

Fujian liquor merchant Cheng Runze said that his parent company is also listed in Hong Kong, and although it is a family business, it strictly follows rules and regulations. Major company matters must have written records, and fund transfers must be signed by the CFO to take effect, otherwise, they may be questioned by regulatory authorities.

Therefore, **as a former 3 billion yuan distributor, Tianwo International's unconventional fall has external factors, but it also reflects major defects in its corporate governance structure**, which became the "trigger" for the collapse.

As one of China's most successful founders of food and liquor distribution enterprises, Lin Jianhua created brilliance, and the rapid fall of Tianwo International is also lamentable. Reality is the future of the past. For many distributors pursuing brilliance, the change in Tianwo is a good mirror.


---

## Citation metadata

- Publisher: New Distribution
- Author: 云酒
- Published: 2019-09-27
- Canonical: https://xinjignxiao.com/en/articles/tianwo-s-fallout-the-unconventional-downfall-of-a-3-billion-yuan-distrib-072ec732/
- Original source: https://mp.weixin.qq.com/s/qurwlJLuAc6sqotDbQEqFg

## Copyright and AI use

This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL.

Contact: zhaobo258@gmail.com · +86 158 5481 7671