In the second half of 2016, Uni-President made some big moves, replacing two top executives in a single day, with Hou Ronglong succeeding Lo Chih-hsiung as president, and then Liu Xinhua taking over Hou's role as general manager. In the post-Lo era, Uni-President's "changes" continue.
Uni-President Sells Off Jianlibao
On June 23, 2016, Uni-President replaced two top executives in one day. First, General Manager Hou Ronglong took over Lo Chih-hsiung's position as president of Uni-President, and then Liu Xinhua, general manager of Uni-President China Investment, succeeded Hou as general manager.
In August 2014, Uni-President released its first-half results, showing severe losses. However, by 2015, although Uni-President's revenue declined by 1.7%, its profits surged by 192%. For a time, Uni-President's innovative model was regarded as the bible of the FMCG industry—after all, in 2015, the entire FMCG industry was in a slump, with industry leader Master Kong experiencing declines in both sales and profits until the first half of 2016.
Just as everyone thought Uni-President would maintain its current position and seek new opportunities, it adhered to its tradition of stepping down from the front line at 60 and retiring at 65. Lo Chih-hsiung, the "son-in-law," stepped back from the front line, only serving as chairman of Uni-President (consider that Mr. Zong, in his seventies, is still holding the front line—makes you feel inexplicably sorry for him).
After the leadership change, Uni-President's third-quarter financial report was not so good, with a loss of 19 million, while its old rival Master Kong's net profit rose 17.37% year-on-year in the same period. Compared to the cliff-like decline in the second quarter, this was a decent performance.
On November 11, while the whole of China was focused on the Double 11 e-commerce shopping festival, Jianlibao quietly returned to the hands of the State-owned Assets Supervision and Administration Commission. On one side, the e-commerce carnival; on the other, the decline of traditional industries—this is the most realistic portrayal of the times. Who would have thought that Jianlibao, once a dominant force, would be transferred so quietly?
As early as May 2016, during Lo Chih-hsiung's tenure, Uni-President sold its 47.83% stake in Jinmailang for 1.291 billion yuan to focus on its own business. In fact, Uni-President's stake in Jinmailang felt a bit like a chicken rib—Jinmailang's main strength lies in the low-end product line, which conflicts with Uni-President's goal, set after 2014, of focusing on high-end products and avoiding price wars. Moreover, Jinmailang's boss, Fan Xianguo, is a quite assertive person, and Uni-President could not intervene in Jinmailang's management and operations. So, rather than both sides distracting each other, it was better to sell.
Unlike Jinmailang, Uni-President held 100% of Jianlibao Trading Group. Uni-President acquired Jianlibao Trading Company in 2007 and dispatched a professional marketing team to handle Jianlibao's operations, with Jianlibao responsible for production according to Uni-President's requirements. This brand, which was on the verge of bankruptcy, achieved sales of 1.8 billion yuan in 2016 thanks to the efforts of the Uni-President team. Although still far from Jianlibao's peak, achieving such sales performance for a brand that had been so severely weakened is quite gratifying, especially since Jianlibao had shrunk from a national market to focusing on three provinces: Guangdong, Xinjiang, and Henan.
On this point, we have to give the Uni-President team's execution ability a thumbs up.
Perhaps it was precisely because of Jianlibao's strong recovery under Uni-President that CITIC Group, under the State-owned Assets Supervision and Administration Commission, was motivated to acquire it, claiming that as a national brand, Jianlibao's brand value was at least 2.2 billion yuan. It seems they forgot that when Sanshui City Government sold Jianlibao to Zhang Hai back then, Jianlibao was clearly worth nothing.
In this transaction, Uni-President didn't lose out, transferring it for 950 million yuan and gaining a profit of 343 million yuan.
Perhaps because the new Uni-President team's goal is to focus on Uni-President's own business, or perhaps because Uni-President doesn't want to follow in Li Jingwei's footsteps, there was no hesitation in this transfer. Currently, the marketing team led by Li Shizheng is gradually withdrawing from Jianlibao Group. Whether Jianlibao will return to the chaos of the Zhang Hai era or recreate Li Jingwei's glory remains unknown.
Integration and Layoffs Begin
After selling off Jinmailang and Jianlibao, Uni-President focused all its energy on operating the Uni-President brand, shifting from capital investment to a focus on the core business, as the high-margin policy of the past year had brought substantial returns to the Uni-President team.
The next step for Uni-President is internal team integration. The teams originally responsible for the beverage line and the instant noodle line will be merged, dealer teams will also be merged, and the original provincial regions will be consolidated. This will reduce internal redundancy, flatten the department structure, streamline the dealer team, increase dealers' annual returns, and implement a survival-of-the-fittest approach for dealers to prevent cross-regional selling.
The result of this will be layoffs and dealer cuts. Yes, layoffs—the two words we've heard most often since 2015, and the two words every FMCG professional doesn't want to face. You've worked hard to distribute products, worked hard to open new customers, worked hard to follow company requirements, but in the end, you still can't avoid the two words: "layoffs."
Lao Na doesn't doubt the execution ability of the Uni-President team. A team that can make Xiao Ming Tong Xue, Hai Zhi Yan, Jianlibao, and Lao Tan Suan Cai so successful must have excellent execution. Nor do we doubt Uni-President's innovation capability, as innovation is almost synonymous with Uni-President. Perhaps the external environment is really too harsh, or perhaps they just want to streamline the organization. After all, with e-commerce and the internet more developed now, companies no longer need a human-wave tactic to visit retail outlets.
Currently, Uni-President's layoff plan is that those at the section chief level will be demoted to director positions. For the first six months, they will keep their original rank and salary; after six months, they will be paid according to the new position. It is said that layoffs below the director level may not come with compensation. (This is based on information from several people who tipped me off; it may not be the final version. If Uni-President staff have more specific information, please leave a comment.)
Is Innovation a Master Key?
Layoffs have been the theme of the entire FMCG industry over the past two years. Basically, any company with a bit of a name can't escape these two words. In times of economic weakness, layoffs are the best way for companies to save costs. Currently, the mood at Uni-President is relatively stable; perhaps everyone knows this is an unavoidable matter.
We shouldn't doubt a company's development prospects just because it lays off employees (unless it's someone with ulterior motives spreading rumors—that's a different story, but Lao Na believes Master Kong won't stoop as low as Wang Laoji). Companies lay off employees simply to streamline redundant structures, and also because different leadership teams have different development strategies.
Similarly, we shouldn't shout that a company's myth is shattered just because of a temporary profit decline. That's nonsense. The experts who once touted the myth are the same ones now cursing it.
In recent years, or more precisely, in the past two years, as Uni-President's new products have risen strongly one after another, Uni-President has replaced Master Kong's position in the industry. Launching new products has become the master key for companies to save themselves, and experts are increasingly recommending new product strategies to companies seeking help, regardless of the situation. But do you know the cost of launching a new product?
Let's count Uni-President's successful new products in recent years: in instant noodles, Lao Tan Suan Cai and Tang Da Ren; in beverages, even more—Hai Zhi Yan, Xiao Ming Tong Xue, Assam Milk Tea, A Water (Ai Kua), etc. These products have helped Uni-President increase sales and boost dealer profits.
Perhaps due to the success of new product launches, Uni-President has gradually become obsessed with launching new products. To launch new products, they can even introduce more than ten items in a single day. However, many of these so-called successful new products are currently just third- or fourth-tier products. Tang Da Ren and Lao Tan can't replace the status of Master Kong's Braised Beef flavor, Xiao Ming Tong Xue hasn't reached the sales of Ice Black Tea, Hai Zhi Yan is still several steps behind Mizone, and Hai Zhi Yan and Assam have shown weakness in the market in 2016. Launching new products can help a company find new growth points, but after finding them, do you maintain these products, or do you continue to cast a wide net and catch whatever you can? Look at Uni-President's new products in 2016—whether it's Tirato or Hong Cha Jun (which Uni-President launched for Jianlibao), or Orange PLUS Lemon—which one attracted widespread attention upon launch? It seems none of them were as appealing as Nongfu's Tea π. Moreover, Hai Zhi Yan's sales have been declining this year.
Currently, it feels like Uni-President is launching new products for the sake of launching new products. In fact, Uni-President's current new products can each lead their own category. The main task now should be to increase investment in these products to attract more consumers. It's like using ten yuan to buy a rose: if you give it to your wife, you get a kiss; if you use it to pick up a girl, you might get a slap. New products are not a master key; what's suitable and appropriate is best.
How to Save Yourself in 2017
In 2017, Uni-President Chairman Lo Chih-hsiung's goal is zero revenue growth—a very realistic goal, given the current external environment. As for some leaders who still propose "small goals" like 50% sales growth without increasing investment, Lao Na can only say such companies are gods.
In the current economic downturn, besides betting on unknown new products, Lao Na believes the most important thing is to develop your existing internal resources.
Whether in the food or beverage industry, we all know that our sales only have two seasons, six months (April to September). Basically, after September, everyone is idle. In October, when the boss sees that the annual target can't be met, basically the year's task is unfulfilled, and the next step is to start planning the next year's "water war" collection. Salespeople also start to slack off and busy themselves with so-called ordering meetings.
However, many companies overlook a very important season: the Spring Festival. Currently, the only companies that truly have a "Spring Festival Battle" are JDB and Wang Laoji. Do other companies really consider this season? Want Want does launch a bunch of gift packs at this time every year, mainly because there's nothing to do with ice cream products, and they can't just sit idle. Plus, there are all those leftover materials to use up, so they take the opportunity to bundle some poorly selling products into gift packs. It's this mindset that has caused Want Want's gift pack sales to decline year after year, with many dealers buying them at their own expense. As Want Want people say, there are two swords hanging over the ice cream business—Lao Weng (Lao Weng Herbal Tea) and gift packs.
If you approach the Spring Festival Battle with this mindset, then your product's effect will be like Want Want's gift packs—a sword hanging over your salespeople's heads. But if you truly put effort into the Spring Festival, it will reward you with a brilliant report card.
Is there no sales during the Spring Festival? What market in China has greater sales than the Spring Festival? The 7 days of Spring Festival sales can complete half a quarter's sales. People spend an average of two months' salary during the Spring Festival market. JDB's Henan market can sell 1 billion yuan in 7 days during the Spring Festival—equivalent to Tea π's sales in 2016.
Is there no sales in the off-season? Everyone knows that winter is the off-season for fruits in many cities, but fruit sales in winter are no less than in summer. Moreover, the closer to the Spring Festival, the more people buy fruits by the case, rarely buying one at a time. That means in summer, you might need to sell to 24 people to sell one case, but now one person might buy a case. The purchase frequency is lower, but the single purchase volume is higher. Who can explain why ice cream sells better in winter in the Northeast than in summer?
Does your company value the Spring Festival Battle? Except for the frozen food industry, very few companies value the Spring Festival. Even the frozen food industry hasn't explicitly proposed a Spring Festival Battle, treating the Spring Festival as a battle to fight. Instead, they treat it as a time to relax for the year or just a holiday to prepare for next year's water war. Think about it: e-commerce can create a Double 11 for sales. Why do you ignore such an important festival as the Spring Festival? Many small manufacturers use the Spring Festival as their lifeline because they know that only during that time, big manufacturers won't invest in display fees or end-cap displays. As long as they give terminal customers enough profit, they can get a good position and good sales.
Now that the FMCG industry is so weak, companies still focus all their energy on the weather. If it's cold, you sell poorly; if it's hot, you have sales. Do you think all your efforts are less important than the weather? Wrong. In winter and during the Spring Festival, everyone is equal. If you want to improve worker efficiency and reduce costs, you need to increase their sales output, reduce their rest time, and find new growth points. Clearly, the Spring Festival is a season worth investing your energy and people in.
Ask JDB and Wang Laoji about their Spring Festival sales. Ask how much milk can be given as gifts during the Spring Festival. Ask how much Red Bull sells during the Spring Festival. Ask how much Six Walnuts sells during the Spring Festival. Will Spring Festival sales be lower than Double 11?
Back then, JDB also found this opportunity point and achieved a qualitative leap in sales.
In 2017, be realistic. Set a zero growth sales target. Break down the tasks: March for water war, April to September for immediate consumption, October to February for the Spring Festival Battle. This is how you truly tap into your own potential. The Spring Festival is worth your investment, worth more than 40% of your costs and energy. Do you want to give it a try?
Lao Na's Comment: Layoffs are the topic Lao Na least likes to write about, because FMCG now equals layoffs, and few companies don't lay off. Lao Na won't praise Master Kong just because of its good third-quarter results, nor deny Uni-President because of its poor third-quarter sales. Uni-President is transforming, Liby is transforming, Blue Moon is transforming. We should give more encouragement to companies in transformation. There may be many problems, but everyone's goal is better development for the company, to patch up the FMCG ship. Over the years, we've heard everywhere that drinking beverages is unhealthy, so we keep declining. Some unscrupulous companies even gloat over rumors about their peers, leading to today's situation. The harm you did to your peers yesterday is the epitaph you carve on your own tombstone today.
In fact, in the food and beverage industry, although the peak season is busy, the off-season is too long. The Spring Festival shouldn't be an off-season, but it hasn't attracted enough attention from companies, or perhaps it has never attracted attention at all. If you ignore the Spring Festival, naturally it won't favor you. Tap into your own potential; don't bet your future on new products you know nothing about.
Please, every planner, engrave the four words "Spring Festival Battle" into your heart!
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