Source: Yunjiu Toutiao (ID: YJTT2016) For both Weiwei and the liquor industry, this is a past worth pondering. Once cheerful and joyful, Weiwei Soy Milk lost its composure due to a 'hangover'. Now, the intoxication is fading. On August 6, 2019, with the formal takeover by Jiangsu Nantong Zongyi Group, Weiwei Co., Ltd. and Guizhou Chun finally parted ways after seven years of love-hate entanglement. On the night of the handover, Weiwei announced its new direction, introducing state-owned Xinsheng Group as its major shareholder and focusing on the grain industry. One after another, clean and decisive, seemingly without any lingering attachment to the liquor industry. No wonder, the past seven years have been unbearable for Weiwei. Zhijiang's high start and low end, and Guizhou Chun's collapse, cost Weiwei not only hundreds of millions in investment but also the once-glorious image of the 'Soy Milk King', which gradually blurred amid repeated setbacks in its diversification strategy. Such a high price is clearly not something that can be erased with a graceful turn. For Weiwei and the liquor industry, this is a past worth deep reflection. If we trace the roots, the scope goes beyond these seven years, back to 2006 when Weiwei entered the liquor industry by acquiring Shuanggou. That seemed like a starting point for both fame and fortune, but perhaps it was the beginning of a fantasy. Founded in 1992, Weiwei had seen grand scenes. As a pioneer in China's soy milk industry, as early as 1997, Weiwei's soy milk sales reached 1.3 billion yuan, capturing nearly 80% of the soy milk market. In 2000, Weiwei was listed on the A-share market as the 'first soy milk stock', raising over 1 billion yuan. However, early success is not necessarily a blessing. Having tasted success too early, Weiwei's understanding of success seemed somewhat hasty. After 1998, affected by the financial crisis, Weiwei's soy milk sales fell from a peak of 1.3 billion yuan to around 900 million yuan. This was perhaps the first setback Weiwei experienced, and under pressure, Weiwei chose a strategic shift. After listing in June 2000, Weiwei began to venture into dairy, liquor, real estate, biopharmaceuticals, grain and oil, coal, tea, finance, and other fields. By around 2015, Weiwei, with numerous industries, seemed to have become a diversified empire, but every inch of this empire was not solid. Media once commented on Weiwei's diversification path, saying it 'in every field, acted on a whim, mostly dabbled, until the corporate structure became messy and disorderly'. Among Weiwei's many investment cases, there was a successful experience that outsiders often talked about: the acquisition of Shuanggou Liquor in 2006. In November 2006, Weiwei acquired 38.27% of Shuanggou Liquor for 80 million yuan, becoming its largest shareholder. In March 2008, Weiwei increased its stake, spending 36 million yuan to raise its shareholding to 40.59%. In September 2009, on the eve of the merger of Yanghe and Shuanggou, Suqian Guofeng Asset Management Co., Ltd. (state-owned, representing Suqian Municipal Government) bought back all of Weiwei's shares in Shuanggou for 398 million yuan. From this alone, Weiwei gained an investment income of 253 million yuan, with a return rate of 218%. If we add the annual profits contributed by Shuanggou, Weiwei's total return was close to 300 million yuan. In less than three years, netting nearly 300 million yuan was a perfect investment for Weiwei. It was this almost only major success that prompted Weiwei to bet on the liquor industry repeatedly. However, good luck did not strike again. Unlike the trial in Shuanggou, Weiwei's acquisition of Zhijiang was a heavy investment. According to a notice issued by Weiwei Co., Ltd. on September 29, 2009, 'Announcement on Changing the Use of Some Raised Funds', the 348 million yuan for acquiring 51% of Zhijiang came from raised funds originally planned for the 'Infant Food and Beverage and Infant Formula Project' and the 'Plastic Color Printing Outer Bag and Carton Production Line Project'. The willingness to change the investment projects to complete the acquisition at least proves that Weiwei was initially sincere in entering the liquor industry. In the announcement, Weiwei also stated that acquiring Zhijiang 'truly gives the company a top-ten Chinese liquor enterprise, initially achieving the company's strategic goal of entering the liquor industry'. At that time, Zhijiang was indeed worth Weiwei's effort. When acquired by Weiwei, Zhijiang's sales revenue was close to 1.4 billion yuan, and its production and sales scale had ranked first in Hubei's liquor industry for many consecutive years. Because of this, the acquisition was once described as 'Zhijiang marrying down'. For this marriage, then Zhijiang chairman Jiang Hongxing, sales company general manager Cao Shengwu, and other major shareholders believed that Weiwei's entry would bring better development to Zhijiang. One key reason was that Weiwei's main business was relatively weak, and after Zhijiang belonged to Weiwei, it would account for at least 80% of its net profit. 'For its own development and survival, Weiwei could not afford to neglect the Zhijiang liquor brand.' In the early years, Weiwei indeed had high hopes for Zhijiang. Yunjiu Toutiao (WeChat: Yunjiu Toutiao) reviewed Weiwei's annual reports and found that the real 'honeymoon period' between Weiwei and Zhijiang was only from 2009 to 2011, less than three years. During this period, Zhijiang's performance continued to rise, with revenue contributions growing from 1.4 billion yuan in 2009 to 1.999 billion yuan in 2011. In Weiwei's official statements, liquor was also emphasized as a major pillar industry. Starting in 2012, as the liquor industry entered an adjustment period, Zhijiang's performance was affected. At this time, although Weiwei still had expectations for the liquor industry (for example, spending 357 million yuan to acquire 51% of Guizhou Chun and, in 2013, during the industry downturn, spending 240 million yuan to increase its stake in Zhijiang by 20%), its development strategy had been adjusted to 'based on the big food strategy, continue to pay attention to possible project development opportunities', and it successively entered real estate, tea, and other sectors. Subsequently, Weiwei's development strategy was further adjusted to 'big agriculture, big grain, big food', and the strategic weight of the liquor industry gradually decreased. Correspondingly, Zhijiang Liquor's performance declined since 2012, and Guizhou Chun became a complete burden until it was sold off. With Weiwei's liquidation of Guizhou Chun, the future of Zhijiang, whose revenue has shrunk to 583 million yuan, has become a major suspense in the industry. At least from Weiwei's 2019 development plan, there is almost no mention of the liquor industry. Looking back at Weiwei's 13 years in liquor, the three investments seemed to have successes and failures, but the so-called success with Shuanggou was largely due to luck. If viewed purely from an operational perspective, Weiwei's liquor business, like its diversification attempts in other fields, yielded little. Weak main business and scattered industries were important factors in the repeated setbacks of Weiwei's diversification strategy, but the fundamental reason lies in Weiwei's investment mentality and understanding of corporate growth. Throughout Weiwei's strategic transformation, it seems to have always followed a principle of advance and retreat: enter when the industry is good, exit when it is bad. However, every industry has ups and downs. Without a long-term plan to share the industry's fortunes, it is difficult to obtain long-term investment returns. Even if you seize the timing when the industry is good and get short-term returns, you may well pay it back as tuition in the subsequent industry adjustment. Weiwei's three investments in the liquor industry are a typical case. Overly frequent cross-industry investments and meager returns not only gradually eroded Weiwei's dominant position as the soy milk king but also accumulated a huge funding gap. According to Weiwei Co., Ltd.'s 2018 annual report, Weiwei's total liabilities reached 5.412 billion yuan, with a debt-to-asset ratio as high as 64.8%, of which short-term current liabilities to be repaid were 5.105 billion yuan. Weiwei Group, the major shareholder that had taken over real estate and Guizhou Chun projects for Weiwei, also faced enormous financial pressure. According to Weiwei's reply on August 19 to the Shanghai Stock Exchange regarding the inquiry about Weiwei Group's transfer of shares to Xinsheng, as of August 1, 2019, Weiwei Group held 550 million shares of Weiwei Co., Ltd., of which a cumulative pledge of 479 million shares accounted for 87.07% of its shareholding, and the pledge was 'mainly for working capital loans'. This time, Weiwei Group transferred shares to Xinsheng and even gave up its position as the largest shareholder precisely to optimize its asset-liability structure, recover funds, and repay bank loans. Although Xinsheng Group has no intention of controlling Weiwei within the next 12 months, whether Weiwei can turn around with the 1 billion yuan from the share transfer remains unknown. Hopefully, after this twists and turns, Weiwei, with its intoxication fading, can truly sober up. Tips will be paid 400-2000 yuan once adopted.