4 The acquisition was denied, was it the reason for Zhu Xinli’s fall?
In 2008, the sensational acquisition of Huiyuan by Coca-Cola began. After Huiyuan released the news that she was "to be married", Coca-Cola offered a high price of HK$17.9 billion to "marry" Huiyuan. It's a deal that both sides really want. As a beverage giant, Coca-Cola's carbonated business is tired and needs new business growth points. Huiyuan, as the domestic leader, accounts for almost half of the country, and Coca-Cola certainly wants it. Shareholders such as Huiyuan’s Danone also need capital to liquidate.
Although Zhu Xinli is trying his best to publicize his indifference to acquisitions, in fact, Zhu Xinli is already waiting for the rice to be ready for this transaction. I don’t know if it was the guidance of Delong’s majestic plantation that made him obsessed with upstream agriculture. In short, he needs this large capital to do the ecological agriculture he has always wanted to do.
Judging from Yili Chongjin Ranch, COFCO Chongjin Farm, and Shuanghui’s entry into breeding, it is understandable to extend to the upstream of the industrial chain to gain market dominance and even raw material pricing power. But unlike Nongfu Spring’s “small business” of finding a place to grow oranges, Huiyuan’s ecological agriculture is very grand. Including fruits, vegetables, tea and other very wide categories, covering more than half of the country's map, and the primary, secondary and tertiary industries must be combined to work together. Any one of them may crush a company, but Zhu Xinli wants to win them all.
Zhu Xinli’s calculations are very clear. If he holds these places of origin, he will be the front-end of China’s largest supply chain. All subsequent businesses can only be downstream of him, and Coca-Cola will not acquire him. exception. To this end, he also built a supply agreement into his contract with Coca-Cola. By selling Huiyuan, he can use the 10 billion to leverage Huiyuan's agricultural dream, which looks even grander than Delong's.
What made Zhu Xinli impatient was that at that time, Huiyuan "will get old if she doesn't get married." On the one hand, Zhu Xinli is already 60 years old. He feels exhausted from working hard for Huiyuan, but no one, including his son and daughter, is willing to take over. In addition, Huiyuan's business has been going downhill. If it doesn't get rid of it quickly, the prosperity bubble will burst, and it may be lost. In addition, Huiyuan has already carried out two major downsizing for this merger. The number of sales representatives has been reduced from 3926 to 2520, and then to 700. What's even less room for maneuver is that Zhu Xinli has begun to spend money profusely for his grand blueprint, scattering billions of real money in advance.
But we never expected that in 2008, the Olympic Games, the Wenchuan earthquake, and 30 years of reform and opening up, the people's patriotic sentiment would be extremely high. In addition, the country has begun to shift from the idea of ????introducing foreign investment to the idea of ????enhancing the national brand. In this year, the country promulgated the Anti-Monopoly Law, and Coca-Cola’s acquisition of Huiyuan was the first case that violated this new law. At that time, almost all the top five companies in every industry in China were foreign-owned. The government could not sit idly by and ignore this situation. What's more, Coca-Cola is so arrogant that it acquired 100% of Huiyuan's equity, as if challenging legal authority. And judging from past historical behavior, Coca-Cola is not friendly to national brands, and the tragedy of acquiring national brands may still happen to Huiyuan. Amid the unprecedented wave of opposition from the public, this acquisition, which both parties were determined to win, was rejected!
Zhu Xinli was stupid! Enterprises should "raise them as sons and sell them as pigs", "Why can foreigners sell companies? I can't?" Zhu Xinli couldn't figure it out. Indeed, China's policy environment has added great uncertainty to business operations, but Zhu Xinli is not without problems. With the original intention of selling pigs, the breeders will not pursue training the pigs to be agile, agile and smart (scientific and lean management), nor pursue the immortality of the pigs (long-lasting business spirit). Raising them and selling them at a good price are top priorities, otherwise they will be lost if they are too old and raised to death.
Faced with the blow, Zhu Xinli continued to boost everyone's morale. He wrote an internal letter to employees. But the disdain for the beverage industry itself is clear in his words. Zhu Xinli, who had a grand blueprint in his mind, no longer looked down upon the drudgery of producing cans of drinks. This work was too "low-end" and too slow.
The cooked duck flew away, but what about the promised projects? What was even worse was that the financial crisis came in 2008.
Later, some buyers, such as COFCO, communicated with Huiyuan, but Zhu Xinli could not consider the price of more than 3 billion. What to do with the money that has been thrown away? The projects that have been launched will continue to be supported, and the projects that can be withdrawn will be withdrawn. Many local leaders were dumbfounded. What would happen if the plants planted by farmers produced crops next year? Zhu Xinli, who promised to benefit farmers, accidentally dug a hole for them. These projects that have already started are also hungry wolves waiting for food, leaving Zhu Xinli with no time to take care of them.
5 There is no stopping the cliff
Since we still have to sell drinks bottle by bottle, the laid off workers have to be recruited again. Zhu Xinli found a large number of veterans to rebuild the team he had cut down. The damage to the company from this change is self-evident. Huiyuan's business continues to decline, but the company's liabilities continue to rise.
From 2008 to 2016, Huiyuan Juice’s return on net assets never exceeded 5%, and its capacity utilization rate was only 30%. But Huiyuan is "not short of money." They not only borrowed large amounts from banks, but also used assets sold off to keep Huiyuan alive. In addition, they also received large government subsidies. In 2012, Huiyuan suffered a loss for the first time, but received 251 million government subsidies. Since then, Huiyuan's losses have gradually expanded, and Huiyuan's practice of demolishing the east wall to pay for the west wall has become more and more frequent.
Huiyuan has sales actions every year. In 2015, it sold 9 companies including Beijing Huiyuan and Jiangxi Huiyuan for a total of 1.812 billion yuan. There is no doubt that the purpose of loss reduction can be achieved by selling assets. More importantly, the profits from these sales companies and high government subsidies have brought prosperity to Huiyuan with "a steady increase in revenue, gross profit, and net profit, outperforming the market." In 2016, the company "earned" 13.28 million yuan, but excluding 145 million yuan of other net income and 38.493 million yuan of additional income from the sale of subsidiaries, Huiyuan's actual loss was 303 million yuan.
Funds are tight and the production capacity utilization rate is only 30%, but Zhu Xinli has not stopped building the factory. "There were no orders when the factory was built, but they built it anyway. The reason is that there is a logic that can divert funds during the process of building the factory." Fang Lie, a senior investor, analyzed. Although the method of transferring funds cannot be verified, it is an indisputable fact that Huiyuan spends money lavishly.
Around 2010, in order to rebuild the sales system, Huiyuan’s sales staff once surged to 17,000. In 2014, Huiyuan Juice started the construction of company business offices. After 6 months, it built more than a thousand business offices across the country to compete with traditional dealers in selling goods. This makes Huiyuan's already chaotic sales system even more confusing.
In 2014, Zhu Xinli also spent 3 billion (originally planned to be 5 billion) to use Deyuan Capital to participate in the restructuring and reform of Sinopec’s sales business. The new company's promised listing three years later did not materialize, and the shares were not redeemed. Zhu Xinli's capital chain became even tighter. Since then, Zhu Xinli's assets of 4.1 billion were frozen due to Deyuan Capital's pledge of equity. In addition to these major cooperations, Zhu Xinli has never stopped trying to diversify, but there are only few successes. In addition, Huiyuan has also cooperated with dumpling companies to build e-commerce channels, participate in O2O, and even created Huiyuan's mobile application "Huiyuan around you".
The 2017 interim report showed that Huiyuan’s total liabilities exceeded 11 billion yuan, and nearly 10 billion of these total liabilities were obtained through banks, financial leases, corporate bonds, etc., resulting in a heavy interest burden . The interest Huiyuan pays to banks and other channels in a year can amount to at least about 500 million. Huiyuan's juice business is bleak, but it doesn't actually need that much money. In order to reduce expenses, Huiyuan Juice reduced its employees to 3,965 in 2017. But Zhu Xinli's "big agriculture" dream is a bottomless pit of money, and Zhu Xinli's high hopes are placed there. It is inevitable to transfer some funds from listed companies to complete the second growth curve of his life.
The matter was soon confirmed, and Huiyuan was suspended from trading. From August 2017 to March 2018, Huiyuan provided a short-term loan of 4.275 billion yuan to another affiliated company of Zhu Xinli. This loan has exceeded 8% of Huiyuan's assets, but Huiyuan did not disclose it. Huiyuan ceased trading on April 3, 2018. This loan was not only not disclosed, but no agreement was signed, and it was not approved by the board of directors. It quietly transferred the listed company's money to the unlisted company. The Hong Kong Stock Exchange stipulates that if it fails to meet the resumption conditions before January 31, 2020, Huiyuan will be delisted.
It was obvious 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, accounting for 60% of the shares. Huiyuan invested 2.4 billion yuan in assets, including the trademark of Huiyuan Juice, to establish a new company. But three months later, the plan died. "Huiyuan has distributed its trademarks to many companies due to debt problems. If Tiandi No. 1 wants to obtain Huiyuan's trademark, it needs the consent of all companies holding trademarks, but this is too difficult."
In 2018, Zhu Xinli was still a rich man on the Hurun Report with a net worth of 3.5 billion yuan. In 2019, he became a "lao Lai" who has been restricted from spending several times. On September 20, 2019, due to the equity pledge mentioned above, 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 entered the list of dishonest persons. And the thorny issues don't end there.
The stranded projects and creditors of all sizes across the country have become a reality that Zhu Xinli has to face. Various suppliers such as sapling dealers were also surprised that Huiyuan would use 50,000 or 100,000 to repay debts "like toothpaste." In September 2019, an announcement from Pioneer Group’s P2P platform tore up Huiyuan’s huge debt chain. The four companies under Zhu Xinli's name were unable to repay the 4.185 million yuan in debt and planned to use Huiyuan juice series products to pay off the debts. The loan guarantees were all provided by Huiyuan Group.
Zhu Xinli once said, "If it had followed the original plan, Huiyuan would have become a company worth hundreds of billions long ago and would not have ended up where it is today." But if Huiyuan was sold, with tens of billions We don’t know whether Zhu Xinli will generate hundreds of billions of cash or a deficit of hundreds of billions. But what is certain is that 10 billion cannot support Zhu Xinli’s “big agriculture” dream.
6 One person’s Huiyuan
Amid the disintegration of the Huiyuan empire, Huiyuan ushered in the largest personnel change in its 28-year development history. On February 12, 2020, Zhu Xinli and his daughter both quit Huiyuan. On February 14, Huiyuan was delisted. Huiyuan has always been Zhu Xinli's Huiyuan. Without him, where would Huiyuan go?
It is true to say that Zhu Xinli raised Huiyuan as his son when he built Huiyuan from scratch. For Huiyuan, Zhu Xinli gave up almost all his hobbies, including singing, dancing, playing cards and mahjong. In order to rush for time, he broke through the glass door of the office and fell into a sewer of more than one meter in broad daylight. In the early days of starting a business, he unloaded trucks and loaded goods with his employees. He does not look for "part-time employees". He hopes that employees will consider Huiyuan their home, and thus he has become Huiyuan's patriarch.
Along the way, many of Zhu Xinli’s decisions could not be understood by those around him. From being a village director in the early days, to later spending huge sums of money to win CCTV advertisements, Zhu Xinli succeeded in everything in the end. More than ten years of success have made it difficult for Zhu Xinli not to continue to insist on his own opinions. In 2001, the country introduced the Three Gorges resettlement policy, and Zhu Xinli decided to invest heavily in establishing an citrus production base. However, the growth period of saplings requires at least three years, and it would be a huge waste of money to have the production lines idle. Zhu Xinli defied public opinion and settled his conscience and political scores because the local people were willing to plant trees only when they saw hope. In this way, the project was successfully implemented.
Family management does have many advantages in the early stages of enterprise development. However, as the company grows, if the organization and management mechanisms are not updated, shortcomings will quickly appear. In July 2008, a post titled "A Letter to President Zhu Xinli" appeared on the Tianya Forum. The letter accuses Huiyuan of complex nepotism, nepotism, exclusion of dissidents, and chaotic management.
For a long time, Zhu Xinli’s sons, daughters, brothers, brothers, sons-in-law and many other relatives have held important positions in Huiyuan. Some villagers complained that most of Huiyuan's employees were brought by Zhu Xinli from his hometown in Shandong, and they did not bring any boost to local employment. Within the company, it is also easy to exclude "outsiders" who are not from Shandong.
Since 2007, more than ten vice president-level managers have resigned from Huiyuan, and when each professional manager leaves, he takes a group of people with him, causing Huiyuan to suffer a serious brain drain. In 2008, Vice President Mao Tianci, who was posted to Huiyuan from Danone, once laughed at himself, "I am Huiyuan's chief model." Professional managers simply cannot control Zhu Xinli's relatives, fellow villagers, and comrades in the company.
In September 2014, Zhu Xinli spent a lot of money to poach Su Yingfu, who had once "killed all the bureaucrats." The outside world is looking forward to the membership reform. However, Su Yingfu, who led the core team into Huiyuan, resigned a year later, and Huiyuan's "de-familyization" failed again. Su Yingfu revealed: "As long as family members go home and have a meal together on Sunday, they can basically form a first-class understanding of what decisions are discussed in the company."
In addition to leaving no room for professional managers to show off their skills, Zhu Xinli also Not enough incentives are given to enough talents. It is different from entrepreneurs such as Jack Ma and Niu Gensheng, who created a number of billionaires and multi-millionaires during the process of the group's listing. It is not difficult to see from Huiyuan's ownership structure that it is the Zhu Xinli family that really benefits from Huiyuan's growth and listing. Zhu Xinli has always firmly held the equity in his hands, while Jack Ma only owns 5% of Alibaba's equity. The famous saying “Talent gathers and disperses, wealth gathers and people disperse” also explains some of the reasons for Huiyuan’s brain drain.
Many people say that Huiyuan’s products are too single and not diversified enough, but in fact, the fate of Huiyuan’s product line is a true reflection of Huiyuan. In his early years, Zhu Xinli relied on his one-step approach to establish the Huiyuan brand. But since then, Zhu Xinli has been busy expanding and has no capable talents internally, so Huiyuan has almost no innovative products since then. The so-called new products are just imitations following others. Huiyuan has as many as 80 product categories, but many are only fleeting on the shelves.
The lagging new products show the weakness of Huiyuan and its organization. Zhu Xinli was 60 years old, and it was no longer possible for him to handle all production, supply, and sales. But there is no second Zhu Xinli in Huiyuan. When he was running wildly on the capital road, no one could restrain him from constantly emptying listed companies and injecting blood into his "big agriculture". Power that is not contained in a cage is terrifying, and it also led Zhu Xinli to the abyss.
Zhu Xinli himself felt that if Huiyuan had sold out, he would be a different person. Needless to say, such a possibility does exist. However, we need to be vigilant that China has already passed the stage of extensive development. Under the guidance of wrong thinking, having greater resources may lead to greater disasters. Zhu Xinli unknowingly embarked on Delong's path. So what if it becomes a company worth hundreds of billions? Deron still fell.