The lessons of blood and tears of introducing international capital, finally understand why Huawei and Laoganma are not listed on the market

In recent decades, the development of my country's market economy can be described as riding the wind and waves, making rapid progress, and the situation is gratifying. In the raging business wave, many outstanding brands with innovation, scale, and vision have emerged, such as Huawei, Alibaba, JD.com, Xiaomi, Gree, etc. They are the pride of their respective industries and the best brands of this era. testimony.

But the market economy is also cruel. Many big brands have risen and many have fallen, such as South Beauty, Auntia Dumplings, Tianfu Cola, Dabao, Megamax, etc. They once had great glory and vitality. It was full, but now it is languishing and silent, and it is about to be forgotten and abandoned by this rapidly developing era. What is going on? Let me talk to you about this topic today.

Let’s first look back at their brightest moments.

South Beauty: The only Chinese catering partner for the 2008 Beijing Olympic Games

It once qualified as the only Chinese catering service provider for the 2008 Beijing Olympic Games and was responsible for providing catering services for 8 Olympic venues. It has nearly With 73 directly-operated restaurants, Beauty Jiangnan has largely occupied my country’s high-end Sichuan food market.

Da Niang Dumplings: a popular national fast food in the north and south

Founded in 1996, after 20 years of development, the total operating area has reached 1 million square meters, with more than 400 stores in more than 100 cities. A restaurant chain, Da Niang Dumplings has been awarded "Top Ten Famous Brand Enterprises of Chinese Fast Food" and "Top Ten Famous Fast Food Enterprises of China".

Tianfu Coke: The Strongest Domestic Coke

The Coke memory of a generation of Chinese people, at its peak there were 108 factories in major cities across the country, with an annual production of more than 60,000 tons, equivalent to 1 With more than 100 million bottles, traces of it can be seen in Moscow, Japan, and the United States. It is Chongqing’s Tianfu Coke.

Nanfu Battery: China’s first national brand

I believe everyone is very familiar with this brand. It reached its peak in 2003, occupying half of China’s dry battery market and ranking first in sales in China. Nanfu is the fifth-largest dry cell battery brand in the world, selling 700 million units a year.

Wait

It can be said that these brands were among the best and most glorious at the time, but slowly, some of them changed their appearance, some faded out of the public eye, and some faded away. Exit. The reason has a lot to do with their blind introduction of capital.

So how did the introduction of foreign investment lead to their demise step by step?

Generally speaking, in order to pursue their own returns, investors ignore the specific development of partners. If they do not provide understanding and support to the other party, they focus on the realization of self-interest, and even add insult to injury, causing the brand owner to operate Falling into trouble, and finally selling or exiting the business, the brand that has been managed for many years will die. In a word, we can only share the joys and sorrows, but cannot resist the bitterness.

Take South Beauty as an example

In order to speed up the development of the company, Zhang Lan introduced investment from CDH Ventures. In order to ensure investment returns, CDH required Zhang Lan to sign a listing and gambling agreement, which stated that if South Beauty could not be listed within three years due to reasons not caused by CDH, CDH had the right to withdraw from South Beauty through repurchase. Specifically, it refers to the amount of return that CDH will receive after South Beauty is listed when it is determined when signing the contract. If it cannot be listed, it will still have to pay this amount, and CDH can also withdraw the investment principal. Of course, South Beauty can obtain the right to use CDH’s investment funds for three years.

As a result, South Beauty was exposed to the scandal and was affected by the "ban on official consumption". Both its reputation and sales dropped. South Beauty has since fallen into operational difficulties and was ultimately unable to be listed on schedule. At this time, CDH Investment required strict implementation of the gambling agreement. Due to a sharp drop in income and financial constraints, founder Zhang Lan was forced to accept CDH Capital's proposal and sell 82.7% of his South Beauty shares to CVC, a Hong Kong private equity fund with a European background. , used to fulfill the original gambling agreement with CDH Investment.

After this financing incident, Zhang Lan not only lost control of the company, but South Beauty was no longer the same South Beauty as before. CDH, who had promised to make money together when they made mistakes in South Beauty, did not give the other party a chance to make a comeback. It resolutely implemented the gambling agreement, which led to the decline of a generation of well-known Chinese food brands. It can be said that capital's pursuit of interests is unambiguous and unambiguous. Can't wait.

Let’s take another look at Da Niang Dumplings

Da Niang Dumplings was founded in 1996. After more than ten years of development, the number of stores nationwide has reached 450, with annual business With a turnover of 1.5 billion yuan, he has become a master of the dumpling catering industry.

Due to his advanced age, Wu Guoqiang wanted to find a relatively easy way to operate Da Niang Dumplings. At this time, CVC, a Hong Kong private equity fund that had invested in South Beauty, approached Wu Guoqiang and expressed its willingness to invest in Da Niang Dumplings.

Wu Guoqiang was reluctant at first. Later, CVC Fund gave Wu Guoqiang suggestions on product standardization and building China’s No. 1 fast food brand, and offered a higher share price. Finally, Wu Guoqiang was tempted and offered only Hold 10% of the shares and introduce CVC. Since CVC became a shareholder, Da Niang Dumplings has transformed from an enterprise that entrepreneurs worked hard to start up to a capital-operated enterprise.

In order to increase profits, Da Niang Dumplings manipulated product costs and saved costs by cutting corners and reducing the number of employees. The original weight of each dumpling was reduced from 20g to 17.5g. The quality shrank significantly, but The price did not drop, causing Da Niang Dumplings to begin to lose fans and customers, and its revenue fell sharply, even experiencing negative growth. Wu Guoqiang only worked as a consultant for three years and as chairman for two years before he was forced out.

When consumers gradually stayed away from Da Niang Dumplings, CVC came up with new ideas. They squeezed out the remaining value of the Daniang Dumplings and transferred them to the domestic Gemei Group at a low price of 350 million yuan, quickly cashing out. .

Capital is always profit-seeking. No matter how much money is invested, it will be doubled. This mentality of eager for quick success is fundamentally different from the founder’s concept of building a century-old brand over time. Once a company becomes capital-intensive, The pirate ship cannot turn back.

Compared with South Beauty and Da Niang Dumplings, which were directly manipulated by capital, the merger and acquisition of Nanfu Battery and Tianfu Coke was more tactful and suffered a dumb loss.

The rise of Tianfu Cola is a miracle for China’s carbonated drinks. In 1980, Chongqing Beverage Factory began to produce Tianfu Cola. In 1981, the Tianfu Cola brand won 75% of the Sichuan and Chongqing beverage market and became one of the specialties of Sichuan and Chongqing. At its peak, Tianfu Cola had 108 factories, covering almost all of the country except Tibet, Hong Kong, Macao and Taiwan.

In 1990, Tianfu Cola was sold overseas, and a filling plant was established in Moscow. It was represented by Japan Kazama Co., Ltd., and a sales company was set up in the World Trade Center in the United States. It entered the US market. In 1994, Tianfu Cola, which was at its peak, and Pepsi marriage. Originally, it was said that Pepsi would help Tianfu develop overseas markets, and Tianfu would help Pepsi develop domestic markets.

As a result, in the first year of the joint venture, Tianfu Cola could maintain a 75% market share; in the second year, the production proportion dropped to 50%; in the third year, it was only 20%; in the fourth year, only 1 %. By 1998, Tianfu Cola had ceased to exist in name only, and Pepsi's efforts to help Tianfu Cola develop overseas markets had become empty talk. However, all of Tianfu Cola's sales channels were occupied by Pepsi. In 2006, Tianfu Cola had no choice but to sell its stake to PepsiCo for 130 million yuan.

Let’s look at Nanfu again

Fujian Nanping Nanfu Battery Company was established in 1988. Its main shareholders include Fujian Industrial Bank, China Export Commodity Base Construction Fujian Branch, and China Resources Group Baifu Ltd.

On July 15, 1990, Nanfu introduced the first domestic alkaline zinc-manganese battery production line at a cost of more than 60 million yuan and officially put it into production. In 1993, Nanfu once again introduced the German alkaline high-energy zinc-manganese battery production line. In 2003, Nanfu occupied half of the national battery market, with total sales of more than 700 million units and an output value of 760 million. It became the largest alkaline battery manufacturer in China and the fifth largest in the world.

In August 2003, Nanfu was suddenly acquired by its competitor Gillette of the United States (the parent company of Duracell batteries). This incident caused quite a stir at the time. So, how did Nanfu Battery, the "national power" that the Chinese were once proud of, fall into the hands of the Americans overnight?

It turns out that in 1999, Nanfu Battery, which was booming in business, formed a joint venture with Morgan Stanley, Dutch National Investment Bank and Singapore Government Investment Corporation to form China Battery Co., Ltd. in response to the request to introduce foreign investment. Among them, foreign The Chinese side holds 49% of the shares and the Chinese side holds 51%. Although it seems that Nanfu has absolute controlling rights, as long as the foreign shareholders increase their shares by 2%, they can indirectly control Nanfu through China Battery.

Later, due to the huge losses caused by poor management of Baifu Company, 8.25% of China Battery's shares were sold to Morgan Stanley. Then, Morgan Stanley acquired 20% of the Chinese battery shares of the original base Fujian company for US$15 million. In 2002, foreign shareholders acquired more than 10 million US dollars of Chinese battery shares through other means. So far, foreign investors' holding of Nanfu has reached 72%.

For international venture capital giants, their operating method is to find outstanding companies with potential, promote them to be listed after investment, sell their shares when the time is right, and earn huge profits from the appreciation of the stocks. . However, due to various reasons, Chinese batteries have not yet been launched. Morgan Stanley's major foreign shareholders couldn't wait any longer and sold all their shares in China Battery to Gillette of the United States for US$100 million.

Duracell, which was once defeated by Nanfu (it has been in the Chinese market for 10 years and has a share of only 10%), has suddenly turned into Nanfu’s boss. In order to avoid competing with the parent company's Duracell battery market share, Nanfu had to withdraw its troops in a hurry. Half of its production capacity was idle, and Nanfu gradually lost its vitality.

In 2005, Procter & Gamble acquired Gillette for US$57 billion, and Nanfu became a subsidiary of Procter & Gamble. In November 2014, a domestic investment institution repurchased Nanfu Batteries from Procter & Gamble. In 2016, Nanfu Battery backdoored Yajin Technology and successfully listed on the New Third Board. At this point, Nanfu Battery ended its history of selling out and returned to Chinese hands.

It can be said that once a company enters into a cooperative relationship with a capital institution, whether it is voluntary or involuntary, it loses its integrity and dignity, and its development experience becomes frustrating and bumpy.

However, as Huawei Technologies and Laoganma Foods, which were also founded in the 1980s and have huge brand effects and impressive performance, have a clear understanding of their own development and the nature of capital, they are well positioned to do so. Avoid being involved in the sinister manipulation of funds. Because they know that once the company introduces capital, it will deviate from the existing development track, the company will no longer belong to them, and the brand will likely disappear.

Although funds are an indispensable core element for a company, a high degree of vigilance must be maintained when introducing capital. Even if there is indeed a need, you must at least understand the following three points to ensure the long-term development of the company and not to be a wedding dress for others.

1. Investors and operators should be separated

Basically, investors focus on how to make money quickly and make money and leave; if they are allowed to When participating in operations, they will pursue maximization of profits. This is the essence of capital. As for business operators, they understand that brand building is not easy, and they value market development and customer experience. They are willing to establish a sustainable value system to achieve profitability. What they pay attention to is long-term success and a century-old store.

Because the two parties have different concerns, the results will naturally be different. For example, when a company is not operating well, managers think about how to improve products and services; investors think about how to stop losses in time and transfer shares to obtain principal while the company is still valuable. South Beauty was pushed to CGV Fund, and Nanfu Battery was changed hands many times. This is the best example. Therefore, investors and operators should be separated as much as possible.

2. Whether capital should be introduced for brand expansion?

Capital plays a great role in the development of an enterprise, but for an enterprise, whether it really needs to introduce capital depends on its own situation. Come. Take Nanfu Battery as an example. At that time, Nanfu Battery had achieved a high market share in the country and its development momentum had been very good. Due to the unnecessary introduction of foreign capital, the company's subsequent operations were very passive.

From the initial transfer of shares by Baifu to Morgan Stanley to Morgan Stanley's initiative to acquire shares of Fujian Company, a Chinese commodity base; from Morgan Stanley, Dutch National Investment Bank, and the Singaporean government to jointly transfer shares From selling to Geely to Geely selling shares to Procter & Gamble, from Procter & Gamble buying shares to a domestic investment institution to listing on the New Third Board.

Nanfu, a leading brand in the battery industry with huge potential, has been repeatedly changed hands, changing hands frequently, and has become a tool for capital arbitrage. It has no initiative and can be called the saddest national brand.

Therefore, the introduction of funds must depend on whether the enterprise has this need and whether it can seize the initiative in corporate decision-making in later operations. This is the key.

3. Be clear about the true intention of capital investment

There is nothing wrong with investing capital in order to make money. But we need to figure out whether they want to make a quick buck and leave for short-term returns, or whether they are investing to capture your market, or whether they are willing to develop with you to build a long-term brand and obtain more lasting returns. The difference is very big. Big ones.

Among them, the investment institutions encountered by South Beauty, Da Niang Dumplings and Nanfu Battery are typical examples of those who just want to make a fortune in the short term. Therefore, after these institutions take shares, they are concerned about cutting corners to reduce costs, lowering employee benefits to reduce expenses, and then they are constantly looking for high-priced takeovers, etc. They cannot see the company's potential problems, do not consider the company's future development, and only think about how to recover more and faster returns on investment.

There is also a typical example of luring the wolf into the house and falling down before understanding what is going on, such as the cooperation between Tianfu Cola and Pepsi Cola. Since both are colas, the relationship between competition and substitution is very obvious.

As a company with rich experience in international business operations, Pepsi-Cola not only failed to thank Tianfu Cola for giving it the opportunity to connect, but instead pushed Tianfu Cola into a dead end. From the initial 75% of shipments to 1% The company’s shipment volume lasted only four years, and it was typical of the company to eat at the expense of its partners.

For example, SoftBank is different to Alibaba, Gaoling is different to JD.com, and IDG is different to Tencent. They know that it takes time for a company to grow, and only when a company develops and grows can it get more returns; therefore, they understand and tolerate the small problems of these companies, and are willing to wait for their growth slowly, which is why they have today's excess returns. This is something that many financial institutions cannot do, or the companies are in different eras and environments, or they have different choices, so there is such a huge difference, which is really surprising.

Enterprise development is very similar to human growth. It will experience many ups and downs and encounter many opportunities. How to make decisions is especially important. If you are not careful, you will fall into the abyss of eternal destruction. We must understand that brand development takes time, and all opportunistic efforts will not last long. There is no love without reason. Investors are more demanding and ruthless in the return of capital. Therefore, decision-makers must have a clear understanding of the business development of the enterprise. Knowledge and planning.

Okay, that’s it for today. Thank you all for forwarding and paying attention. If you have any topics you are interested in, you can leave a message in the comment area and we will discuss it together. Thanks!