Li Tuchun loses business logic behind **milk

On January 20, 2012, the prosecution agency of Zhuzhou City, Hunan Province made a decision not to prosecute Li Tuchun, the president of the former Hunan Prince Milk Group and chairman of the board of directors. Li Tuchun was acquitted after being detained for 15 months.

Zhuzhou City in early spring is still warm, and the original plant of the former Prince Milk Group of Liyu Industrial Park on the side of Zhuzhou Avenue is still shrouded in a misty rain. It once hosted the dreams and hopes of Li Tuchun Dairy Empire. Today, it seems that it has nothing to do with him. Because this enterprise has been subject to change after bankruptcy, Li Tuchun, the founder, is already an outsider.

Prince milk's share in the lactic acid bacteria beverage market in China once reached 76.2%, and it is a well-deserved industry leader. From 2001 to 2007, Prince Milk’s sales jumped from 50 million yuan to 3 billion yuan, doubling its performance for six consecutive years. How did Li Tuchun, the founder and operator of Prince Edward Milk, lose his novice start-up and bigger business? Please allow me to break away from the games of politics, business, finance, power, and investment that were raised in 2008 due to difficulties in the operation of the Prince's milk (see the news report and the Annexes I and II of this article) and analyze the operations of Li Tuchun. How did Prince Edward's milk go down one step at a time and reveal the business logic for us?

Loss of strategy and decision-making mistakes Taiziji’s ambitious goal, landing on the ground, the core is not strong, blind expansion, and ultimately lost in the strategic direction, what the wind is the wind, all efforts are wrong.

Fermented lactic acid bacteria have always been the flag of Prince Edward Milk. The market has proved that fermented lactic acid bacteria drinks can be used as an independent category, and its market is huge and profitable. As a beverage (non-pure yoghurt), lactic acid bacteria have always been done by small businesses. The large-scale dairy industry has begun to take the lead in doing so. The more you do it, the more you taste the sweetness. Today, Yili, Guangming, Mengniu and Kangshifu all make a lot of money on non-pure yoghurt lactic acid bacteria drinks. Originally able to serve as a national brand of lactic acid bacteria beverages, it should be said that only the Prince Milk family, but Li Tuchun did not see through the commercial value, always felt the food in the others bowl, holding the banner to return the flag, what actually is done is completely another thing.

After the success of the first step in the rejuvenation of fermented lactic acid bacteria, Prince Edward's milk might have been dazzled by the victory. Perhaps it was really lost in the direction and started a multi-directional, unrelated diversification of the Great Leap Forward, and put these entities into practice. The success of the industry hopes to be held in capital operation. In the core business, lactic acid bacteria beverages, in addition to the bluffing movements of the National Enclosure and Shangma Industrial Park, there has been no substantial development and strategic focus has been lost.

Obviously, Hunan Prince Milk Group has occupied over 70% of the market share for 5 consecutive years in China's fermented lactic acid bacteria beverage industry, giving Li Tuchun a big illusion that he is intoxicated in the small kingdom of lactic acid bacteria and has not concentrated his energy. When the financial power grows bigger and bigger, it is thought that it can be omnipotent in the market and forget that the real opponent comes from the dairy industry.

Actually, lactic acid bacteria were originally a small category. The total sales of the top 150 lactic acid bacteria beverage companies, including Prince Milk, accounted for only 5% of the total in the dairy industry. However, Mengniu and Yili were the only ones. The share in the dairy market is above 20%. Prince Edward’s milk has always been living under the shadow of “big cows”. The lactic acid bacteria boss of Prince Edward’s milk is just Li Tuchun’s self-respect.

The lactic acid bacteria boss of Prince Edward Milk is not very powerful in marketing. The first is that consumers do not recognize it. In the market, the concept of lactic acid drinks, yoghurt and lactic acid bacteria beverages is messed up. Prince milk is really fermented probiotic drinks are not outstanding. Second, Prince Edward milk from advertising to the channel to the terminal, a single product, the image is old, up to be known as a second-rate brand. Third, the dairy giants have become "sour" and have divided their food market. Such as Yili's yogurt, Mengniu sour milk, Wahaha's nutrition fast line. Many more companies “have the understanding to disguise themselves,” and the large-scale blended lactic acid beverages are mixed in the market. Prince milk fermented lactic acid bacteria are trapped in them. They are weak, they do not explain themselves, others do not say. Therefore, the true rivals of Prince Edward's milk are not similar lactic acid bacteria products, mainly from blended lactic acid beverages, yogurt, and dairy giants!

On this point, Li Tuchun has an ostrich mentality and blindly buries his head, preferring to live in his defined market concept, anesthetize and intoxicate. Therefore, it is time for Prince Milk to be diversified.

In this case, diversification will not be successful. Apart from the tightness of money, the premise is that Prince Milk did not make fermented lactic acid bacteria a large enough category, and dealers and consumers knew and depended on this category. Far from reaching the level of personal preference. As a result, in the minds of consumers and in the marketing work, Prince Milk is always regarded as a second-rate brand and always lives under the shadow of dairy giants. It has not been able to constitute the trust and allure of first-class brands.

Prince milk is too scattered in the diversification, business involves dairy products, food, "spicy sky" condiments, children's clothing, daily necessities, brewing, tourism and leisure, catering, retail, media, real estate and so on. The association is not strong and does not support each other. There are no recursive steps in the promotion process, and there is no focus, revealing the greedy attitude of Li Tuchun.

At the rum receptionist, the author shockedly discovered that the word "Prince" was used in the "Spicy Shaking Heaven" series of products, called "Prince Edward's Pepper." I don't know how the parents of Prince Edward’s children once they saw the Prince’s milk. Should they believe that “Sunrise Brand Prince Milk” is a probiotic and mellow scent, or do they believe that the “Princeling Pepper” is hot enough? This kind of diversified operation and bold extension of the brand is a fuss. It is a "painful lover, fast-paced enemy," and does not need to be attacked by opponents. He will destroy himself.

Prince milk's decision-making mistakes in the low-temperature milk products once again showed Li Tuchun's mistakes in the direction of Prince Edward's strategic market.

In July 2007, Prince Milk Group invested heavily in research and development of low-temperature milk products in three pilot regions in Hunan, Hubei, and Beijing, and then, less than half a year, the entire low-temperature milk defeated.

Prince milk lactic acid bacteria drink, although there is milk, but its essential position is a milk beverage, in the consumer's mind is located in the beverage industry. Pure milk market is a highly competitive, big brand dominates the market, Prince milk produced low-temperature milk, it is precisely based on their own short board in Mengniu Erie's long board, all aspects of resources do not support the market does not buy it. In other people's lands, they are ignoring their own fields. This is a typical strategic loss and it is not defeated.

The products are monotonous and obsolete. Princeton milk products are monotonous and old-fashioned. It is not said that the market is out of favor.

Products are the "basis" of marketing and they are also profitable props. Prince milk products are ten years old, monotonous and rustic, giving people the impression that only the size of the bottle has changed. There has been no development of products from the perspective of consumer demand, and the types of products and corresponding target populations and usage fields have not been seen. Differently, it highlights the drawbacks of weak innovation capability, weak product strength, and weak profitability.

Princeton's means of dissemination and the brand image it disseminates are similar to its products. It is very old and stereotyped. Its form and content cannot keep up with the times and it does not reach the eyes and minds of consumers. Wahaha sang in an advertisement: I only have eyes in you. Prince Edward milk shouted in advertisements: “Remember! Drink prince milk every day and add lactic acid bacteria every day.” Go straight to the subject, regardless of whether the consumer can accept it or not, why accept it, A direct order.

The reality is, how many people know that more than 80% of Chinese people are unable to absorb milk nutrition, drink white drink, as well as nausea, abdominal distension, borborygmus, diarrhea and other discomfort? How many people know that only high-quality non-anti-milk milk can be fermented into lactic acid bacteria beverages, which is the most reassuring safe drink? How many people know that Lactobacilli and Bifidobacteria in Lactobacillus beverages are longevity bacteria with multiple health benefits? How many people know that lactic acid beverages and lactic acid bacteria beverages, the former is the deployment of the latter is fermented, from the mouth feel nutrition to production costs are very different?

Prince milk represents lactic acid bacteria. The content of Mengniu does not say, and Eli does not say that even more companies want to stir up the water and take advantage of the opportunity. The fisherman will never open his mouth. Why should Prince Edward not say!

Prince Edward's advertisements and public relations were disseminated. First, there was less content, such as the CCTV standard king. In 1998, once again in 2005, the movement was quite large. However, the Prince's milk did not spread and did not let more consumers know. . Many of the above-mentioned practical functions that can help Prince Edward sell milk are even less, and they will only spread empty reputation again and again. Second, public relations news is poor and the media mix is ​​small. Prince milk and lactic acid bacteria are necessary for their own lives. Many times, they use news and public relations to spread out without spending money or spending money. Unfortunately, it does not. The third is to advertise only for investment, as long as the goods to the dealer even if everything is all right. Li Tuchun said that it would invest 400 million yuan in advertising expenses for one year, but only during the prime time of the January-February month of Prince Milk Merchants' Promotion, only Prince Edward's advertisements were occasionally seen on CCTV. Not responsible for the performance of the dealer, let alone to maintain the loyalty of consumers.

The profitability of the market is the basis for the survival, development and capital operation of the company. The Princeton milk product is monotonous and obsolete, resulting in sales revenue of more than RMB 1 billion in most of the good years. This is related to its large fixed assets. The ambitious goal of doing 100 billion yuan a year is not commensurate. The basis of marketing is not solid, and the more you want to grow, the more problems arise. The more you want to go directly to the money, the more money you will leave.

Weak control and pattern malformation Prince Milk’s “three high” model in the marketing management system is simple and extensive, using upstream and downstream money, raising his princes, channel terminals to let themselves drift, and sales results are resigned. In the end, they lost faith in the channel terminals and the capital chain collapsed.

After the initial increase in the popularity of the Prince Milk brand, it may be that the status has changed. The factory can defraud the business. Perhaps the expansion is too fast and the capital is too tight. The company considers the interests of the distributor less and less, and begins to fish out. .

Li Tuchun established the “Three High Models”, which means high purchase prices, high rebates for distributors, high marketing expenses, and sales of Prince Milk products can be highly profitable. Through the Three High Policy, Li Tuchun brought together more than 3,000 loyal distributors in 29 provinces and cities, more than 300 prefecture-level cities, and more than 3,000 counties across the country. Prince Milk was even put on a luxury banquet.

But this kind of concession is not “free lunch”: downstream distributors must pay the advance payment and wait until the product is produced and then shipped. At the same time, Li Tuchun asked upstream suppliers to send raw materials first, then sell products and pay later. In fact, Li Tuchun used up and down funds to raise his Prince. In other words, he is playing "empty gloves", although it does not mean making money.

“A dealer runs 50,000 yuan per month, and more than 3,000 yuan each month is 150 million yuan each year, nearly 2 billion yuan each year.” This is a Hunan dealer for Prince Edward milk account.

Since the second half of 2007, dealers have discovered that they are always being duped out, but after the payment has been made, the goods have been delayed. Some of the investment policies that were promised have not been honored, and the subsidies for doing activities are even more. Nobody cares.

Prince Milk has always attracted and controlled the business operators by relying on the simple “three-high” policy, resulting in a “malformation” in the distribution of Prince Milk's profits among enterprises, distributors and terminal shops. The more serious problem is that Prince Milk does not actually control sales, let the terminal idle, and sell itself. In the contemporary market environment, this kind of desperate sales management is doomed to be uncompetitive, destined to be short-lived and eliminated. No matter how much investment or borrowing Prince Milk has brought, if business concepts, development strategies, marketing models, and management models do not change, it will still be a drop in the bucket, and it will be impossible to truly achieve greater success and long-term stability. For Prince Edward and Lee Chun-tuk, the real cause is not a shortage of funds, but a low self-hematopoietic capacity. The bone marrow of marketing must be replaced.

The terminal is a great place for sales and communication that is in direct contact with consumers. However, Prince Milk does not have positive and positive movements and sounds. The terminal image is old-fashioned. This is in line with the vivid image of dairy and beverage mainstream companies in the terminal. A sharp drop.

Expansion was greedy and mentality was distorted. Prince Milk's method of expansion was great and joyous, and land was granted to build houses, exhausting financial resources and the desire to reach speed.

As early as 2004, Prince Milk Group announced in a high-profile that it will spend two billion yuan to build four new production bases in Hunan Zhuzhou, Beijing Miyun, Hubei Huanggang and Kunshan. It is expected to be completed and put into operation in June 2005, when the total annual output value will reach 30 billion yuan.

Kunshan Prince Milk Base, which is claimed to invest 600 million in huge capital, will be the largest base of fermented milk for active lactic acid bacteria in China. It will consume 400,000 tons of raw milk annually, produce 1 million tons of lactic acid bacteria fermented milk, and have an annual output value of more than 2.5 billion yuan. . If it is completed, Prince Milk will lock the leading position of the domestic lactic acid bacteria milk beverage industry.

Here, we believe for a time that Li Tuchun is really committed to investing in these infrastructures on the premise that the lactic acid bacteria are bigger and stronger. If this is true, Li Tuchun at this time may forget that the design and production capacity of machinery and equipment cannot replace the management and management capabilities. , brand marketing capabilities and market profitability.

It is estimated that the Kunshan Prince Milk Base, completed in 2005, has only invested less than one billion yuan till now. By June 5, 2008, the first-phase project construction has not yet been completed and the production will be far behind.

At the beginning of 2007, Prince Edward, who had been eager to complete infrastructure construction, become a Fortune 500 company and has been in tight funding chain, may be stimulated by Mengniu and PE on the success of gambling. Li Tuchun also asked Prince Edward to embark on the table: In the three years after the three major international venture capital investment of 73 million U.S. dollars by the United Kingdom, Goldman Sachs, and Morgan Stanley, if the growth rate of the Prince Milk Group exceeds 50%, the shareholding of the other party can be reduced; if it fails to achieve 30% growth, Li Tuchun Will lose control.

The result of the matter was actually determined at the beginning of the matter. Li Tuchun lost this time. Seeking funds, it is increasingly lacking funds until it tightens the ropes that have been placed around their necks.

The scale of assets and liabilities of Prince Edward Milk is unusually large. At the same time, the asset structure is extremely unreasonable. About 80% of Prince Edward's milk is fixed assets and 20% are current assets. This kind of asset structure is extremely inappropriate in the fast-moving area. The big one is not big, the small one is not small, the cart before the horse is overloaded, and it is difficult to move forward.

Prince Milk has more than 3,000 acres of land, a building area of ​​520,000 square meters, nearly 60 production lines, assets of over 2 billion yuan in assets, according to the best sales revenue of Prince milk history less than 18 billion, only three to four About one-half of assets can do it.

Those who have been to Prince Edward's milk headquarters will be impressed with their "prestige." Covering an area of ​​800 mu, the office building on the left is modeled on the Tiananmen Gate, the factory on the right is modeled after the White House, and after the door is directly opposite the rockery, more than ten fermented milk storage tanks converge on the sky and the plant stands on top. One hundred billion words.

Wendi Bo of the former High Tech Dairy Group believes (now that it has been double-regulation) that the problem of Prince Edward's milk lies not only in the issue of the capital chain, but also in the short period of two or three years in 2007 that raised more than one billion yuan in funds, which can be played in 2008. In addition to the internal leakage, corruption, and wastage, Li Ting’s purely error-distorted expansion is the main reason.Lao Li’s money is to buy land and no money is needed to build a house; there is money to build a house and no money to buy equipment; Money to buy equipment, no money to start the market." Facts can indeed confirm this.

In early October 2008, the five bases and White House rockery could no longer conceal the defeat of Prince Edward. Li Tuchun officially acknowledged the shortage of funds. Deloitte & Touche's survey revealed that the company owes bank loans of 1.3 billion yuan, dealers' advance payments of more than 300 million yuan, and also includes several hundred million yuan in project arrears and raw materials. In the June 2009 financial report, the assets of Prince Milk were 2.5 billion yuan, and the total liabilities were 2.6 billion yuan, which was already "insolvable."

Revelation: Sincerely, to be the master of business and capital 1. To be a company, it is necessary to do business with a correct attitude, which is not ambition. But the goal is not the goal, but it can't replace the process. Li Tuchun has won the title of “China's Dairy Brand First Listed in the United States” and has also vowed to face the world’s top 500. These are not wrong. However, if it is always too slow to make the market, we would like to take a short cut and come to it as a virtual market. We must implement capital and go straight to the theme. It is a wrong way. Inappropriate metaphor, a person is always too slow to make money, think about it, or grab a bank. If you do business with such a mentality, then in the form of expression must be bluffs, false reports, empty gloves, different minds, different realms. Prince Edward Tai’s milk scale does not care about the actual expansion of the company. In the final analysis, this mentality is not seeking truth from facts and not being sincere.

It is like a person who over-eating aphrodisiacs to show strength. For some companies, capital is the aphrodisiac, and forcible expansion of the scale, the more you eat the more virtual companies, the weaker the ability to export value. The farther you eat from the goal, the more you eat and the more you change your mind. In the end, the business is down and out of the game.

2. What is the difference between entrepreneurship and expansion? Value and integrity are the thresholds for doing business and entrepreneurship? Is it too virtual? wrong! The concept determines the action. If there are problems with values, your methods and methods will be distorted. The result will be the sentence: out of the mix, always have to return.

The success of small businesses depends on savvy, and the success of medium-sized companies depends on management. The success of large enterprises depends on honesty.

Li Tu’s “Illnorance” business success was successful, but it cannot represent the future. Entrepreneurship is to take risks, seize opportunities, make long boards, and lengthen long boards. Li Tuchun is quite outstanding in this regard. When enterprises are bigger, they must pursue norms, and they must strengthen management, and they must make fewer mistakes. Put some energy on the short board. Obviously, Li Tuchun's Prince Milk still stays in its infancy. This is the deeper reason why Taizi’s milk is bigger and more chaotic and the bigger the problem is.

To do business further, we must emphasize truth-seeking, pragmatic and honest, create value for the society, and benefit humanity, and making money is only a result of the incident. Li Tuchun has gone further and further backwards in this respect. It has not paid for the payment by dealers, and has failed to honor employees' wages on time, and has concealed costs and benefits from investors. Integrity is a threshold that cannot be disgraced when companies are bigger and stronger. The bigger the company is, the more it must adhere to this principle, and it does not stick to the problem. I do not know whether Li Tuchun's "China's largest private enterprise success and failure case analysis" has written this question.

Ma Yun said it well. No matter what you do, you can't be utilitarian in your head. If a person thinks about the renminbi, his eyes see the dollar, and his mouth utters pounds, then such people will never really put the needs of their customers first. This kind of company is worth mentioning.

3. Today's market performance is the basis for strengthening and expanding, and is the prerequisite for the operation of tomorrow's capital. What is the foundation of the company to become bigger and stronger? In the final analysis, the market performance, ambition, funds and advertising are all means.

Li Tuchun has a lofty goal and the words “World Top 500”, “corporate aircraft carrier” and “overseas listing” are often held by him. However, Prince Edward’s milk is in market goals, in new product innovation, in marketing management, and in consumers. The management of the company has lagged behind the market-leading companies and has failed to do a good job in the most fundamental and immediate tasks.

Li Tuchun's capital operation seems to be somewhat impure. (This article does not discuss this issue.) Perhaps this is the reason. He seems to be playing with capital, ignoring the need for capital to have a rooted appreciation of the soil.

The market foundation of Prince Edward's milk is very unstable and its profitability is not strong. On this basis, capital operation is no different from building tall buildings on the beach.

In 2008, sales of Wahaha under the leadership of Zong Qinghou continued to increase despite sales of Danone’s strong purchases. The sales in the first half of the year increased by more than 40%, and the annual sales exceeded 30 billion yuan.

Zong Qinghou said: "There is no value for brands that do not benefit." From this point of view, the shortage of capital of Prince Edward is a sign, and the lack of profitability in the market is the basis. Li Tuchun's demand for funds is like filling a bottomless pit. Later, no matter what myths Li Tuo weaves, no one will believe it. This is Li Tuchun's pursuit of capital but it is not fast!

4. The biggest opponent is the expansion of their own business. In fact, the biggest opponent is themselves. Li Tuchun and Prince Edward's milk came to this point today. In the final analysis, it was a deviation between being a man and being the most original source of business. After the success of the venture, his outlook on life and values ​​did not escalate with the growth of the company. sublimation.

Perhaps Li Tuchun’s first few gambling successes buried him in the bane, and he lurked with such a “failed gene” in his body: lack of respect for law and order, and lack of respect for market value and market power. Interpreting a lifetime's success with a momentary success, I want to use my best bet and luck for the rest of my life. Therefore, the continued growth of Chinese companies must first of all be based on whether or not the entrepreneur himself can grow up, whether he can surpass himself or defeat himself through falsehood. Otherwise, defeating himself is not someone else, but above all, himself.

To do business, self-rolling development is already too slow. It is the money that is most needed for ultra-conventional development. Therefore, some entrepreneurs go straight to the “theme” and look at the “capital theory” without looking at the art of war. Some people even use the capital operation as a company. The highest realm and ultimate goal of the game are lost in the "playing" of capital, ignoring itself as the most fundamental and true object of the real enterprise. The result of the cart before the horse is that the desire is not reached quickly and it is counterproductive. Businesses with Prince Edward's similar ideas are not one in China, let us take warning.

Attachment 1: Li Tuchun's arrested memorabilia In June 17, 2010 Zhuzhou City Public Security Bureau set up a task force to investigate the illegal absorption of public deposits by Hunan Prince Milk Group and Li Tuchun.

On July 27, 2010, Zhuzhou Municipal Party Committee Propaganda Department informed that Li Tuchun was arrested on suspicion of “illegal absorption of public deposits” by the procuratorate.

On November 30, 2010, the Zhuzhou Police investigated the case and found that Li Tuchun was involved in the crime of illegally assuring public deposits and misappropriating funds. For this reason, four people have been approved to arrest and 9 people are released on bail.

In December 2010, Li Tuchun's attorney, Wang Qinghui, disclosed that Li Tuchun was prepared to counterclaim the high-tech milk industry and formally sued the high-tech milk industry through the Prince Milk Cayman Company to the Hunan Provincial High Court and proposed more than 350 million compensation claims.

On July 31, 2011 after Li Tuchun was arrested for one year, Wendi Bo, chairman of Gao Ke Dairy, Crown Prince's milk hosting company, was duly regulated by the Hunan Provincial Commission for Discipline Inspection.

On September 14, 2011, Li Tuchun was released on bail pending trial by Zhuzhou Municipal Public Security Bureau.

On September 28, 2011, the draft Princeton milk reform plan was approved by all the creditors' groups, and Prince Milk was brought in by the Xinhualian Sanyuan Consortium.

In January 2012, the Li Tuchun case was not prosecuted and was regained freedom.

Appendix II: The rise and fall of Prince Milk According to public information, the share of Prince Milk in the lactic acid bacteria beverage market in China once reached 76.2%, which is a well-deserved industry leader.

As the founder of Prince Edward, Li Tuchun's road to success is full of legendary. According to public information, in 1996, Li Tuchun established the Prince Milk Factory in Zhuzhou.

From 2001 to 2007, Prince Milk’s sales jumped from 50 million yuan to 3 billion yuan, doubling its performance for six consecutive years.

In 2008, the company’s expansion triggered a capital chain issue. Prince Edward’s milk had a complete business crisis and was on the verge of bankruptcy. In November, Li Tuchun lost the gambling agreement with the three major investment banks of Goldman Sachs, Morgan, and the United Kingdom, losing control of the company.

At the beginning of 2009, the Zhuzhou municipal government stepped in and Gao Kee Dairy leased the core assets of Prince Milk. Since then, Li Tuchun has tried to recover Prince Edward's operating rights on several occasions but failed. In July 2010, Li Tuchun was arrested by the local prosecution authorities for allegedly illegally absorbing public deposits.

In September 2011, the bankruptcy and reorganization of Prince Milk was approved. New Hualian Holdings and Sanyuan Foods jointly provided 715 million yuan in funds to repay all the external debt of Prince Edward Milk, and obtained 100% equity and all assets of the restructured Prince Milk. .