2024-07-24
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In mid-July, a distributor of Tinghua Liquor forwarded an article about Tinghua Liquor and wrote in his circle of friends: "I'm back! Those who can't kill me will make me stronger!"
The “sky-high” Tinghua wine is indeed back.
On the official website of Tinghua Liquor, there are currently two main series on display - 53-degree 750ml Tinghua Liquor (premium packaging), priced at 58,600 yuan; 53-degree 750ml Tinghua Liquor (standard packaging), priced at 5,860 yuan.
After the 3.15 Gala this year exposed the efficacy of Tinghua wine, its product sales were temporarily suspended. In early May, the Chengdu Tinghua wine flagship store resumed business. In the same month, Tinghua wine, which is keen on marketing, began to advertise again.
Although Tinghua Liquor’s offline stores have gradually resumed operations, online operations have not yet resumed.
As of July 24, there were still no results for searching for "Tinghua Wine" on online platforms such as Tmall, JD.com, Pinduoduo, and Meituan. However, there are many bottles of Tinghua Wine waiting to be traded on second-hand trading platforms.
In fact, with the two administrative penalties, the 3.15 Gala exposure incident of Tinghuajiu has come to an end.
On May 10, Qinghai Spring, the listed company to which Tinghua Liquor belongs, issued an announcement stating that its wholly-owned subsidiary Chengdu Tinghua Shengshi Trading Co., Ltd. (hereinafter referred to as "Tinghua Shengshi") received the "Administrative Penalty Decision" from the Chengdu Wuhou District Market Supervision Bureau.
The "Administrative Penalty Decision" shows that Tinghua Shengshi used scientifically unconfirmed viewpoints and unverified user reviews of Tinghua wine for misleading commercial promotion in the process of selling Tinghua wine, misleading consumers, which violated the relevant provisions of the "Anti-Unfair Competition Law". It was ordered to immediately stop the illegal behavior and decided to impose a fine of 1.8 million yuan on it.
On June 26, Qinghai Spring announced that the Beijing Chaoyang District Market Supervision Bureau, based on the same legal provisions mentioned above, imposed an administrative penalty on Qinghai Spring's subsidiary Beijing Tinghua Trading Co., Ltd., requiring it to stop relevant illegal activities (making misleading commercial promotions for its products) and impose a fine of 800,000 yuan.
In its reply to the Shanghai Stock Exchange's inquiry letter, Qinghai Spring mentioned that the company and its subsidiaries sincerely accepted the above-mentioned penalties. At the same time, since the company's internal rectification work has been completed and Tinghua wine has no quality and food safety issues, relevant business operations have been resumed in an orderly manner since May.
From being exposed by the 3.15 Gala to being announced as an administrative penalty on June 26, the entire incident has been temporarily settled.
This day also became a turning point in Qinghai Spring’s stock price trend.
Starting from March 15, Qinghai Spring's stock price continued to fall from March 15 to June 26, with a drop of more than 70%, including multiple limit drops, and the stock price per share fell from 6.57 yuan to 1.94 yuan. In addition, the company's stock name was also labeled "ST" on May 6, becoming "ST Spring".
Unexpectedly, from June 27 to July 22, ST Chuntian's stock price reversed its downward trend and continued to rise, hitting the daily limit for several consecutive trading days. On July 23, it even staged a daily limit, hitting the daily limit after opening, and hitting the daily limit at closing. On July 24, ST Chuntian hit the daily limit again, closing at 3.16 yuan per share, an increase of more than 70% compared with the lowest point of 1.84 yuan on June 26.
Regarding the sharp rise and fall of ST Chuntian’s stock price, some stockholders said frankly, “It’s like riding a roller coaster.” The unusual movement of the stock price also attracted the attention of the Shanghai Stock Exchange, which issued a regulatory work letter on July 22, clarifying the regulatory requirements for matters related to the company’s recent stock price fluctuations, involving listed companies, directors, supervisors, senior management, controlling shareholders and actual controllers.
ST Chuntian has issued several announcements to warn of transaction risks, but it also emphasized that the company has no major events that should be disclosed but have not been disclosed.
"Shijie" noticed that in the first quarter, a total of 9,768 shareholders bought ST Spring, and some of them became major shareholders. As of April 18, three new faces appeared in the top ten shareholders of ST Spring, namely Du Jingxi, Hong Kong Central Clearing Company Limited, and Zhan Xiaokang. The three new shareholders held 2 million to 3 million shares. In addition, Shanghai Daoman, a new shareholder in the first quarter,Private EquityManagement Co., Ltd. also increased its holdings by 17.86%.
Starting from July 9, the advertisement of Tinghua Liquor appeared in the double screen of Mingzhu in Zhengda Plaza, Lujiazui, Shanghai. Many Tinghua Liquor sales staff promoted it. It can be said that the Tinghua Liquor that was advertised everywhere is back.
On the same day that the Tinghua Liquor advertisement appeared in Lujiazui Zhengda Plaza, ST Chuntian released a performance forecast of continued losses.
According to the performance forecast, in the first half of 2024, Qinghai Spring expects to achieve operating income of 130 million yuan to 146 million yuan, a year-on-year increase of 23.56% to 35.91%; it is expected to achieve a net profit attributable to shareholders of listed companies of -58 million yuan to -68 million yuan, and the loss will widen from -51 million yuan in the same period last year.
ST Chuntian explained that according to the company's annual operating plan, it plans to improve the performance of the wine and beverage business segment in 2024, and carried out relevant marketing and market investment work in the first quarter, but failed to achieve the predetermined operating goals. Coupled with the impact of factors such as the industry cycle in the second quarter, the company incurred losses during the reporting period.
Of course, Qinghai Spring's business was not doing well to begin with, and coupled with the impact of March 15, it is not surprising that it suffered losses.
In the announcement in response to the inquiry letter, Qinghai Spring stated that between March 16 and April 30, the company's wine business only sold to some old customers - the sales volume in March was 1,335 bottles, and the sales amount was 5.1163 million yuan (excluding tax); the sales volume in April was 156 bottles, and the sales amount was 425,600 yuan (excluding tax).
After being exposed, Tinghua Liquor took the initiative to suspend sales. It is not surprising that sales have dropped; what is strange is that there are still people buying it.
The reason why it is not surprising that Qinghai Spring suffered losses in the first half of 2024 is that it has been making losses since 2020.
In 2020 and 2021, Qinghai Spring's net profit attributable to the parent company was -320 million yuan and -249 million yuan respectively. In addition to poor product sales, the surge in management expenses and sales expenses was the main reason for the profit erosion.
In 2022, Qinghai Spring's net profit attributable to the parent company was -288 million yuan, continuing to lose money. In this regard, Qinghai Spring explained that the loss was due to the fact that the wine and beverage products were still in the market investment stage, foreign investment losses and the provision of some asset impairment provisions.
In 2023, Qinghai Spring's operating income was 214 million yuan, a year-on-year increase of 33.52%; the net profit attributable to shareholders of the listed company was -268 million yuan, and the loss was reduced.
From 2020 to 2023, Qinghai Spring has accumulated a net loss of 1.125 billion yuan in four years. If the first half of 2024 is included, the loss in four and a half years is at least 1.183 billion yuan.
Qinghai Spring’s business is divided into two major segments: traditional business - big health, and cross-border business - wine and beverages.
The health sector mainly sells Cordyceps sinensis and Chinese patent medicine product Lifei Tablets, and the wine and beverage sector mainly sells Tinghua wine. In terms of products, in 2023, Cordyceps sinensis and Chinese patent medicine both grew significantly, but the revenue of wine and beverage products declined.
In 2023, Qinghai Spring's Cordyceps sinensis product revenue was 39 million yuan, a year-on-year increase of 97.5%, and a gross profit margin of 3.13%; the revenue of Chinese patent medicine products was 85 million yuan, a year-on-year increase of more than 103%, and the gross profit margin was 74.44%; the revenue of wine and beverage products was 83 million yuan, a year-on-year decrease of 11.42%, and the gross profit margin reached 75.19%.
From the perspective of the revenue structure of the main business, Cordyceps sinensis accounts for 18.8%, Chinese patent medicine accounts for 41.1%, and alcoholic beverages account for 40.1%. It can be seen that in 2023, Chinese patent medicines and alcoholic beverages will play a vital role in Qinghai Spring.
Tinghua Liquor placed advertisements everywhere, which led to a sharp increase in sales expenses. This is one of the main reasons for its losses.
In 2022, Qinghai Spring's sales expenses reached 123 million yuan, a year-on-year increase of 121.34%, and the sales expense ratio soared from 43.58% in the previous year to 76.94%. It explained that this was mainly due to the increase in marketing expenses for the wine and fast-moving consumer goods sector.
In 2023, Qinghai Spring's sales expenses increased to 171 million yuan, and the sales expense ratio reached 79.97%, setting a new record. Among them, advertising expenses rose to 78 million yuan, accounting for the largest proportion.
Qinghai Spring stated in its annual report that in 2023, the company continued to place advertisements in mainstream media such as CCTV, China National Radio, People's Daily, and Outlook, as well as major airports, aviation magazines, and elevators in target buildings...
For the wine and fast-moving consumer goods industry, the investment in sales expenses is essential. However, Qinghai Spring's sales expense ratio is so high that it is rare among listed wine companies, and it is even the only one.
What's more, Tinghua Liquor, which cost huge amounts of money to market, did not bring about the same increase in performance, and sales expenses even swallowed up the profits.
Competition in the liquor industry is fierce, with inverted prices and high inventory levels becoming commonplace, and even the leading brands are facing sales pressure. It is even more difficult for Tinghua Liquor, which is expensive and has no brand heritage, to achieve corresponding performance growth through vigorous marketing.
From the dream of Taishang Laojun, to the hiring of Nobel Prize winners, to various marketing, Tinghua wine is indeed very "different". Therefore, Tinghua wine is also ridiculed as "divine wine". Of course, there must be a "divine man" behind the "divine wine".
The helmsman of Qinghai Spring is 55-year-old Zhang Xuefeng. The Qinghai Spring official website introduces him as: "China's leading figure in independent innovation, inventor of Cordyceps sinensis efficient utilization technology and Jicao products, solver of Cordyceps sinensis artificial cultivation and field production increase solutions, and chief designer of Tinghua Liquor."
It has many titles, carries a lot of weight, and the story is even more magical.
According to the announcement and media reports, Zhang Xuefeng, born in 1969, is from Chengdu, Sichuan. He holds a master's degree in business administration and has been doing business in Chengdu. Later, why did he go to Qinghai? There is a story behind it.
An article on Qinghai Spring’s official website stated that Zhang Xuefeng’s fate with Qinghai and Cordyceps sinensis began with a horse.
In 2003, Zhang Xuefeng heard a story when he was a guest at the Living Buddha's place. One of the Living Buddha's most cherished horses had fallen ill in the winter, and had taken all kinds of medicines but had not gotten better. The horse was about to die, so the Living Buddha mixed the Cordyceps sinensis given to him by a friend with the fodder and fed it seven cordyceps a day. Unexpectedly, after a week of feeding, the horse recovered.
This aroused Zhang Xuefeng's strong interest in Cordyceps sinensis. Later, the "Jicao" series of pure powder lozenges made from Cordyceps sinensis supported Qinghai Spring.
▲ (Zhang Xuefeng. Image source: Tinghua Wine official website)
Like the story of a dream, the story of a horse cannot be verified. But this does not affect Zhang Xuefeng's marketing and pricing of the product. Once, in the magazines of many airlines' first-class cabins, the advertisement "Just as humans have found the fire, we have found the ultimate way to absorb Cordyceps sinensis..." was very shocking.
The price is even more shocking. The "Jicao 5X" series of products are priced between 3,876 yuan/box and 29,888 yuan/box. The national unified retail price is 29,888 yuan/box, and the so-called supreme lozenges have a specification of 0.35g x 81 tablets.
Driven by the Cordyceps business, Zhang Xuefeng led Qinghai Spring to complete a backdoor listing in June 2015. Qinghai Spring became the "first stock of Cordyceps sinensis". In the previous year, its revenue exceeded 2 billion yuan.
In 2014, before the product was launched on the market, Qinghai Spring’s Cordyceps sinensis pure powder tablets were questioned because of their “unknown identity”. In March 2016, the core product of Qinghai Spring was stopped by relevant departments.
Later, Qinghai Spring transformed into the wine industry and launched a small bottle of wine Lianglu, focusing on the hot pot catering market, but the effect was not ideal. Later, there was a story of a dream and a bottle of wine, and the 58,600 yuan Tinghua wine was born.
Zhang Xuefeng also hired three Nobel Prize winners to serve as co-chief scientists of Qinghai Spring.
From Cordyceps sinensis to Tinghua wine, although the products have changed, the marketing methods remain the same.
Liquor brands have always used history, production area, craftsmanship, etc. as their marketing focus. Suddenly, a wine with a controversial identity but very expensive price came out. It has no history, is OEM and has its own brand, and the craftsmanship is glossed over. The marketing focus was first on the guidance of a master in a dream, and then on inviting a Nobel Prize winner. The pricing directly surpasses high-end liquors such as Maotai, Wuliangye and Luzhou Laojiao, and it has the potential to subvert the industry.
Amid controversy, Tinghua Liquor was exposed by the 3.15 Gala. Now, Tinghua Liquor, which has resumed sales, has changed its strategy.
On May 9, Qinghai Spring issued three "notices" on its official website, respectively limiting the quantity, stabilizing the price, and exporting Tinghua wine. Obviously, this is a way to stabilize the market after the March 15 incident.
However, the actual selling price of Tinghua wine is much lower than the official price.
A distributor of Tinghua Liquor told "Shijie" that the original standard packaging of Tinghua Liquor had a retail guide price of 5,860 yuan per bottle, but the group purchase price was 3,989 yuan; the main version now is the PLUS version, with the same retail guide price as the standard packaging and a group purchase price of 4,688 yuan per bottle, mainly with a sauce aroma.
The price at wine merchants is even lower.
A wine merchant told "Shijie" that the actual selling price of the standard package is 2,400 yuan, and the PLUS version is also 2,400 yuan. Another wine merchant said that if you buy a whole box of the standard package, each bottle costs 2,350 yuan; the PLUS version is 100 yuan more expensive than the standard package.
Even so, this price is still considered "sky-high" in China's wine industry.
As for exports, Qinghai Spring said that the sales of Tinghua Liquor (premium packaging), priced at 58,600 yuan, will be suspended in the mainland to focus on ensuring export supply.
Exporting liquor overseas has always been a problem for the entire industry. Can such an expensive Tinghua liquor have a market for export? A liquor merchant told "Shijie" that this move is just to "control the supply." Another industry insider said that this move is intended to remove the "sky-high price" label of Tinghua liquor.
In mid-to-late July, Shijie learned from several distributors and wine merchants that Tinghua wine, which costs 58,600 yuan per bottle, is still available in the mainland. The above-mentioned distributors quoted a price of "around 40,000 yuan" per bottle, and the above-mentioned wine merchants quoted a price of 39,800 yuan per bottle.
Tinghua Liquor is back, but when will it be profitable again? Qinghai Spring, which has been losing money for years, when will it finally see spring?
Author | Lei Yanpeng
Editor | Chen Fang
Operations | Liu Shan
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