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(Original title: Chengde Lulu: The Wanxiang Group postponed the leadership change and cleverly set up performance appraisal to "create wealth")

"Jin Zhengyan" Southern Capital Center Xihe/Author Xiao Zhi Xizhou Yingwei/Risk Control

Known as the "trendsetter of the times" and "reformer"Lu GuanqiuThe Wanxiang Group he founded has now grown into a multi-industry company with assets exceeding RMB 100 billion.Universal system"A member ofChengde LuluThe joint-stock company (hereinafter referred to as "Chengde Lulu") is 41.61%-owned by Wanxiang Sannong Group Co., Ltd. (hereinafter referred to as "Wanxiang Sannong"), and the actual controller is Lu Weiding, the son of Lu Guanqiu.

In March 2024, during the extension of the terms of office of the current directors and supervisors, the board of directors approved the employeeShareholdingIn 2023, Chengde Lulu achieved revenue of 2.955 billion yuan and non-net profit of 635 million yuan, of which the above employee stock ownership plan and restricted stock incentive plan were completed in April of the same year.EquityThe performance evaluation indicators set for the incentive may be lower than the company's own performance growth rate in the most recent year and the performance evaluation targets of companies in the same industry. At that time, the five directors and senior executives participating in the subscription may have a total floating profit of more than 20 million yuan.

On the other hand, in 2024, the trust company controlled by the actual controller of Chengde Lulu was investigated for using its own funds to advance interest to investors. In addition, Chengde Lulu claimed to attach importance to product quality, but was repeatedly complained about product quality problems; and as a key pollutant discharger, Chengde Lulu was frequently monitored to have excessive pollutant emissions in the past year.

1. The change of leadership of the Wanxiang Group will postpone the implementation of equity incentives to the next year, and the five directors and senior executives may have a total floating profit of more than 20 million yuan

As a modern enterprise management system, equity incentives can motivate employees, enhance the core competitiveness of enterprises, improve their market influence and profit levels, and promote their long-term development and sustainability.

In this regard, as of the end of 2023, Chengde Lulu may not have implemented an equity incentive plan in the 26 years since its listing. In 2024, during the extension of the terms of the current directors and supervisors, the board of directors approved an employee stock ownership plan and a restricted stock incentive plan, among which the five directors and senior executives who participated in the subscription may have made a floating profit of more than 20 million yuan.

1.1 Except for the independent director, all six directors are from the Wanxiang Group, and two-thirds of the seats on the board of supervisors are also from the Wanxiang Group.

According to Chengde Lulu's 2023 annual report, as of April 15, 2024, Wanxiang Sannong held 41.61% of Chengde Lulu's shares and was its direct controlling shareholder. Lu Guanqiu Sannong Fuzhi Fund was the indirect controlling shareholder of Chengde Lulu, and the actual controller of Chengde Lulu was Lu Weiding.

Let’s take a look at the members of Chengde Lulu’s board of directors and supervisory board.

In addition to independent directors, Shen Zhijun, Liang Qichao, Yang Dongshi, Liu Zhigang, Li Yuanlong and Shi Peiying are directors of Chengde Lulu. Mo Xiaoping, Liu Jian and Zhang Qin are the current supervisors of Chengde Lulu.

As of the query date of August 6, 2024, the above-mentioned positions have not changed.

Among them, Chairman Shen Zhijun is currently serving as Director and General Manager of Ocean Family (Zhejiang) Co., Ltd. (hereinafter referred to as “Ocean Family”), Director of Wanxiang Qianchao Co., Ltd., etc. Vice Chairman and General Manager Liang Qichao is currently serving as Director of Wanxiang Finance Co., Ltd. and Supervisor of Ocean Family. Director Liu Zhigang is currently serving as General Manager of the Human Resources Department of Wanxiang Group, Chairman of Wanxiang Denong Co., Ltd., and Chairman of Wanxiang Finance Co., Ltd.

Director Yang Dongshi is currently the general manager of Hebei Branch of Minsheng Life Insurance Co., Ltd. Director Li Yuanlong is currently the secretary of the board of directors of Wanxiang Sannong. Director Shi Peiying is currently the executive director of Zhejiang Arctic Aquatic Products Co., Ltd. and the deputy general manager of Ocean Family.

Supervisor Mo Xiaoping is currently the supervisor of Wanxiang Sannong, chairman of Denong Seed Co., Ltd., and chairman and secretary general of Minsheng Tonghui Public Welfare Foundation. Supervisor Liu Jian is currently the director and general manager of Xinjiang Saltpeter Potassium Fertilizer Co., Ltd.

It is not difficult to see that except for the independent directors, all the directors of Chengde Lulu are from the "Wanxiang Group". Among the three members of the Supervisory Board, two of the supervisors and the chairman of the supervisory board are also from the "Wanxiang Group".

1.2 The company has not implemented an equity incentive plan for more than 20 years since its listing. During the extension of the term of directors, supervisors and senior managers in 2024, the draft of employee stock ownership and the draft of equity incentive will be passed.

According to Chengde Lulu’s 2023 annual report, Chengde Lulu was listed on the Shenzhen Stock Exchange on November 13, 1997.

According to an inquiry by the Southern Capital Center of "Jin Zhengyan", as of the end of 2023, Chengde Lulu has been listed for 26 years, and may not have set up an equity incentive plan during this period.

It is worth mentioning that during the extension of the term of office of the eighth board of directors, supervisors and senior managers of Chengde Lulu, the board of directors passed the equity incentive draft.

According to Chengde Lulu's 2023 annual report, the term of office of Chengde Lulu's eighth board of directors and board of supervisors was originally scheduled to expire on May 14, 2023. In view of the fact that the nomination of candidates for the ninth board of directors and board of supervisors has not yet been completed, in order to ensure the continuity and stability of related work, the term of office of the current directors, supervisors and senior management personnel will also be postponed accordingly.

On March 14, 2024, the Second Extraordinary Meeting of the Eighth Board of Directors in 2024 passed the "Proposal on the Company's 2024 Employee Stock Ownership Plan (Draft) and its Summary" and the "Proposal on the Company's 2024 Restricted Stock Incentive Plan (Draft) and its Summary".

The performance evaluation targets set for Chengde Lulu’s employee stock ownership plan and restricted stock incentive plan are worthy of attention.

1.3 The first lifting of the sales restriction period corresponds to the assessment year of 2024, and the assessment indicators are claimed to be scientifically and reasonably set.

According to the "2024 Employee Stock Ownership Plan" (hereinafter referred to as the "Employee Stock Ownership Plan") and the "2024 Restricted Stock Incentive Plan" (hereinafter referred to as the "Restricted Stock Incentive Plan") issued by Chengde Lulu on April 2, 2024, the Employee Stock Ownership Plan and the Restricted Stock Incentive Plan will assess Chengde Lulu's performance indicators on an annual basis in the three fiscal years of 2024-2026, and achieving the performance assessment target will be one of the conditions for lifting the restriction on sale of the incentive targets in the current year.

Specifically, let’s look at the performance assessment targets for the first assessment year of Chengde Lulu’s employee stock ownership plan and incentive plan.

Among them, the first lifting of the lock-up period for Chengde Lulu corresponds to the assessment year of 2024. The trigger value of the operating income in the assessment year is 3.1 billion yuan, the interval value is 3.15 billion yuan, and the target value is 3.25 billion yuan; the assessment year is attributable toPublic CompanyThe trigger value of shareholders' net profit after deducting non-recurring gains and losses is 660 million yuan, the interval value is 670 million yuan, and the target value is 680 million yuan.

It should be noted that among the proportions of shares that can be released from the lock-up at the company level, operating income accounts for 60% and net profit accounts for 40%. If the target value assessment indicator is reached, the corresponding proportion of shares that can be released from the lock-up is 100%, if the assessment indicator reaches the interval value but does not reach the target value, the corresponding proportion of shares that can be released from the lock-up is 90%, if the assessment indicator reaches the trigger value but does not reach the interval value, the corresponding proportion of shares that can be released from the lock-up is 80%, and if the assessment indicator does not reach the trigger value, the corresponding proportion of shares that can be released from the lock-up is 0.

The setting of this performance indicator is based on comprehensive consideration of factors such as Chengde Lulu's current situation, future strategic planning, and industry development. The set assessment indicators are challenging for future development. On the one hand, this indicator will help enhance Chengde Lulu's competitiveness and mobilize employees' work enthusiasm. On the other hand, it can focus on Chengde Lulu's future development strategy and stabilize the realization of business goals.

In this regard, Chengde Lulu stated that the assessment system of this incentive plan is comprehensive, integrated and operational, the assessment indicators are set with good scientificity and rationality, and at the same time have a certain constraining effect on the incentive objects.

It should be pointed out that the performance evaluation indicators of equity incentives of listed companies can be compared with their historical performance or relevant indicators of their peers.

According to Article 11 of the Equity Incentive Management Plan for Listed Companies, which was revised on August 15, 2018, listed companies can use the company's historical performance or relevant indicators of comparable companies in the same industry as the basis for comparison of the company's performance indicators. The performance indicators selected by the company may include comprehensive indicators such as return on net assets that can reflect shareholder returns and company value creation, as well as growth indicators such as net profit growth rate and main business income growth rate that can reflect the company's profitability and market value. If the relevant indicators of comparable companies in the same industry are used as the basis for comparison, no less than 3 comparison companies shall be selected.

However, compared with historical performance or performance indicators of companies in the same industry, the indicators of Chengde Lulu’s equity incentive in the first assessment year may be "on the low side."

1.4 Chengde Lulu’s first annual performance evaluation index may be lower than the performance growth rate in the most recent year and the performance evaluation target of companies in the same industry

Let’s first look at Chengde Lulu’s historical performance.

According to Chengde Lulu's 2023 annual report, in 2023, Chengde Lulu's operating income was 2.955 billion yuan, a year-on-year increase of 9.76%. The net profit attributable to shareholders of the listed company after deducting non-recurring gains and losses was 635 million yuan, a year-on-year increase of 5.26%.

The most recent annual reporting period disclosed by Chengde Lulu is 2023. The performance growth rate for the first assessment year, i.e. 2024, is calculated based on the trigger value of the assessment indicators and the performance of 2023. In 2024, Chengde Lulu's operating income may increase by 4.92% year-on-year, and the net profit attributable to shareholders of the listed company after deducting non-recurring gains and losses may increase by 4.01% year-on-year.

In addition, in the above-mentioned employee stock ownership plan and restricted stock incentive plan, the second and third lifting of the restriction period are 2025 and 2026 respectively. The corresponding assessment year operating income trigger values ​​are 3.3 billion yuan and 3.65 billion yuan respectively, and the corresponding net profit trigger values ​​attributable to shareholders of listed companies after deducting non-recurring gains and losses are 700 million yuan and 760 million yuan respectively.

Based on the assessment targets, the performance growth rate is calculated. In 2025-2026, the growth rates of Chengde Lulu's operating income trigger values ​​in the corresponding assessment years will be 6.45% and 10.61% respectively, and the year-on-year growth rates of the net profit trigger values ​​attributable to shareholders of listed companies after deducting non-recurring gains and losses will be 6.06% and 8.57% respectively.

It is not difficult to find that the growth rate of the trigger value of the performance appraisal indicator set in the above-mentioned employee stock ownership plan and equity incentive plan in the first assessment year is lower than the growth rate in the most recent year, i.e., 2023. In addition, from the perspective of performance appraisal targets, the growth rate of the revenue trigger value in the second and third assessment years, i.e., 2025-2026, is also lower than that in 2023.

On the other hand, taking the food and beverage industry as the standard, seven companies including Zhejiang Liziyuan Food Co., Ltd. (hereinafter referred to as "Liziyuan"), Xiangpiaopiao Food Co., Ltd. (hereinafter referred to as "Xiangpiaopiao"), Hubei Juneyao Health Drink Co., Ltd. (hereinafter referred to as "Juneyao Health"), Southern Black Sesame Group Co., Ltd. (hereinafter referred to as "Black Sesame"), Three Squirrels Co., Ltd. (hereinafter referred to as "Three Squirrels"), Zhongju High-Tech Industry (Group) Co., Ltd. (hereinafter referred to as "Zhongju High-Tech"), and Chen Keming Food Co., Ltd. (hereinafter referred to as "Keming Food") can be regarded as companies in the same industry as Chengde Lulu.

Among them, the company-level performance evaluation indicators of Lizhiyuan, Three Squirrels, Zhongju High-Tech, Keming Food, Xiangpiaopiao, and Junao Health include operating income, the performance evaluation indicators of Black Sesame and Three Squirrels include net profit, and the performance evaluation target of Three Squirrels includes both operating income and net profit.

Regarding the assessment indicators of operating income, based on the assessment targets of companies in the same industry with the first assessment year being 2024, Lizhiyuan's performance assessment target is an operating income growth rate of no less than 18% in 2024; Zhongju High-Tech's performance assessment target is an operating income growth rate of no less than 12% in 2024; and Keming Food's performance assessment target is an operating income growth rate of no less than 10% in 2024.

It should be noted that Lizhiyuan, Black Sesame, Three Squirrels, Zhongju High-Tech, and Keming Food all implemented employee stock ownership plans or restricted stocks and stock option incentive plans in 2024, and their first assessment year was 2024; Xiangpiaopiao implemented a stock option incentive plan in 2023, and its first assessment year was 2023; Junao Health implemented a stock option incentive plan in 2022, and its first assessment year was 2022.

By comparing the performance growth rates of the above-mentioned companies in the same industry in the most recent year of implementing employee stock ownership plans or incentive plans, and the performance indicator growth rates in the first assessment year, it can be seen that, except for Black Sesame, the performance indicator growth rates of other companies in the same industry in the first assessment year are higher than their performance growth rates in the most recent year.

It should be pointed out that Liziyuan, which is in the same plant protein industry as Chengde Lulu, has an employee stock ownership plan performance assessment of an operating income growth rate of no less than 18% in 2024. During the same period, Chengde Lulu's estimated operating income growth rate in 2024 is 4.92%, which is lower than Liziyuan.

As for net profit, the growth rate of Chengde Lulu's net profit assessment indicator is also lower than the net profit growth rate of Black Sesame and Three Squirrels in the first assessment year.

In other words, compared with Liziyuan, which is also in the plant protein industry, or compared with the above-mentioned companies in the food and beverage industry, the growth rate of the performance trigger value of Chengde Lulu's equity incentive in the first assessment year may be lower.

In this case, we may have an idea of ​​the threshold for Chengde Lulu's directors and executives to obtain equity incentives.

1.5 Through the employee stock ownership plan and restricted stock incentives, the five current directors and executives who participated in the subscription may have a floating profit of more than 20 million yuan

According to the employee stock ownership plan, the holders of Chengde Lulu's employee stock ownership plan are Chairman Shen Zhijun, Vice Chairman and General Manager Liang Qichao, Deputy General Manager and Chief Financial Officer Ding Xingxian, Deputy General Manager Sun Wei, Secretary to the Board Liu Mingshan and 164 core management personnel and core technical (business) personnel. Among them, the total number of target stocks corresponding to the upper limit of the shares to be held by 5 directors and senior executives is 3.6 million shares.

According to the restricted stock incentive plan, the incentive targets of Chengde Lulu are Chairman Shen Zhijun, Vice Chairman and General Manager Liang Qichao, Deputy General Manager and Chief Financial Officer Ding Xingxian, Deputy General Manager Sun Wei, and Secretary to the Board Liu Mingshan. The total number of restricted stocks granted to the five directors and executives is 13 million shares.

That is to say, through the employee stock ownership plan and restricted stock incentive plan, Chengde Lulu's five directors and senior executives can obtain a total of 16.6 million shares of Chengde Lulu.

According to the employee stock ownership plan and the restricted stock incentive plan, the price at which the employee stock ownership plan purchases the company's repurchased shares and the grant price of the restricted stock incentive plan are both RMB 6 per share.

On April 24, 2024, the non-trading transfer of Chengde Lulu's employee stock ownership plan was completed. On April 17, 2024, Chengde Lulu completed the registration of the grant of the 2024 restricted stock incentive plan.

As of the query date August 6, 2024, Chengde Lulu's closing price was 7.97 yuan per share.

It has been estimated that the five directors and senior executives of Chengde Lulu can obtain a total floating profit of approximately RMB 26.062 million through the employee stock ownership plan and restricted stock incentive plan.

The new products launched by Chengde Lulu in 2023 may be similar to traditional almond milk.

1.6 said it plans to expand its product matrix to form a profit growth point, and the almond milk series added in 2023 may be homogenized

According to the Shenzhen Stock Exchange Interactive, on January 10, 2024, Chengde Lulu stated that for future profit growth points, on the one hand, Chengde Lulu will focus on the northern market, and on the other hand, Chengde Lulu is actively exploring the southern market.

At the same time, in terms of products, Chengde Lulu insists on "leading the development of plant-based beverages", is market-oriented, consumer-centric, and develops products from multiple dimensions such as taste, packaging materials, and visual design. It plans to expand the single almond milk product line into a product matrix of dew series, milk series, water series, and other series, establish a product innovation system, provide consumers with green, healthy, and reliable plant-based beverages, and promote the sustainable development of Chengde Lulu.

Let’s take a look at the expansion of Chengde Lulu’s product line.

According to Chengde Lulu's 2023 annual report, Chengde Lulu added an almond milk series to its products in 2023. The sales amount of the almond milk series in 2023 was 3.4534 million yuan, accounting for 0.12% of the operating income of that year.

According to Chengde Lulu’s 2021 annual report, almond milk is a quality upgrade of the existing almond milk, with increased nutritional content such as protein.

According to the product page of the Tmall store of "Lulu Flagship Store", the certification entity is Chengde Lulu, the ingredients of almond milk and classic original almond milk are the same. At the same time, the customer service of "Lulu Flagship Store" said that almond milk can be considered as a concentrated version of almond milk.

That is to say, the new almond milk launched by Chengde Lulu may be similar to its original almond milk products.

In short, for future profit growth points, Chengde Lulu's strategy includes expanding its product matrix, and its newly added almond milk in 2023 has the same ingredients as its main product almond milk, which may face the dilemma of new product homogeneity. Under the above development strategy, whether Chengde Lulu can maintain the sustainability of its performance growth is worth paying attention to.

And behind this, the term of office of the 8th Board of Directors and Board of Supervisors of Chengde Lulu, which is headed by the "Wanxiang Group", was originally scheduled to expire on May 14, 2023. In July 2023, Chengde Lulu issued an announcement on the postponement of the term of office of the Board of Directors and the Board of Supervisors, and the term of office of the 9th Board of Directors and the Board of Supervisors has not yet been completed. During the extension of the term of office of the current Board of Directors and the Board of Supervisors, the Board of Directors of Chengde Lulu passed the employee stock ownership plan and the equity incentive plan. The five directors and senior executives who participated in the subscription of Chengde Lulu may have a total floating profit of more than 20 million yuan, and the relevant performance assessment target "threshold" may be lower than its own performance growth rate in the past year and the performance assessment targets of companies in the same industry.

2. The trust company controlled by the actual controller paid interest for investors and was fined for providing guarantees in violation of regulations

Recently, the China Securities Regulatory Commission requires that the key minority of companies to be listed must have a good "reputation". In this regard, the guidance institutions need to submit a statement on the laws and regulations, breach of trust, etc. of the companies to be listed and their key minority, as an important reference for subsequent listing links.

It should be pointed out that in 2024, the trust company controlled by the actual controller was investigated for using its own funds to advance interest to investors. In addition, in the past, the company had also been punished for providing guarantees in violation of regulations and failing to truly reflect the quality of its own assets in accordance with regulations.

2.1 Wanxiang Trust, controlled by the actual controller, once provided guarantees in violation of regulations and was fined in 2022 for failing to truly reflect the quality of inherent assets in accordance with regulations

According to Chengde Lulu’s 2023 annual report, as of the end of 2023, the actual controller of Chengde Lulu was Lu Weiding.

According to the 2023 annual report of Wanxiang Trust Co., Ltd. (hereinafter referred to as "Wanxiang Trust"), as of the end of 2023, the actual controller of Wanxiang Trust was China Wanxiang Holdings Co., Ltd., and the actual controller of China Wanxiang Holdings Co., Ltd. was Lu Weiding.

That is, Wanxiang Trust and Chengde Lulu are companies under the same control.

In recent years, Wanxiang Trust has been fined a total of 750,000 yuan for multiple violations.

According to Document Zhejiang Banking Regulatory Penalty Decision No. [2018] 1, on January 5, 2018, Wanxiang Trust was fined 200,000 yuan by the Zhejiang Regulatory Bureau of the China Banking Regulatory Commission for requiring the provision of guarantees in violation of regulations.

According to Document Zhejiang Banking Regulatory Penalty Decision No. [2018] 15, on June 14, 2018, Wanxiang Trust was fined 300,000 yuan by the Zhejiang Regulatory Bureau of the China Banking Regulatory Commission for its imprudent management of real estate project loan approval.

According to Document Zhejiang Banking and Insurance Regulatory Penalty Decision No. [2022] 11, on June 2, 2022, Wanxiang Trust was fined 250,000 yuan by the Zhejiang Regulatory Bureau of the China Banking and Insurance Regulatory Commission for failing to truly reflect the quality of its inherent assets in accordance with relevant regulatory requirements.

In addition, in 2023, some of Wanxiang Trust’s products experienced delayed redemption.

According to Wanxiang Trust’s 2023 annual report, in 2023, the credit risk pressure of Wanxiang Trust’s existing financing business increased significantly, some project counterparties were unable to perform their obligations on time, trust products were delayed in redemption, and the number of trust projects entering the risk disposal stage increased.

It should be pointed out that Wanxiang Trust’s non-performing asset ratio at the end of 2023 was higher than that of 56 companies in the same industry.

According to Wanxiang Trust’s 2023 annual report, based on the five-level classification standard of credit risk assets, at the end of 2023, the non-performing asset ratio of Wanxiang Trust’s proprietary assets was 78.75%.

According to public information, as of June 1, 2024, among the 57 trust companies that have disclosed the asset quality classification of proprietary business at the end of 2023, only Jianyuan Trust has a higher non-performing rate of proprietary business credit assets than Wanxiang Trust.

Not only that, in one of its trust products, Wanxiang Trust used its own funds to advance interest for existing investors.

2.2 In 2024, Wanxiang Trust used its own funds to advance interest to existing investors, but the regulations state that self-payment constitutes rigid redemption and is considered illegal operation.

According to public information, the "Investigation Report on Reporting Illegal Banking and Insurance Activities" (Zhejiang Banking and Insurance Regulatory Commission [2024] No. 60) issued on March 25, 2024 shows that after investigation by the Zhejiang Regulatory Bureau of the State Financial Supervision and Administration Bureau, the funds paid to investors for the liquidation distribution of Wanxiang Trust-Infrastructure No. 215 (Duyun Economic Development Urban Investment Receivables Investment Collective Fund Trust Plan) were the interest paid by Wanxiang Trust's inherent funds for existing investors. In addition, Wanxiang Trust did not disclose information on the counterparty's arrears of interest and the interest paid by inherent funds.

According to the "Guiding Opinions on Regulating the Asset Management Business of Financial Institutions" issued on April 27, 2018, if asset management products cannot be redeemed on time or redemption is difficult, the financial institution that issues or manages the product raises funds on its own to repay or entrusts other institutions to repay on its behalf, which is considered rigid redemption. If a non-depository licensed financial institution engages in rigid redemption, it will be deemed to be operating in violation of regulations, and the financial supervision and management department and the central bank will correct and punish it in accordance with the law.

It can be seen from this that in 2024, Wanxiang Trust used its own funds to advance interest for investors. Relevant regulations point out that the act of raising funds by itself for repayment or entrusting other institutions to repay on its behalf is regarded as rigid redemption, and rigid redemption is deemed to be an illegal operation.

2.3 Improve the classification and evaluation standards for listed companies, and pay attention to the “reputation” of the key minority of listed companies

Based on public information, a classification and evaluation mechanism for listed companies will be established, and the level of corporate governance, quality of information disclosure, financial authenticity, type of audit opinion, the company's ability to continue operations, the prosperity of the industry in which it operates, and the "reputation" of a company's key minority will be included in the classification and evaluation standards for listed companies, guiding listed companies to improve their internal governance and enhance transparency and the quality of information disclosure.

In short, in 2024, Wanxiang Trust, controlled by the actual controller, was found to have used its own funds to advance interest to investors, and relevant regulations pointed out that rigid redemption constituted by self-payment was deemed to be illegal operation. In the face of the above situation, whether the reputation of Lu Weiding, the actual controller of Chengde Lulu, will be affected is worth paying attention to.

3. They claim to attach importance to product quality but are frequently complained about. As a key pollutant discharger, they have been repeatedly found to have discharged pollutants exceeding the standard.

Listed companies should actively practice the concept of sustainable development, take the initiative to assume social responsibilities, safeguard the public interest, and attach importance to ecological and environmental protection.

However, as a key pollutant-discharging unit, Chengde Lulu has been frequently monitored to have excessive pollutant emissions in the past year. On the other hand, Chengde Lulu has also been repeatedly complained about product quality problems.

3.1 Claiming to regard product quality as the life of the enterprise, the company will develop its main business around "environmental protection, green and health"

According to Chengde Lulu's 2023 annual report, in 2023, Chengde Lulu carried out public welfare activities to expand the company's social influence and played a good advertising role. In addition, Chengde Lulu regards product quality as the life of the company and ensures that the products are genuine and reasonably priced. In addition, Chengde Lulu's development strategy revolves around the theme of "environmental protection, health, and green" and vigorously develops its main business.

However, in 2023, Chengde Lulu was complained about for product quality issues.

3.2 Frequent complaints about product quality and providing expired products in the 2023 marathon

According to information released by the Huzhou Municipal Development and Reform Commission on September 21, 2023, expired beverages appeared in the supplies packages provided to the runners of the 2023 Shenyang Marathon. The Lulu beverages in the supplies packages had expired for three or four months. In response, the person in charge of Chengde Lulu in Shenyang said that there were a total of 3 boxes of expired products.

It can be seen that Chengde Lulu provided some expired products in the above-mentioned marathon event supply packages.

Not only that, in recent years, Chengde Lulu has also received complaints about product quality.

According to public information from the consumer service platform "Black Cat Complaint", as of the query date August 6, 2024, the search results showed that there were 41 complaints containing the search term "Lulu Almond Milk", many of which were related to product quality.

Specifically, on June 15, 2024, the complaint numbered 17373816932 showed that the complainant claimed that the Lulu almond milk purchased at the Lulu Tmall flagship store had deteriorated within the shelf life, had foreign matter, and had mold spots and lumps of foreign matter around the bottle cap. On January 7, 2023, the complaint numbered 17364254555 showed that the complainant claimed that the almond milk purchased at the Douyin Lulu flagship store had plastic, glass slag, etc. in it.

In addition, Chengde Lulu also has problems with environmental protection.

3.3 As a key pollutant discharge unit, it was monitored that pollutant discharge exceeded the standard more than 350 times in the past year

According to Chengde Lulu's 2023 annual report, Chengde Lulu and its subsidiaries were key pollutant dischargers in 2023. Chengde Lulu stated that all pollutants discharged met the standards.

However, Chengde Lulu’s statement above may not be tenable.

According to public data from the Hebei Provincial Department of Ecology and Environment and the Guangzhou Green Network Environmental Protection Service Center, from May 6, 2023 to July 22, 2024, the exhaust gas discharged from the exhaust outlet of Chengde Lulu's factory area was detected to have exceeded the pollutant concentration 355 times after excluding repeated periods. The pollutants that exceeded the emission standards included nitrogen oxides, smoke, and sulfur dioxide.

In general, Chengde Lulu claims to attach importance to product quality and will develop its main business around "environmental protection, green and health". However, in recent years, Chengde Lulu has been frequently complained about product quality problems. Not only that, in terms of production, Chengde Lulu, as a key pollutant discharge unit, has been detected to have exceeded the pollutant discharge standard many times in the past year.