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Guangyuyuan, a time-honored Chinese medicine company, has made another investment in the wine industry. A company named Shanxi Guangyuyuan Wine Marketing Co., Ltd. was recently established with a registered capital of 2 million yuan. It is wholly owned by Guangyuyuan and its business scope includes wine business and food Internet sales. Although the revenue and gross profit margin of the sector have declined, the health wine business is one of Guangyuyuan's core businesses.

There are more Chinese medicine companies also planning to enter the wine industry. Tasly, which just welcomed a new controlling shareholder at a price of more than 6 billion yuan, seems to have its founder's son Yan Kaijing focusing on the company's wine business. Earlier, Qinghai Spring also turned to the wine industry after its original cordyceps business hit a wall. Has "selling wine" become the common "destination" of Chinese medicine companies?

Guangyuyuan Health Wine's revenue and gross profit margin are both declining

Tianyancha shows that Shanxi Guangyuyuan Wine Marketing Co., Ltd. was recently established with a registered capital of 2 million yuan. Its business scope includes wine business and food Internet sales. Equity penetration further shows that the company is wholly owned by Guangyuyuan.

It is not surprising that Guangyuyuan has increased its investment in the wine industry. After all, health wine has a place in its business map. Guangyuyuan, founded in the Jiajing period of the Ming Dynasty, has a history of more than 480 years. To date, in the field of pharmaceutical industry, the company has three major business segments: traditional Chinese medicine, fine Chinese medicine and health wine. Guilingji wine is also one of the company's main products. As of the end of 2023, Guangyuyuan still holds 1 liquor license.

However, from the performance point of view, compared with traditional Chinese medicine and fine Chinese medicine, Guangyuyuan's health wine segment contributes less to performance. In 2023, Guangyuyuan's health wine business achieved revenue of 35.2421 million yuan, a gross profit margin of 52.27%, and a revenue cost increase of 0.30%. In the same period, the company's traditional Chinese medicine and fine Chinese medicine revenue scale were 894 million yuan and 281 million yuan, respectively, with gross profit margins of 74.21% and 83.28%, respectively. Both revenue and gross profit margin showed positive growth, and the increase was double-digit. In contrast, the revenue of the health wine business in 2023 decreased by 10.24% year-on-year, and the gross profit margin decreased by 5.01% year-on-year. Guangyuyuan stated that the decline in revenue and gross profit margin of health wine was mainly due to adjustments in the wine business strategy. In 2023, the production and sales volume of Guangyuyuan health wine products both declined. During the reporting period, 168,600 kilograms were produced, a year-on-year decrease of 43.31%, and the sales volume was 187,100 kilograms, a year-on-year decrease of 5.77%.

On August 19, a reporter from the Beijing News sent an interview outline to Guangyuyuan regarding the main considerations for establishing a wine marketing company at this time and whether the newly established company can synergize with Guangyuyuan's original business. As of press time, no response was received from the other party.

Many Chinese medicine companies are developing wine business

Guangyu is far from being the first Chinese medicine company to enter the wine industry. Tianshili, which recently changed its ownership to China Resources Sanjiu, has also been in the wine industry for many years.

Yan Xijun, the founder of Tasly, once said in public that Tasly has created a "big health industry chain" brand project, that is, to make a box of medicine, a bottle of water, a cup of tea, a bottle of wine, a set of health management programs, and a children's education platform, and to establish a new model of big health management that integrates "prevention-treatment-nurturing-management". Guotai Liquor is the representative of its "one bottle of wine" business. As early as 1999, Tasly responded to the call of the country's western development and the invitation of Guizhou Province to attract investment, and went to Maotai Town for investment inspection. On the basis of acquiring a local time-honored brewing company, it built Guotai Liquor and built it into a large-scale sauce-flavored liquor company. The popularity of Tasly's "one bottle of wine" business is also increasing. In 2017, Tasly announced to the public that Guotai Liquor has developed into the second largest brewing company in Maotai Town, which is government-approved, industry-recognized, and socially recognized. In December 2017, Guotai Liquor announced the use of an image spokesperson for the first time and signed a contract with Tang Guoqiang, a well-known Chinese performing artist. The Guotai advertising film endorsed by Tang Guoqiang also landed on CCTV-1 prime time in January 2018. At that time, Guotai Liquor hoped to build the Guotai brand into a national brand in the next three to five years. During this period, Guotai Liquor planned to go public several times. First, in May 2020, Guotai Liquor disclosed its prospectus. However, after the China Securities Regulatory Commission raised more than 40 questions in its feedback and asked the company to explain issues such as the ownership of the "Guotai" series of trademarks, Guotai Liquor chose to withdraw its IPO. Since then, the industry has once again reported that Guotai Liquor is planning to go public on the Hong Kong stock market and accept listing guidance, but there has been no substantial progress afterwards.

In May this year, Yan Kaijing took over the position of Chairman of Guotai Liquor from his father Yan Xijun, and expressed his determination to build a smart industry, relying on the outstanding advantage of the wine industry in directly linking the C-end, focusing on the core features of the smart industry such as smart manufacturing, digital supply chain, digital marketing, and self-centered creation, and strive to get Guotai into the first echelon of China's smart industry as soon as possible. Subsequently, Yan Kaijing also succeeded Zhang Chunxin as the legal representative of Guotai Liquor Sales Company. These two actions have led the industry to speculate whether Tasly will focus on the "selling wine" business after changing hands with China Resources Sanjiu.

Qinghai Spring is a representative who entered the market earlier. After the failure of the Cordyceps business many years ago, Qinghai Spring began to transform. After the advertising business, it set its sights on liquor. In March 2018, Qinghai Spring announced that it planned to acquire 100% of the equity of Tibet Tinghua Liquor Industry held by Tibet Zhengku from its related parties for 33.85 million yuan. At first, the switch to the liquor industry did not drag Qinghai Spring out of the quagmire. From 2017 to 2019, the company's revenue was 471 million yuan, 333 million yuan, and 234 million yuan, respectively. The net profit in the same period fell sharply, 311 million yuan, 68.4469 million yuan, and 5.8078 million yuan, respectively. The net profit in 2018 and 2019 fell by 77.96% and 91.51% year-on-year, respectively. At this year's CCTV 3.15 Gala, Tinghua Liquor was "named", and the international patent of Tinghua Liquor, which was priced at more than 50,000 yuan, was not recognized. The "high-tech" cooling agent is actually a common mint extract. Qinghai Spring's 2024 semi-annual report shows that in the first half of the year, the company's wine and beverage FMCG business segment achieved operating income of 50 million yuan, a year-on-year increase of 45.95%, and the original semi-annual operating target was not achieved. After being "named" by CCTV, in order to cooperate with the inspection of the market supervision department, Qinghai Spring suspended the operation of this segment's business. In May this year, Qinghai Spring also issued a notice that the Tinghua boutique series will suspend domestic sales and only supply exports.

In the domestic capital market, the "drinking and taking medicine" market has been hot for several times, so it is not difficult to understand why some companies want to "stick to it".

Beijing News reporter Zhang Xiulan

Proofread by Jianing