What is the way forward for Xifeng Liquor? Is the question to go public? It is to put consumers in what position

The key to the future is to put consumers in their place.

Tang Zhenguan years, a poet praised the Xifeng wine "open altar incense ten miles, next door to the drunken three", to the Ming Dynasty, Shaanxi Fengxiang territory, "burnt workshop everywhere, full of fragrance", so that the guests "know the taste of the parking, smelling incense Dismount from the horse", it is a pity not to taste. During the Qing Dynasty, Xifeng wine was listed as a famous wine in the Nanyang Persuasive Tournament, and won the Grand Prize at the Universal Exhibition in 1915.

In 1952, at the first national wine fair, Xifeng wine was awarded the title of the first national famous wine together with Moutai, Fenjiu, and Luzhou Laojiao, and became one of the "Four Famous Wines" as a representative of the phoenix-flavored white wine, which was the highlight of Xifeng wine, and also an honor for Xifeng wine to be hung on the lips of the people.

However, it is embarrassing that Guizhou Moutai, listed in 2001, with a net profit of 50 billion and a market capitalization of 2,500 billion, Shanxi Fenjiu, listed in 1994, now with a profit of 2.5 billion and a market capitalization of 250 billion, Luzhou Laojiao, listed in 1994, with a profit of 5.6 billion and a market capitalization of 2,860 billion, but the award-winning Xifeng Liquor, the present Shaanxi Xifeng Liquor Co. Ltd., was incorporated in 1999, the profit is only a fraction of the former companion, and still struggling on the road to IPO, after four failures.

In 2009, the ten-year-old Shaanxi Xifeng Liquor Co., Ltd. launched a restructuring and reorganization in order to land on the capital market, and CITIC Industrial Investment entered the picture, taking 15% of the shares with 360 million yuan, becoming the second largest shareholder. In order to ensure the success of Xifeng Liquor's listing, CITIC Securities became Xifeng Liquor's listing sponsor. Two years later, it was preparing to land on the stock market, but the Xifeng Liquor was exposed to financial performance fraud, the IPO program was aborted.

In 2016 , after careful preparation, Xifeng Liquor once again prepared for the listing, and published a prospectus, the prospectus shows that in 2014, Xifeng Liquor receivable 3.321 billion yuan, net profit of 168 million yuan. During this period, Xifeng wine to reduce the dependence on dealers, but also led to a decline in performance, the listing program is again on hold.

In 2017 , Xifeng Liquor once again impacted the A shares, but the dealer Hao Hailu, Ding Jimin through bribery to obtain the original shares of the incident broke out, the former general manager of Xifeng Liquor, Zhang Lockxiang, the former deputy general manager of the former Gao Bo was sentenced to imprisonment due to embezzlement and bribery.

By May 2018 , Xifeng Liquor again updated the prospectus, but suddenly broke out Xifeng Liquor plasticizer exceeded the standard by 3 times, had to withdraw the material the day before the audit meeting. According to expert research, plasticizer toxicity than melamine toxic 20 times.

But more chilling to consumers is the attitude of Xifeng Liquor. You should know that in 2012, the liquor was exposed to plasticizer exceeded the standard 2.6 times, the liquor industry sector all fell, the market value of hundreds of billions of units evaporated. After the incident, liquor companies gradually will be used in the production process of plastic wine barrels, plastic wine tubes, wine pumps in and out of latex tubes and other products replaced with stainless steel, regulation is also more stringent.

But six years later, Xifeng Liquor also broke the plasticizer exceeded the standard by three times, and the recall program is accused of a lack of sincerity: the original price of 800 yuan of vintage wines, collection of six years later, only 308 yuan of the factory price of the recall; and has been drinking consumers, Xifeng Liquor in the recall announcement not only did not mention the compensation, and not even apologize for a sentence. This will obviously give it a bad name in the minds of consumers.

Some commentators have said that Xifeng doesn't put serious winemaking first.

So how does Xifeng make wine?

According to the prospectus, close to 20% of the finished wine sold by Xifeng Liquor is commissioned from cooperative manufacturers, and even close to 37% in 2017. On top of that, the quantity of Xifeng Liquor's outsourced base wine is around 20,000 tons, and the proportion of outsourced base wine is near 70%. Basic wine refers to the original liquor liquid that has not undergone any blending and is produced from raw materials such as grain. Generally the base wine has to be stored for a certain number of years, and can only be used for blending finished wine after the harmful substances have evaporated, so the quality and capacity of the base wine is very important.

But Xifeng's outsourcing is too big, and naturally the risk increases, because it's hard to control the quality and price of the purchased base wine.

And, the prospectus also explains that in addition to purchasing Fengxiang-type base wines from wineries around Fengxiang County, it also purchases some flavored base wines, such as strong-flavored and saucy-flavored wines. This leads to the sale of Xifeng Liquor outside Shaanxi Province, mainly concentrated white wine, which is in conflict with Xifeng Liquor as a representative of phoenix-flavored white wine, and for consumers, there is no taste distinction with other concentrated white wine, which is not conducive to the development of the brand.

But wait until the problem, the responsibility is still borne by the brand, and the brand in the recall on the lack of sincerity, the harm is consumers and brand image.

Why did the Xifeng brand do this?

This is related to the operation mode of Xifeng Liquor.

There are many brands of Xifeng wine, reportedly more than 300 brands of all sizes, and the operation of the brand is largely in the hands of distributors.

The brand distributors of Xifeng Liquor and the company cooperate in the production, but the brand distributors have a strong voice, including the liquor body design, packaging design, marketing, branding distributors have a great deal of decision-making power.

Some of the louder brands of Xifeng wine, such as Huashanjian and Guohua Porcelain, are in this mode of operation. The advantage of this model is that the Xifeng Liquor Joint Stock Company does not have to put out too much money to mobilize the enthusiasm of the dealers.

But the disadvantage is that on the one hand, a large part of the profits from distribution is in the hands of dealers, and at the same time, if something goes wrong, the brand is not too good to deal with, on the other hand, to open up the market, operate the brand, attract consumers need talent and experience, and left to dealers to run the operation of the brand of Xifeng Liquor in the operation of the lack of experienced personnel, so that the outside world is not sure what is the main brand of the company Xifeng Liquor Co. The company's main brand is not clear to the outside world.

The dealer's right to speak also manifests itself in bribery, according to China's referee network information, the aforementioned Xifeng dealer Ding Jimin, Hao Hailu bribed officials to take the shares of Xifeng Liquor before its listing as an example, even if the two were imprisoned for bribery, the list of shareholders is still on the list, and it is still the third largest and the fourth largest natural person shareholder.

Due to the lack of talent and experience in brand operators, Xifeng Liquor JSC has not been able to establish a good self-owned brand for four years, and 70% of its sales are located in Shaanxi Province, and it has not achieved the goal of getting out of Shaanxi.

The prospectus shows that from 2015 to 2017, sales were highly dependent on distributors, 99% of the main business income from distribution, and accordingly, its gross profit margin was lower than peers by about 10%. To a certain extent, Xifeng wine is selling this brand to eat, as for the market and consumers, it seems that neither the mind nor the ability to take care of.

In fact, Xifeng wine is not unaware of the problem. CITIC Industrial Fund entered the Xifeng wine, the introduction of liquor industry legend Xu Keqiang, Xu Keqiang in the Wuliangye and Jugui wine have a great record, but ultimately had no choice but to retire.

This may be related to the complex situation within the Xifeng Liquor, in June 2016, Xifeng Liquor burst out of the note misappropriation of 58 million yuan, lasting from June 2013 to June 2016, resulting in a loss of more than 24 million yuan. A long time to go out of trouble, 2020, CITIC Industrial Fund also chose to withdraw.

However, Xifeng wine said, CITIC Industrial Fund withdrawal will not affect the future development plan of Xifeng.

Now Xifeng wine under the leadership of Zhang Zheng has a bigger goal. Can it be realized?

The key to the way out, is to put the consumer in what position.