On January 12, the China Securities Regulatory Commission (CSRC) released on its official website the "Feedback on the Application Documents for the Initial Public Offering of Adopt a Cow Holding Group Co., Ltd.", which put forward 48 supplementary requirements for a series of contents disclosed in the company's IPO prospectus, including milk sources, food safety, and whether pyramid schemes and illegal fundraising are involved.
"It's better to buy milk than to adopt a cow." In 2016, Adopt a Cow announced its entry into the domestic dairy market, and then successfully came out of the circle with its trendy advertising slogan and "cloud cattle breeding" marketing strategy, quickly completed the accumulation of original customers, and became one of the few "Internet celebrity" dairy products enterprises in recent years. According to public information, at the end of 2021, adopting a cow already had 25 million fans and 14 million members.
The adoption of a cow that has successfully established itself in the market begins to sprint to IP0. On June 22, 2022, the company filed an initial public offering prospectus with plans to list on the main board of the Shanghai Stock Exchange. However, with the publication of the prospectus, the adoption of a cow has been controversial in terms of milk source, adoption model, official publicity, marketing and other aspects.
According to the rules and procedures, the adoption of a cow requires the implementation of each of the 48 questions in the feedback and the provision of written responses within 30 days, and if the feedback is not submitted on time, the CSRC will terminate the review.
On January 12, the China Securities Regulatory Commission (CSRC) released the "Feedback on the Application Documents for the Initial Public Offering of Shares by Adopting a Cow Holding Group Co., Ltd." on its official website. Image source: Screenshot of the official website of the China Securities Regulatory Commission.
How many pastures and how many cows do you have?
The reporter of "Minsheng Weekly" all-media noticed that in recent years, adopting a cow has always insisted on having its own milk source in external publicity.
According to public information on adopting a cow, as of the end of 2021, the company had 37,062 dairy cows. However, in its June 2022 prospectus, the company said it actually owned more than 60,000 head of cattle, and the other 30,000 came from Junhong Dairy and Junkang Animal Husbandry, a joint venture between the company and Junlebao, which each held 49% of the shares, and the other 51% was held by Leyuan Dairy under Junlebao.
In fact, in addition to raising 60,000 head of cattle in the joint venture, adopting one cow also purchases more raw milk from third-party companies. According to the prospectus, from 2019 to 2021, the company's main raw milk suppliers include China Shengmu, Bright Dairy, Holstein Dairy, Junlebao Dairy, Huashan Dairy and Australasia Group, with a total procurement amount of more than 700 million yuan.
It should be mentioned that in 2019, almost all the fresh milk of the adopted cow came from the production of other enterprises, and until 2020, more than 90% of pure milk and more than 95% of yogurt were produced by third-party companies. The Shandong production base, which was completed and put into operation in October 2020, has nine production lines with a total production capacity of 815 tons per day by the end of 2021. Some people believe that this production capacity is far from enough to meet the brand's huge consumer user base.
Not only that, the adoption of a cow in the prospectus disclosure, "up to now, the adoption of a cow has successively established 7 large-scale dairy farms in Hebei, Heilongjiang and other places, of which 5 are the company's own pastures and 2 jointly operated pastures..."
For the milk source, the CSRC requires the adoption of a cow to provide additional information on the purchase amount of fresh milk under different procurement models and the reasons for the difference, the pasture and its breeding situation, the cooperation method and related relationship, and the risk of milk source stability.
Is the "Adopt a Cow Model" MLM?
"I was really attracted to their ads and thought they were saying the same thing."
A consumer in Hengshui, Hebei Province, told the "Minsheng Weekly" all-media reporter that for a while, when browsing the web on the mobile phone, there would always be such an advertisement related to the adoption of a cow: "Our cows are well raised, eat imported high-quality pasture, drink 380 meters of deep well water, pay 80 yuan a day for food, and listen to music for cows, do SPA and medicinal baths, so that the milk produced is better." After that, she spent 1188 yuan to become a "cattle breeder" who adopted a cow in an online store's promotion activity, and under her recommendation, her parents and classmates also spent money to raise a "cow".
The all-media reporter of "Minsheng Weekly" combed and found that in the initial stage, the adoption of a cow launched two adoption models: one is "adopt a cow", and you can obtain the adoption right of the cow and other related rights and interests by paying a fee of 2999 yuan; The second is to spend 10,000 yuan to become a "joint rancher", in addition to obtaining all the rights and interests of "adopting a cow", you can also enjoy the dividends of ranch operation.
In 2020, Adopt a Cow optimized and upgraded the "adoption" model, and reinstalled and launched three adoption models: first, "cloud adoption", participating in online cultivation interactive games, consumers after adoption, cow raising, milking interaction, milk exchange, etc.; The second is "joint adoption", launching IP co-branded cards, buying cards to obtain adoption rights, and regularly enjoying the service of direct delivery of products to your home; The third is real-name adoption, which can book milk one year in advance at the exclusive farm, and the highest level members can decide the name of the cow, and regularly receive photos of the cow and various growth data.
In the feedback on the adoption of a cow, the regulatory authorities required the company to disclose the specific situation of the business model related to the adoption of cows, whether customer acquisition and business development involved pyramid schemes; At the same time, explain whether the above-mentioned relevant models or activities are "illegal absorption of funds by means of substitute breeding, rental breeding, joint aquaculture, etc.", whether they involve illegal fundraising or illegal public offering business, and whether there are disputes or potential disputes.
In addition, in terms of food safety, the feedback requires the adoption of a cow to additionally disclose the food safety assurance measures adopted by the issuer in various links such as dairy farming, raw material procurement, product production, logistics and transportation, and product sales, and whether the relevant measures are effectively implemented.
Spending money on cards to highlight the international standard? Such a small action is accused of brand lack of confidence
According to public information, from 2019 to 2021, the sales expenses of adopting a cow were 194 million, 303 million and 483 million, accounting for 22.46%, 18.35% and 18.82% of the operating income, respectively. Especially in 2021, the company's operating income increased by 55.6% year-on-year, but its net profit decreased by 3.3% year-on-year, which is lower than the overall level of the industry. Some industry insiders pointed out that the high cost of marketing is an important reason for this situation.
However, in the process of sprinting IP0, the adoption of a cow program raised 1.85 billion yuan, of which 520 million was used for marketing and promotion.
If exchanging a big speaker for a big price is the wisdom of adopting a cow, then making small actions on your own official website makes consumers think that it is a sign of brand unconfidence.
In November 2022, a reader in Beijing wrote to Minsheng Weekly, saying that she found the adoption of a cow in the "Industrial Chain Construction" section of the official website, saying that the company was a council member of the "Animal Welfare International Cooperation Committee". She checked the official website of the Ministry of Civil Affairs that there is no "International Cooperation Committee on Animal Welfare".
Upon further inquiry, she found that in China, only the China Council for the Promotion of International Cooperation in Agriculture has an "International Cooperation Committee on Animal Welfare".
Based on this, this reader believes that "adopting a cow" is either "transferring flowers and trees", and nakedly labeling the pheasant association on the official website to increase his value. Either it is "taken out of context", the full name of the "China Council for the Promotion of International Cooperation in Agriculture and Animal Welfare International Cooperation Committee" is dismembered, the "China Association for the Promotion of International Cooperation in Agriculture" is removed, and only the "International Cooperation Committee on Animal Welfare" is retained, in order to highlight the "international" word of the "International Cooperation Committee on Animal Welfare". Moreover, as far as she knows, the threshold for becoming a member of the "Animal Welfare International Cooperation Committee of the China Association for the Promotion of International Cooperation in Agriculture" is very low, and you can get a license when you spend money.
Some people believe that in order to highlight the word "international" and dilute the mark of "Chinese agriculture", the adoption of a cow selectively uses the name "Animal Welfare International Cooperation Committee of the China Association for the Promotion of International Cooperation in Agriculture". Image source: Adopt a cow official website and the company's response information.
In this regard, the "Minsheng Weekly" all-media reporter verified with the adoption of a cow. The reply was that the Animal Welfare International Cooperation Committee is a branch established by the China Association for the Promotion of International Cooperation in Agriculture approved by the Ministry of Agriculture in 2013, registered by the Ministry of Civil Affairs, and is a social organization specializing in promoting animal welfare in China. Adopt a cow became a governing unit of the "Animal Welfare International Cooperation Committee of the China Association for the Promotion of International Cooperation in Agriculture" in 2021 and was awarded a plaque of the governing unit, valid from 2021 to 2026.
When asked why it did not use the full name of "China Association for the Promotion of International Cooperation in Agricultural Agriculture" on its official website, the company said: The International Cooperation Committee on Animal Welfare does not use the full name in its usual publicity.
The all-media reporter of "Minsheng Weekly" then asked the Animal Welfare International Cooperation Committee of the China Association for the Promotion of International Cooperation in Agriculture for verification on the issue of the fees charged by the governing units. A staff member surnamed Cai told reporters that adopting a cow is one of the member enterprises of their governing unit, and for such enterprises, the general fee is 30,000 yuan for a 5-year brand.
Readers of Minsheng Weekly believe that either way, it is a manifestation of the false propaganda of "adopt a cow", which not only lures consumers, but also exposes the cultural inferiority complex of the local dairy company.
"In the new era and new journey, our real national brand must be confident, self-reliant and self-reliant. As a people's livelihood security product, dairy products need more than just a slogan, a gimmick, nor an international standard with an "international" label. What ordinary people need is the conscience of the enterprise, what they need is the truth. The reader said in the letter.
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