The founder's file was lost, and the executives immigrated to the United States: the treasure of playing domestic products has long been sold to foreign capital

Author|Deep Krypton New Consumption Baolu

If you want good skin, use Dabao in the morning and evening.

There is no doubt that Dabao is the enlightenment of almost every Chinese person for skin care products.

In the advertising slogan "Dabao will see you every day", Dabao has accompanied at least two generations as a synonym for good quality and low price. In the domestic market in the 90s, the annual consumption of cosmetics per capita in the country was less than 10 yuan, and Dabao's turnover could exceed 100 million.

Today, Dabao's star product, the classic red and white bottles of SOD honey, still sells more than 100 million bottles every year, and in 2018, the personal penetration rate of the Dabao brand is close to 14%, that is, on average, every 7 people, there are still people using this classic old domestic product. When it comes to old domestic brands and nostalgic memories, the easiest thing for people to remember is always Dabao.

However, what few people know is that this domestic star, who has been the top producer and seller in the Chinese market for 8 consecutive years, is still active in the market with the impression of "national brand and childhood memories", but Dabao has long been a pure American brand.

01

The birth of a national brand

Dabao Company was originally founded in 1957 as a product of the joint-stock reform of Beijing Sanlu Factory. More than one-third of the employees are disabled, but the profitability of welfare state-owned enterprises is usually not outstanding, and even the need for state subsidies is the norm.

Dabao, Yu Sanlu Factory is a factory-like existence, it can be said that Dabao has maintained a deep national complex since its birth.

In 1985, after Wu Baoxin, the founder of Dabao, took over as the director of Sanlu Factory, due to the birth of Dabao, it became the first batch of brands specializing in skin care products suitable for Chinese people, and it took only 4 years to make this welfare factory, which had a debt of up to 2.8 million yuan at that time, promoted to a state-owned cosmetics enterprise of 100 million yuan.

After Dabao stabilized profits, Wu Baoxin was sent abroad to the Philippines, left Dabao, and transferred 6 of the patented technologies of at least 15 products to Dabao, and the remaining 9 have been used by Dabao for free.

In 1990, Dabao launched an epoch-making product, SOD honey, which became a household name and sold for many years.

From the current point of view, SOD honey may have long been an outdated product, but in the nineties when domestic skin care products were almost just starting, Dabao's SOD honey was the first domestic skin care product that can extract superoxide dismutase (SOD in English for short) as a raw material in China, with multiple effects such as beauty, sunscreen, whitening, etc., in the era of few choices, Dabao's SOD honey was already regarded as a hexagonal warrior in domestic parity.

Since 1997, Dabao has ranked first in the sales of skin care products in China for 8 consecutive years. By 2001, Dabao achieved sales revenue of 780 million yuan, and SOD honey contributed 80% of the revenue, and the sales of other single products were only about one-tenth of SOD honey on average. The market share of this single product alone was once as high as 15.76%, becoming a national product with one bottle per person.

Dabao can occupy such a high market share, in addition to the product itself, ultra-high frequency of magic TV advertising is also the strongest communication help, after all, who has not been brainwashed by the "Dabao every day" advertisement, even if the current Dabao is no longer active in front of consumers, Dabao's classic lines can still be recited by two generations.

Since the 80s, there has been an explosion in the ownership of civilian television sets. According to the data released by the National Bureau of Statistics, at that time, the ownership rate of civilian television sets in China was only 9 per 1,000, and only one in 100 households could barely find a TV set; in the 90s, when SOD honey was launched, 267 households owned TV sets in an average of 1,000 households, an increase of nearly 30 times.

The number of television sets has increased, but the number of TV programs is still scarce, and TV commercials have become the highest proportion of broadcasts.

In 1993, the advertisement of "True Love Never Changes, Dabao See You Every Day" began to be frequently broadcast on CCTV, and the price was 600,000 yuan per year.

In 2003, Dabao's market share reached 17.79%, much higher than that of other competitors.

02

Receiving Weight

But a year later, Dabao's situation began to deteriorate sharply, and more wealthy foreign giants entered China, just like a three-body man entering the earth, reducing dimensionality.

At that time, Procter & Gamble had just changed its strategic direction and took beauty care products as its business center, and the proportion of revenue increased from 18% before the transformation to 28% after the transformation, becoming the main business.

In 2004, Procter & Gamble became the first foreign-funded bidder since CCTV's advertising bidding with a sky-high bid of 385 million yuan a year, and in the following years, Procter & Gamble has been CCTV's largest advertiser.

Since then, the advertisements for Procter & Gamble's OLAY Olay have begun to be overwhelming, and Dabao can't compete at all.

Becoming the standard king of CCTV has won outstanding results for Procter & Gamble.

In 2004, Procter & Gamble's annual profit rose sharply, as high as 44%, and its beauty product business sales exceeded 17 billion US dollars, accounting for 34% of total sales, of which skin care and makeup products represented by Olay oil expanded at a double-digit rate in the domestic market, with sales of nearly 15 billion yuan.

In the two years from 2003 to 2005 alone, Dabao's market share shrank from 17.79% to 1%, and a new bottle of people changed from SOD honey to OLAY olay oil.

It's not that Dabao is reluctant to spend money on marketing, but that he can't.

As one of the first cosmetics brands in China, Dabao has completed the process of public-to-private shareholding reform, but it still faces a common problem that almost all brands in the previous era must face, that is, decision-making will still be constrained by the state-owned enterprise system.

Lacking the right to make independent decisions, Dabao had to report for approval at every step of the way, and was slow to respond, unable to quickly adjust its strategic direction according to market changes, and was led by Procter & Gamble step by step.

And because it is a welfare state-owned enterprise, although Dabao makes a lot of profits, it basically needs to be handed over and distributed, which is used for overall arrangement, and it is not that Dabao can use it freely after making money. Where to invest the funds in the next step depends on the distribution left after taking care of other places in the previous step, so although Dabao is profitable, it has limited resources in actual operation, and it is constrained step by step.

Dabao, which has suffered a serious market crisis, is in decline step by step in the predicament. In the case of limited advertising funds, in order to regain market share and increase sales, Dabao sacrificed the profits of the product, and everything was based on sales.

Dabao will distribute 2% of the sales proceeds as a reward to sales managers with large quantities of goods, not only promising them to enjoy a large cash income, but also giving corresponding preferential treatment in the promotion policy;

The overly aggressive sales concept caused serious problems in Dabao's sales channels. Only the pursuit of high sales of the standard of judgment so that Dabao's dealers began to turn their heads to eat Dabao's "human blood steamed buns", many dealers in order to sell data good, many provinces and cities have appeared product wholesale price lower than the factory price chaos.

Dabao, who has small profits but quick turnover, has to spend money to give back to dealers, so it has suffered a lot, although the sales have risen, the profits are lower than when the sales are small.

To add insult to injury, no sales - grab sales - no profit - save money through other channels...... Instead, Dabao fell into a vicious circle, and the formula of the star product SOD honey has been stuck in the nineties without funding to improve.

The repeated mistakes of its policies are also the reasons for the internal chaos of Dabao and the increasingly fierce open and secret fighting.

Wu Baoxin, the founder of Dabao, not only refused to request a job arrangement after returning to China after being sent by the government, but also found that the file was "lost", so that he could not go through the retirement procedures, and after many years of unsuccessful searching, he ran for 22 years for the lawsuit and was compensated 60,000 yuan after winning the lawsuit.

03

Sell Johnson & Johnson

Dabao, which is suffering from internal and external troubles, was sold to Johnson & Johnson of the United States in 2008 and became an American brand 100% controlled by Johnson & Johnson.

Johnson & Johnson is the world's largest medical, health care and care products company, and its path to entering each country's market is similar, through the advantage of the US dollar and abundant funds, the acquisition of local domestic leading brands, so as to have a complete chain of continuation of the entire national market, for laying its own products.

Johnson & Johnson has his eye on Dabao because Dabao is the perfect piece of the puzzle for Johnson & Johnson in the Chinese market.

Johnson & Johnson has long been at the leading level in the mid-to-high-end market, but to penetrate the Chinese market, the low-end market outside the Fifth Ring Road is the most densely populated place.

At that time, Johnson & Johnson only owned the mid-range Neutrogena and Clean&Clear in the cosmetics field in the Chinese market, and for Johnson & Johnson, the acquisition of Dabao will become an important help for Johnson & Johnson to expand the low-end market.

As a national brand that once had an absolute high market share, Dabao's channel laying has penetrated the domestic market like a capillary for a long time, especially in the second- and third-tier markets.

Dabao has established nearly 350 sales counters in Beijing and major shopping malls across the country, and more than 3,000 counters in supermarkets and convenience stores across the country, and dealers are all over the villages and towns. These are Johnson & Johnson's weaknesses in the domestic market, and perhaps because of this, Johnson & Johnson's willingness to acquire Dabao is so high that it even seems a little "illogical".

At that time, Dabao required the interested party to be a skin care brand with high visibility, reputation and good market performance in China or the world, and also required that the equity transfer price paid should not be lower than the listing price and must be paid in cash in a lump sum. These conditions were so strict that they were considered by the media at the time to be "tailor-made for foreign investment".

For Dabao, Johnson & Johnson spent a high price of 2.3 billion yuan to acquire all shares, which is far more than several times the total audited assets of Dabao, which can be said to be a high-risk transaction.

In general, commercial acquisitions are made in a more cost-effective and secure manner. For example, Johnson & Johnson first acquired only a part of Dabao's equity, listed Dabao as a shareholder, and then acquired the remaining shares after recovering the funds, which is the lowest risk for Johnson & Johnson.

But in the end, there was no indication that Johnson & Johnson chose a better plan, but paid a lump sum for Dabao with a practical and high-priced cash.

In the acquisition of Johnson & Johnson and Dabao, which took more than 2 years, Johnson & Johnson has never spoken publicly, and Dabao has also kept silent, even at the moment when the acquisition is over, there are still too many questions left for the public.

Although the business is "one is willing to fight and one is willing to suffer", Johnson & Johnson's willingness to buy at a high price is a mystery, and why Dabao has to sell himself is also a mystery.

Dabao's sales did have low growth and low profits at that time, but it did not lose money.

As a national brand, on the eve of the implementation of the "Anti-Monopoly Law", it suddenly sold itself to foreign capital when it was still profitable, and these meaningful problems that caused public associations gradually faded out of the public view with the avoidance of both sides.

Later, Wu Baoxin, who mastered the core formula, founded Senbao in Zhuozhou, which was regarded as a copycat brand imitating Dabao in the domestic market all year round, and the executives who participated in the Johnson & Johnson acquisition all immigrated to the United States, and the national brand was swallowed by Johnson & Johnson.

Maybe Dabao sold Johnson & Johnson to seek better development, but what Dabao can get his hands on now seems to be the bottle of SOD honey from the last century.

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Bibliography:

1. Procter & Gamble: Tilt the company's resources into the beauty industry

2. From the rise and fall of Dabao, look at today's "big item" fever|i root number C

3. Thirty years of Dabao, witnessing the legend of "Made in China" |