Why did Prince Milk fail?

The "Great Leap Forward" heroism is still poisoned by many Chinese entrepreneurs. In 1997, Li Tuchun, who started his business, made a surprising move, investing 88.88 million yuan in the golden advertising period of CCTV, winning the standard of daily consumer goods. At this time, the total assets of Prince Milk were far lower than the bidding price, and even for more than half a year, he had not paid a salary, and even Li Tuchun's 200,000 yuan admission ticket to the CCTV bid was also borrowed to buy. This time, Li Tuchun miraculously got an order of "800 million yuan". Li Tuchun said: "In 5 years, the total assets reached 2 billion yuan, and the total sales reached 10 billion yuan. After 10 years, the annual sales of 100 billion yuan is the goal that Prince Milk Group must achieve. ”

After becoming the queen of CCTV standards, Prince Milk began to lay out in accordance with the strategic goal of "100 billion", and from 2002 to 2006, Li Tuchun invested billions of yuan to launch 5 major lactic acid bacteria production and research and development bases in Zhuzhou, Hunan, Miyun, Beijing, Huanggang, Jiangsu, Kunshan, and Chengdu, Sichuan, and chose the "diversified" development path that will become a black hole of loss in the future.

As we all know, the dairy industry is an industry with high marketing expenses and low profits, and it is good that the profits of the best companies with the best cost control can reach 5%. In 1998, when it claimed to have "won an order of 800 million yuan", the actual sales of Prince Milk was about 30 million yuan, about 50 million yuan in 2001, the peak was no more than 1.76 billion yuan in 2007, and about 1.23 billion yuan in 2008. How profitable is it? A due diligence conducted by a well-known foreign auditor firm shows that in 2005, for example, the net profit of hundreds of millions of yuan claimed by Prince Milk may not even reach 30 million yuan.

On the one hand, the actual net profit is suspected of being injected; on the other hand, Prince Milk does its best to invest its profits in the extraordinary expansion and development, and the high advertising and other marketing costs also swallow up a large number of profits, so that the follow-up development is weak. But that's not the deadliest.

Prince Milk's "high debt" expansion has been looming since it won the CCTV bid in 1998. Prince Milk requires raw material suppliers to supply in advance and dealers to pay in advance, pursuing "trade-style marketing", and even a considerable part of the advertising fee of biaowang in that year comes from dealers' advances, while the capital in expansion comes more from liabilities. According to the announcements issued by Zhuzhou State-owned Assets Investment and Operation Co., Ltd. and Hunan Trust in January and August 2006 respectively on the transfer of their respective shares in the state-owned legal persons of Prince Milk, the total assets of Prince Milk Group at the end of 2005 were only about 1.3 billion yuan, the net assets were nearly 170 million yuan, and the liabilities were as high as 1.16 billion yuan, far exceeding the debt safety line required by domestic financial institutions for financing.

In November 2006, Prince Milk obtained a US$73 million equity investment from morgan, Abbe, Goldman Sachs and other three major investment banks at the consideration of 30% equity, as well as a three-year unsecured, unsecured low-interest loan of Citigroup of 500 million yuan, which overcame the urgent need. And signed a VAM agreement: if the performance of Prince Milk increased by more than 50% in the first three years, it could adjust the equity of the other party; if it did not complete the 30% growth, it would lose its controlling interest.

After the tight capital chain of Prince Milk obtained financing, he hoped to borrow money and eggs to win back a city, and continued to expand regardless of risks, costing up to 3.3 billion yuan. However, the business model of "high-speed expansion and low profit margin" has made Taizi Milk step by step into a vicious circle.

In the first half of 2008, the financial crisis caused the international syndicate to have to withdraw 500 million yuan of loans; the "melamine" incident hit the dairy industry hard, including prince milk, out of stock, unpaid wages, production suspension, forced debt... The former national lactic acid bacteria king is once again facing a severe situation of capital chain rupture. According to a 2008 due diligence report issued by Deloitte Touche Tohmatsu, Prince Milk had total assets of RMB2.6 billion, debts of RMB2.54 billion and more than 7,300 creditors.

In 2008, the annual sales plan of Prince Milk was 3.6 billion yuan, and by the end of July, only 26.7% had been completed. Under the dual pressure of the capital chain tending to break and the sales performance falling sharply, the "VAM agreement" signed by Li Tuchun was forced to be fulfilled in advance, and Morgan, Abron, Goldman Sachs and other financial investors stabbed the prince's milk with the fatal last stab.