Source: Unicorns Always Knew
Author: iponews studio
On the afternoon of October 19, Lan Shili, the founder of Dongxing Group, dressed in a gray-blue suit, was surrounded by old friends such as Li Guoqing, founder of Dangdang.com, and Guo Fansheng, founder of Huicong Network, calmly announced that he owns a second listed company, Wuhan Second Factory Soda has officially appeared in the Hong Kong capital market, China through mergers and acquisitions, and has also become the first stock of soft drinks in China.
The former richest man in Hubei, who has experienced ups and downs in business, returned to the public eye in 2022 and began a new round of entrepreneurship. Lan Shili's unmanned retail and soft drink businesses were listed on the Hong Kong stock curve within a very short period of time of establishment. In the eyes of the outside world, Lan Shili's new story is probably just beginning.
The listing entity chosen by Lan Shili is Raffles Interior (01376.HK), a company that provides interior decoration services in Singapore. It was listed on the main board of the Hong Kong Stock Exchange of China on May 7, 2020.
In 2023, Raffles Interior earned SGD 52.918 million in the first half of 2023 and achieved net profit of SGD 2,204 million.
On August 1 of this year, Raffles Interior announced that it had reached an agreement with Wuhan Star Aviation Investment Network Co., Ltd. (“Wuhan Star Aviation Investment”) to issue convertible shares at a cost of HK$25.5 million to purchase shares of Wuhan Second Factory Soft Drink Co., Ltd. (“Wuhan Second Factory Soda”) sold by Wuhan Star Aviation Investment. After the transaction was completed, Raffles Interior will hold 51% of the shares in Wuhan Second Factory Soda.
According to industrial and commercial data, there is no figure of Lan Shili among the shareholders of Wuhan Star Aviation Investment and its affiliated companies, but according to Lan Shili, he is the actual controller of the company.
On the evening of October 18, Raffles Interior issued an announcement appointing Xiang Ying and Peng Shangfeng from the business system of Dongxing Group as executive directors and non-executive directors respectively. They also stated that on September 12, they had received listing approval from the Stock Exchange for the acquisition and share conversion, and that they would issue convertible stock notes to Wuhan Star Aviation Investment in accordance with the terms and conditions of the agreement.
Lan Shili said at the listing press conference that this also means that all formalities and approvals have been completed, and that Wuhan No. 2 Soda has successfully entered the capital market in Hong Kong, China.
According to Lan Shili, this listing method is different from the traditional listing process, but it's just like taking a college entrance examination. Some people took the college entrance examination, and some were specially recruited without an exam, but in the end they all went public.
According to information, although the soft drink business has been merged into Raffles Interior, the name of the listed company will not change. In response, Lan Shili said that according to the requirements of the Stock Exchange, which business of the listed company accounts for relatively high revenue and which business is the main business of the listed company. At that time, the name of the listed company may be further adjusted.
According to the announcement, in 2021 and 2022, Wuhan Second Factory's soft drink revenue was 829,000 yuan and 866,000 yuan, and net tax profit was a loss. However, Lan Shili's performance changed significantly after entering the market. In the first half of 2023, it achieved revenue of 23.101 million yuan and net profit after tax of 2,081 million yuan.
Lan Shili's return is known to the outside world to a greater extent because of its soft drink business.
In April 2023, Lan Shili announced that Wuhan Second Factory Soda has launched 3 classic-flavored bottled soda products. The pricing model is 3.8 yuan to differentiate it from other domestic beverage brands; 3 months later, he also launched three new flavors of bottled soda.
However, Lan Shili, who is not addicted, announced on October 10 that it has launched an orange-flavored can soda priced at 1.99 yuan. This newly launched canned soft drink contains 15% juice, and the tonnage cost is as high as 1,100 yuan/ton, while the tonnage price of traditional 10% juice and pure essence products is only 300 yuan to 500 yuan/ton, but this new product only sells 1.99 yuan/can.
Currently, the prices of mainstream products from traditional domestic soda brands such as Bingfeng, Arctic Ocean, and Dayao on the market are mostly around 5 yuan to 8 yuan.
In the eyes of the outside world, Lan Shili's style of play on soft drinks is very close to his ultra-low price model for travel and airline tickets at the beginning.
The “high cost+low pricing” model of Wuhan Second Factory soft drink has also attracted a great deal of attention in the industry.
Because after Genki Forest became popular in 2020, beverages suddenly became the focus of new consumption. At one point, a large number of new brands and products appeared in the market. In particular, a series of old domestic brands of beverages were revived one after another. Most of them had updated flavors, packaging, and concepts, and at the same time had higher pricing. However, behind the high pricing of these domestic soda brands, it is not only because they have to charge a sentiment tax; it is also influenced by passive factors.
Many new beverage brands have limited market investment capacity. They can only drive growth through high channel profits and high team commissions. They also need to maintain business operations, so they can only adopt higher pricing strategies.
Since the main sales channel for beverages is still a traditional channel, and it is very realistic from wholesalers to retailers, beverage products must not only be recognized by the market and consumers, but also have sufficient profit margin to distribute benefits to offline channels at various levels.
Lan Shili has bombarded this model many times before. He believes that from the time a bottle of drink leaves the factory to the consumer in China, 70% of the profit remains in the distribution sector. When consumers buy a bottle of products for 10 yuan, the factory price is only 3 yuan, which is not reasonable.
Regarding the sustainability of high-quality, low-cost businesses, Lan Shili once said that she has reduced the costs of the upstream supply chain to the extreme, and has also left profit margins for the downstream. For example, bottled soft drinks with a terminal price of 3.8 yuan, the price given to agents is 1.9 yuan, the price of goods taken by the terminal is between 2.2 yuan and 2.3 yuan, and she is operating at a low profit.
Currently, the Chinese beverage market is in full bloom. Lan Shili itself is an OEM production model, and the upfront investment will not be too large. Therefore, leveraging the market with low-cost, high-quality products is also a marketing method. Especially when consumption is weak, this strategy will be more effective. Moreover, after the scale of the enterprise increases in the future, the product structure can also be adjusted again.
The domestic beverage industry is a fully competitive industry. In the soft drink market, two major colas and strong regional soda brands coexist. The last to break out was the Forest of Energy, supported by a large amount of capital. The process is also difficult to say easy. The development prospects of Wuhan No. 2 Soda have yet to be further watched.
According to the announcement, the initial share transfer price agreed by the two parties was HK$0.136, and the stock price of Raffles Interior as of the close of trading on the 19th was HK$0.54. If all of the shares were converted in the future, Lan Shili would hold 15.8% of the shares of the listed company after the expansion. And if the soft drink business grows rapidly in the future and the stock prices of listed companies rise further, the market value owned by Lan Shili will also expand rapidly.
Lan Shili said that the reason they are in a hurry to promote the listing of the soft drink business is, on the one hand, to obtain more financing in the international market in the future; on the other hand, listing can also make enterprises more standardized, which is conducive to further development; furthermore, after listing, enterprises can continue to monetize phased business results in a timely manner, and continue to refinance and expand.
What is interesting is that at the listing ceremony on the same day, in addition to a few of Lan Shili's old friends, leaders from Zhongxiang City in Hubei Province also appeared among the guests. Outsiders once commented that Lan Shili's greatest achievement in the tourism industry was the development of Zhong Xiang's Huangxiandong Scenic Area.
Editor/Jeffy