The chairman of Dong-E-E-Jiao is really hard to be!
Zebra Consumer Shen Tuo
Dong-E-E-Jiao has a well-known advertising slogan: 'After careful selection, only Dong-E-E-Jiao.'
However, the company has struggled to appoint a stable chairman. Over the past five years, four chairmen have stepped down. Particularly in the last three years, the position has changed annually.
The recent personnel reshuffle can be described as earth-shaking. Not only has a key figure from the China Resources (CR) group taken the helm, but also five senior executives from CR Pharmaceutical Group have joined, assuming roles as directors and supervisors.
After this major reshuffle, with increasing CR influence, can Dong-E-E-Jiao (000423.SZ) regain its former glory?
Major Leadership Overhaul
Being the chairman of Dong-E-E-Jiao (000423.SZ) is no easy task.
On the evening of October 22, the company announced that Bai Xiaosong resigned as chairman, and the board elected Cheng Jie as his successor, appointing Sun Jinni as the company's president.
Before becoming chairman, Cheng Jie had served as president for two years and nine months. Sun Jinni was appointed as a director two months ago, having previously served as the general manager of CR Pharmaceutical's strategic management department and as a director of Boya Bio.
In recent years, CR-affiliated individuals have frequently appeared in Dong-E-E-Jiao's leadership changes. However, apart from Wang Chuncheng, none of them stayed long in the chairman's seat.
In January 2015, Wang Chuncheng was elected chairman of the eighth board, serving until November 2019 when he resigned due to work changes. Before joining Dong-E-E-Jiao, he was an assistant general manager at CR Group.
After Wang Chuncheng, Han Yuewei, another CR-affiliated executive, was elected chairman but resigned in January 2022.
Following Han Yuewei, the leadership returned to a veteran of the Dong-E faction. In January 2022, Gao Dengfeng was elected chairman but served only briefly, resigning in February 2023.
His successor, Bai Xiaosong, also from the CR group, became chairman, while Cheng Jie, another CR executive, was appointed president. This marked the first time CR had full control over both the board and management.
Overall, after Wang Chuncheng and Qin Yufeng, Dong-E-E-Jiao's chairmen have become increasingly younger. Han Yuewei, Gao Dengfeng, Bai Xiaosong, and Cheng Jie were 51, 49, 52, and 45 years old, respectively, when they took office. The presidents—Gao Dengfeng, Cheng Jie, and Sun Jinni—were 47, 43, and 41 years old at appointment.
In January 2022, the pairing of Gao Dengfeng and Cheng Jie as chairman and president, respectively, impressed the market with their youth, leading to a stock price surge the next day. However, the recent pairing of Cheng and Sun failed to generate similar excitement in the secondary market, with the stock closing at 59.64 yuan yesterday, down 1.52%.
Additionally, five senior executives from CR Pharmaceutical Group joined Dong-E-E-Jiao. The company recently appointed Shen Jinfeng (general manager of CR Pharmaceutical's R&D management), Wang Xiaoyue (general manager of strategic management), as directors, and Zhou Jiao (general manager of legal compliance), Wang Hongjie (general manager of auditing), and Zhang Jin (deputy general manager of financial management) as supervisors.
Business Turning Point
Over the past five years, Dong-E-E-Jiao has changed its leader four times, with CR's influence growing stronger and business undergoing a transformation.
Qin Yufeng, a veteran of the company, took over from Liu Weizhi in 2006. Early in his tenure, he planned price hikes for the scarce ejiao product line and repeatedly advocated for the industry's 'value return,' driving significant changes in the company's operations.
Revenue rose from 1.076 billion yuan in 2006 to 7.338 billion yuan in 2018, while net profit attributable to shareholders increased from 149 million yuan to 2.085 billion yuan.
However, after 12 years of continuous growth, the ejiao business myth collapsed. In 2019, revenue plunged 59.53% to 2.97 billion yuan, with a net loss of 455 million yuan—the first loss since its 1996 listing. Sales of the flagship ejiao product line dropped by 4.274 billion yuan.
The company attributed this to macroeconomic conditions and reduced market expectations for 'value return,' leading to persistent inventory pressure.
After this setback, Han Yuewei, CEO of CR Pharmaceutical, became chairman, with Gao Dengfeng as president, initiating strategic adjustments. The company revamped its marketing, focusing on the ejiao tonic sector, and gradually recovered, returning to profitability in 2020.
In 2022, Gao Dengfeng and Cheng Jie collaborated again to get compound ejiao oral liquid included in the national medical insurance, making it a key growth product. The product performed well, and Gao set a revenue target of 8 billion yuan by 2025, with an aspirational goal of 10 billion yuan. However, after his early resignation, this plan was rarely mentioned.
After resigning, Gao joined Qi Ai Group as chief brand officer and was appointed as an advisor for Qi Ai industry development by the local government.
Bai Xiaosong, who became chairman in March last year, did not serve long but maintained relatively stable operations. Last year, revenue and net profit grew by 16.66% and 47.55%, respectively. This year, after stepping down, he returned to CR Pharmaceutical, the controlling shareholder.
Under CR's strong influence, Dong-E-E-Jiao's management team is no longer confined to Dong-E County. In 2021, the company relocated its management to Jinan, focusing on the provincial capital while expanding to national markets.
Not Yet Back to Peak
The 2019 performance crisis was a wake-up call for Dong-E-E-Jiao. With CR's support, subsequent years saw more stable operations.
After ongoing adjustments, the company established a dual-growth model of pharmaceuticals and health consumer products. Beyond traditional ejiao, it developed new products like ejiao cakes, ejiao powder, and bird's nest.
At the mid-year earnings conference in August, the company reported strong performance for three star products: ejiao blocks (up 15%), compound ejiao oral liquid (up 45%), and ejiao cakes (up 25%), with ejiao powder sales surging 150%. Ejiao blocks held a 71% market share in their category, while compound ejiao oral liquid accounted for 34% of the blood-tonic oral liquid market.
Recently, the company forecasted a 40%-50% year-on-year increase in net profit for the first three quarters of 2024, reaching 1.1 billion to 1.175 billion yuan.
At this growth rate, surpassing last year's performance is highly likely. However, it still hasn't returned to its peak years of 2017 and 2018, when revenue exceeded 7.3 billion yuan and net profit reached 2.044 billion and 2.085 billion yuan, respectively.
While Dong-E-E-Jiao remains a dominant player in China's ejiao market, the sector is shrinking, with competitors like JiuZhitang, Taiji Group, and Tongrentang increasing their presence.
In recent years, Dong-E-E-Jiao has rebranded to appeal to younger consumers, boosting marketing spending. Sales expenses have risen annually, from 24.58% of revenue in 2020 to 31.52% in 2023, reaching 36.39% in the first half of this year.
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