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Evergrande Group, once the largest real estate developer in China, has diversified businesses, including new energy vehicles, property, mineral water, etc. However, in recent years, Evergrande has fallen into a serious debt crisis and has continued to improve its assets in order to ease liquidity pressure and reduce debt.
Recently, Evergrande announced a major decision to take a 49% stake in its Evergrande Ice Spring, with a total amount of about 20 billion yuan. This means that Evergrande has abandoned one of its core businesses in the field of consumer goods, and Xu Jiayin's "Ice Spring Dream" has also been shattered. Why did Evergrande sell Evergrande Ice Spring at a loss?
Evergrande Ice Spring is an important move for Evergrande Group to enter the field of consumer goods in 2015, when Evergrande acquired the brand, production line and sales channels of Ice Spring Drinking Water for 20 billion yuan.
Evergrande Ice Spring is positioned as a high-end natural mineral water, focusing on the concept of "natural, healthy and quality", and the goal is to build China's "Evian". The listing of Evergrande Ice Spring has also been highly valued by Xu Jiayin.
He has personally participated in the brand planning, product design and marketing of Evergrande Ice SpringHe also said that he would achieve the profitability of Evergrande Ice Spring within three years, surpass Coca-Cola within five years, and become the world's No. 1 drinking water brand within ten years.
However, the development of Evergrande Ice Spring did not go as expected. Evergrande Ice Spring has encountered fierce competition in the market, not only facing the challenge of international brands such as Evian, Binglu, Cestbon, etc., but also dealing with the impact of domestic brands such as Wahaha, Nongfu Spring, Baisui Mountain, etc.
Evergrande Ice Spring's ** is also higher, and a 500ml bottle of mineral water sells for 35 yuan, much higher than the average of similar products**. The sales volume of Evergrande Ice Spring is also not satisfactory, according to its 2019 annual report, Evergrande Ice Spring's sales revenue is 31800 million yuan, a year-on-year decrease of 114%。
The net loss was 6500 million yuan, an increase of 44 percent year-on-year4%。The market share of Evergrande Ice Spring is also very low, and the share of Evergrande Ice Spring in China's mineral water market is only 16%, ranking eighth, far behind Nongfu Spring's 289% and Wahaha's 162%。
Evergrande Group is facing severe debt repayment pressure, especially in the implementation of the "three red lines" policy by Chinese authoritiesIn the context of restricting the financing ability of real estate enterprises.
In order to reduce the debt ratio and improve cash flow, Evergrande Group has to improve its non-core assetsMultiple business segments, including Evergrande Ice Spring. Evergrande Group said in its semi-annual report that it will continue to contact potential investors to discuss some shares of Evergrande Automobile and Evergrande Property.
Another reason for Evergrande to sell Evergrande Ice Spring is to focus on its main business and optimize its business structure. In the past few years, Evergrande Group has carried out a diversified layout, involving new energy vehicles, property, mineral water, cultural tourism, sports, health and other fields.
Evergrande Group said in its semi-annual report that it will adjust the project development schedule, strictly control costs, and vigorously develop equity and assetsand attracting investors to increase the equity capital of the Group and its subsidiaries in order to further improve liquidity, ease liquidity and reduce debt.
Evergrande Group aims to return to its core business of real estate developmentAt the same time, it will increase investment in the new energy vehicle business to achieve business transformation.
For Evergrande Group, the sale of Evergrande Ice Spring can bring a certain amount of capital back to it and ease its short-term debt repayment pressureAt the same time, it can also reduce the loss of its non-core business and improve its profitability.
Evergrande needs to find a balance between selling assets and keeping themIt is necessary to ensure the adequacy of its cash flow and the sustainable development of its business.
For the industry, Evergrande's sale of Evergrande Ice Spring may have a certain impact on the mineral water market. The withdrawal of Evergrande Ice Spring may lead to a change in the competitive landscape of the mineral water market, and other brands may seize the market share of Evergrande Ice Spring.
Buyers of Evergrande Ice Spring may continue to operate the Evergrande Ice Spring brand or integrate it into their own brand system, so as to enhance their market position and economies of scale, and trigger changes in consumer perceptions and preferences.
Evergrande's sale of Evergrande Ice Spring is a difficult choice that Evergrande Group has to make in the face of a debt crisis in order to keep its core business and assets.
both in its favorImprove the financial situation and alleviate the financial pressureIt will also help it optimize its business structure and focus on the two major areas of real estate and new energy vehicles.
Evergrande's sale of Evergrande Ice Spring will also have a certain impact on the mineral water industry, which may change the competitive landscape of the market and bring opportunities and challenges to other brands. Evergrande's sale of Evergrande Ice Spring is an event worth paying attention to and thinking about, which reflects the plight and transformation of Evergrande Group, as well as the changes and trends in China's real estate and consumer goods industries. What are your thoughts on this?