Chapter 271 Chain Reaction, Fund Flow BackGuo Yang actually had no idea how severe the impact of melamine was on multinational corporations. But Ji Zhuowen is more knowledgeable about this aspect. Guo Yang also learned more details from his oral narration. Nestlé was the first multinational company to fall. It is one of the few multinational dairy giants that has its own milk source base in China. In the early 1990s, Nestlé established a milk source base in Heilongjiang Province, adopting the "company + farmer" model, collecting milk directly from farmers without going through middlemen. However, after the incident, the Hong Kong Island Food Safety Centre announced that a sample of Nestlé's pure milk for catering was found to contain melamine. Next came Unilever and Starbucks, both of which chose Mengniu as a supplier and then got hammered. Starbucks, eager to draw a clear line between itself and other brands, began looking for suppliers across the country again, and Hexi Dairy, which had a good reputation, came into its sight. After Guo Yang learned the details, he thought for a while and said, "Is Hexi Dairy's supply chain very tight now?" "Well, the main reason is that the production of raw milk has reached a bottleneck. There are about 30 dairy cows on the ranch now, about half of which are in the productive period. Based on the current yield level, the annual milk production is about 200 million tons."
The current domestic dairy cow inventory is around 1300 to 1400 million heads, with an annual raw milk output of approximately 3900 million tons, and an average yield of around 3 tons per unit. The average yield of Hexi Dairy has reached 10 tons. This is mainly because there are too many individual investors and dairy companies have too little self-controlled milk supply. At present, except Hexi, there is no pastoral group in China with a dairy cow inventory of more than 10 heads. In terms of dairy cow inventory, average yield, and proportion of self-controlled milk sources, Hexi Dairy ranks first. Guo Yang thought about it and said, "There is no need to cooperate with Starbucks for now. After all, our own production is not enough." Ji Zhuowen said: "Starbucks is very eager now. In the past 10 years, their global stores have expanded from 1000 to 13000." "Except for coffee, its milk and other products need to be purchased locally. It will still maintain a unified national milk procurement model, and its milk supplier must be a national brand." "If we don't supply, Starbucks will probably choose Mengniu again after the incident has subsided." "So, my suggestion is to stabilize it first." Guo Yang put the report in his hand on the table, picked up the teacup and took a sip, thinking for a long time before saying: "Forget it, let's prioritize the supply of infant formula." Ji Zhuowen said with a hint of regret: "In fact, there are still many countries that want to import our milk powder. If Hexi's milk powder production is sufficient, it can be exported." Guo Yang raised his eyebrows, "Isn't the exit blocked?" Since the domestic incident broke out, a number of countries, led by Europe and the United States, have explicitly banned the import of any dairy products from China. Ji Zhuowen said: "But there are also customers who recognize our products, especially in countries with a shortage of milk sources, and the domestic government also hopes that we can collect more milk and then process and sell or export it." Guo Yang understood this point, but he still shook his head. Under the impact of internal and external troubles, some domestic dairy companies have serious product backlogs, and the country has been encouraging processing companies to collect more milk. Hexi was hit hardest. However, except for the Hexi branch Delong Livestock Association which collects milk around Tianshan Ranch, the rest of the milk sources are self-controlled.
Not much help for dairy farmers. Moreover, foreign brands are now too arrogant and are extremely tough on pricing. The price difference between low-end local brands and high-end foreign brands is 5 times or even more. However, imported milk may not be safe. Mad cow disease and foot-and-mouth disease have long affected some countries. As a local high-end brand, Hexi Milk Powder will definitely prioritize domestic markets to cope with challenges from foreign brands. Although this will offend some people, it will help restore national confidence and benefit the long-term development of the domestic dairy industry. But it’s even more uncomfortable for Yili, Mengniu and others. Guo Yang thought about it and realized that the interests of hundreds of thousands of dairy farmers were involved behind Mengniu and Yili, and the government would not let them go bankrupt. Foreign acquisition is also impossible. After a moment of silence, Guo Yang said, "Hexi Dairy is not a god. We should not think about the benefits and profits that we cannot get." "The current work focus is to expand the pasture, increase the yield per unit, and increase the total output. Our dairy cow inventory is still too small." "In addition, we need to strengthen research and development and marketing, do a good job in hospital public relations and follow-up visits and professional services for consumers, especially tracking the growth of babies." "Don't netizens say that Hexi milk powder is amazing? If we follow up long-term and come up with specific data, it will be more convincing to consumers and greatly enhance their trust." "Service is also Hexi's current shortcoming." Ji Zhuowen was a little surprised that his boss had quite some insights into dairy marketing. But when he thought about it carefully, wasn't this the same approach used by Tianhe and Fengkai? Jiahe really carries out its service purpose to the end. Seeing Ji Zhuowen still standing there in a daze, Guo Yang waved the document in his hand and said, "Let me look at the report for a while." "Good Le!" Ji Zhuowen came to his senses, but did not walk away. Instead, he went to his office nearby, but his eyes remained on his boss. Guo Yang turned his attention back to the financial statements. 2006 has just passed, and the detailed financial report for last year has not yet come out, but the rough financial data is already available. Placed on the top is the most recent daily sales curve, which first jumped up and down, and then rose rapidly again. After New Year's Day, daily sales reached more than 8000 million yuan, which is the current production capacity limit. Sales in the fourth quarter of 2006 reached 42 billion yuan. Guo Yang raised his eyebrows. How much was it in the first three quarters? It seems to have exceeded 10 billion! Continue reading. As expected, in the first three quarters, Hexi Dairy's sales were 16 billion, 16 billion, and 27 billion, respectively, totaling 59 billion. The total for the whole year is exactly 101 billion yuan. Guo Yang took a sip of tea to calm down, but he still couldn't suppress the excitement in his heart. Hexi Dairy was established only three or four years ago, and it has already exceeded 10 billion? This is indeed a remarkable achievement. I don’t know how Ji Zhuowen managed to hide for so long?
He raised his head and saw Ji Zhuowen quickly looked away, pretending to stare at the computer. Guo Yang smiled unconsciously. Soon after, the excitement in my heart calmed down, and I deserved this achievement. Next year's data will only look better, with an annual growth rate of more than 100% or even close to 200%. 8000 million yuan in sales per day, 24 billion yuan per month, 288 billion yuan per year... It is estimated that despite this incident this year, Yili's revenue will still maintain growth, probably in the range of 150 to 160 billion yuan, but its profit will be a huge loss. The bull is even worse. As long as Hexi Dairy maintains its stability, it will surely become the industry leader next year. Therefore, Ji Zhuowen was still a little too greedy. Thinking of this, Guo Yang looked at Lao Ji again, and their eyes met. Guo Yang teased, "Old Ji, you have great self-control. You haven't even posted a message in the group to show off even though you've reached 10 billion!" Ji Zhuowen scratched his head awkwardly, "I just sent it." Guo Yang was stunned for a moment, laughed twice, and continued reading. Hexi's profit margin is also good. As the scale increases, costs decrease, while the yield per unit area continues to increase. The net profit is close to 30%, which is also the highest in the country, equivalent to 30 billion yuan in one year. The initial cost has almost been recovered. In addition, the data on average cost and benefit of raising each dairy cow are also impressive. An adult dairy cow produces 10 tons of high-quality milk every year. In 2006, the market price of milk was generally between and yuan per kilogram. Due to its product premium and employee profit-sharing plan, the internal price of Hexi milk is 3 yuan per kilogram. The annual output value of each dairy cow is 3 yuan, and the input cost of each cow is about yuan. The net profit is approximately yuan. Cost profit margin is 100%. The financial staff also roughly calculated the market data, with an output value of about yuan, a cost of about yuan, and a cost-profit ratio of about 30%. Judging from data from all aspects, Hexi Dairy’s scale ranch efficiency has achieved overwhelming success. In terms of the number of employees and job creation, Hexi Dairy is actually not doing badly. The first is pasture management, taking a mechanized dairy farm with 10,000 cows as an example. Two senior executives, Animal husbandry and veterinary technical teams, one for every 250 cows, that is 80 people; breeders, about 50 people; breeders, about 100; milking and milk handling, about 80 people; Including feed and plot, and other management personnel, a dairy farm with 400 cows requires at least employees. In fact, the average number of employees in the ranch sector of Hexi Dairy far exceeds the standard, with the total number reaching .
In the areas of processing, transportation, sales, and distribution, more than 6 jobs were directly created. In 2006, Hexi Dairy's employee salary expenditure was million yuan, with an average monthly salary of 2500 yuan per person. This does not include employee profit bonuses. Even at 2500 yuan, this level is far higher than most people and more than twice the average salary in the agriculture, forestry, animal husbandry and fishery industries in 2006. Including dividends, Hexi Dairy's income level can even steadily exceed the average salary of employees in big cities such as Yangcheng and Pengcheng. Hexi Dairy also has many investments in remote areas. With this level of income, the employees in Hexi are undoubtedly very happy this year. In addition, Hexi Dairy has also promoted forage grass planting, organic fertilizer production, bioenergy... The number of people relying on Hexi Dairy is still increasing. In general, although Hexi Dairy has taken away the jobs of many dairy farmers and even the fact that milk prices have remained low for a long time is also closely related to Hexi Dairy. But Hexi Dairy has also created a large number of jobs, promoted the elimination of backward production capacity, and driven the progress of the industry. Overall, the advantages definitely far outweigh the disadvantages. It's just that in the short term it will offend a lot of people, and even make people hate it, especially the Meng Province that was hit hard this time... Jiahe needs to be careful when investing in the future, as there might be herdsmen coming to cause trouble. That afternoon, Guo Yang stayed in the office sorting out various data. If you have any questions, you can discuss them with Ji Zhuowen at any time, or call the technical director or R&D staff to communicate. We strive to clarify and understand the meaning of each indicator data and its level in the country and the world. The more you know. Guo Yang increasingly felt that these data still had a lot of room for improvement. The current output value of Hexi Dairy is so high, mainly due to the initial investment, which has digested the dividends brought by high-quality alfalfa and Hexi dairy cows, plus the management advantages brought by large-scale ranches and self-controlled milk sources. To put it bluntly, the greatest credit goes to the excellent varieties cultivated by seed shops. In terms of product research and development, as well as technological background, Hexi Dairy still cannot compare with old-established companies such as Yili, Bright Dairy and Sanyuan. After this incident, other companies will certainly turn to learn from Hexi Dairy, introduce high-quality forage grass, and even introduce Hexi milk. What can Hexi Dairy do? Guo Yang, Ji Zhuowen and others actively discussed the issue. Expanding production capacity and seizing market share is certain; Variety selection, technological innovation, product development, internal control management, etc. are also very important. It took me two consecutive days to sort out the general direction of the goals and strategies for the new year. ……
While Hexi Dairy was busy enjoying the fruits of victory, many dairy brands were caught in crises. Prince Milk is in financial trouble. Yili and Guangming faced huge losses, their share prices plummeted, and they lost market share. The most anxious company was Mengniu, which was busy looking for help everywhere. Mr. Niu even wrote a ten-thousand-word letter asking the business community and the government to rescue Mengniu to avoid being acquired by foreign capital. According to Mr. Niu, JPMorgan Chase holds of all shares of Mengniu, Citi holds , and UBS increased its holdings against the market trend to . This kept Mr. Niu awake at night. When they learned the news, Guo Yang and others were still in a meeting. When Ji Zhuowen and others expressed their opinions with interest, Guo Yang said: "This is just a show by Mr. Niu. Mengniu has no milk source base, foreign capital also lacks control over raw materials, and Mengniu relies on distributors for distribution." "Also, the acquisition depends on government factors. Foreign capital is unlikely to acquire the leading dairy companies." In addition to the memories of his previous life, Guo Yang has also made up for a lot of dairy industry knowledge these days. Foreign capital wants to directly acquire first-tier brands, but the government will not allow it. Some senior executives in Hexi still don't believe it. During this period, foreign brands such as Danone, Fonterra, FrieslandCampina and Lactalis have increased their investment in China. This caused many domestic experts to become concerned and they made a series of remarks, which triggered another round of panic. Even some people in Hexi were affected by the situation. There is definitely some truth to this, but Guo Yang feels that it is more of an unfounded worry and alarmist statement. The domestic price war is so severe that foreign brands do not care about the profits of mid- and low-end products and only focus on taking profits from high-end brands. As for the high-end brands, there is Hexi milk powder, and Guo Yang is quite confident... really. As the losses from the removal, recall and destruction of Yili and Mengniu products become increasingly severe, the sales end is also in trouble, with inventory backlogs increasing. But the operating model of dairy companies is like tap water, which needs to circulate 24 hours a day. The cows need to be milked! It broke after two days of non-use. The milk can't be sold. The scene of pouring milk and killing cows was reproduced. Dairy farmers and dairy companies are all wailing. Subsequently, in order to help dairy companies out of their predicament, various departments at all levels introduced assistance measures, and the government allocated 3 million yuan in temporary relief subsidies to dairy farmers. Twelve provinces including Beijing, Tianjin, Hebei and Inner Mongolia have also adopted measures such as increasing financial subsidies and subsidizing processing fees to encourage processing companies to expand the purchase of fresh milk. The capital’s finance department has decided to provide a 60% subsidy to dairy processing companies for the losses caused by the destruction of substandard milk. The Inner Mongolia Province also set aside a reserve fund of 1 million yuan, and Hohhot also set aside a special fund of 5000 million yuan to support the two major dairy companies, Yili and Mengniu, to overcome the difficulties.
At the same time, the Mongolian province also applied to exempt the two major groups from value-added tax for the next four months. A series of measures allowed Yili to recover some of its vitality, and it immediately announced that it would vigorously build a milk source base and planned to add 20 new ranches under the dairy cooperative model. Like Hexi Dairy, Yili also has three major natural pastures: Hulunbuir, Tianshan Grassland and Durbert. It’s just that the proportion of self-controlled milk source is not high. As for Mengniu, milk source has always been its shackles. This time, it also announced that it will invest 3 billion yuan in the next 5 to 60 years to build more than 20 super-large-scale dairy cow ranches with heads of dairy cows. But everyone in Hexi believed that Mengniu did not have this ability before new large funds were injected. In addition, Sanyuan also announced plans to build multiple dairy farms with tens of thousands of cows. But these are just slogans at present. In contrast, foreign capital began to invest real money. Nestlé invested million yuan in Shuangcheng, Heilongjiang Province to build a super-large ranch. Previously, it owned dairy cows through various models. New Zealand's Fonterra has approved five super-large ranch projects in Hebei Province... A series of investments have been implemented. Hexi Dairy is also very quick to act, and through years of hard work, it has become adept at managing super-large ranches. Today, Hexi Dairy's assets can be realized very quickly, its bank loan channels are unobstructed, and it has financial subsidies and support, so it has abundant financial resources. Alfalfa Farming and Animal Husbandry is particularly good at land preparation and production of high-quality forage. In terms of management and technical teams, a lot of talents have been cultivated over the years, and now is a good time for promotion. With the right time, place and people, the Hexi Dairy inspection team quickly rushed to all directions to investigate ranch sites. …… While Hexi Dairy was still under investigation, a leader from Heilongjiang Province contacted Jiahe to seek investment. Zhou Kai managed his body very well, and being in his fifties was still the prime of life for his position. Through his connection with the Ministry of Agriculture, he made an appointment with Guo Yang in Beijing. Zhou Kai said: "Mr. Guo, the Heilongjiang alfalfa industrialization cluster of Alfalfa has been proposed for more than a year, and the reclamation area has been looking forward to it!" Guo Yang smiled and said, "Leader, the Hexi survey team has already set out. If nothing unexpected happens, they will definitely choose a site in the reclamation area this time." Heilongjiang Province has always been the largest infant formula production base and high-end formula base in the country. It has independently cultivated domestic dairy companies such as Feihe and Wandashan, and also introduced the international dairy company Nestlé. There is not much demand for dairy companies. Zhou Kai raised his eyebrows and said, "The current alfalfa industry in the reclamation area is scattered and isolated. There is a lack of a large-scale enterprise that can carry out alfalfa breeding, planting, cultivation, mechanical harvesting, processing, sales, breeding, and ecological foreign trade." "At present, only Alfalfa Farming and Animal Husbandry has such strength in China. The more than 300,000 dairy cows in the reclamation area are in urgent need of high-quality forage grass!"
The development history of the alfalfa industry in Heilongjiang Province's reclamation area is roughly similar to that of my country's alfalfa industry. Starting in the 90s, it grew from nothing to something, from small to large, and then due to the grain subsidy policy, the planting area shrank significantly. Until now, affected by the melamine incident, the value of alfalfa has been revealed, and market demand and prices have begun to rise. Guo Yang pondered for a while and said, "The whole country is in short supply of high-quality commercial forage grass, and Alfalfa cannot make large-scale investments everywhere..." Zhou Kai immediately said: "We came here with sincerity. The subsidy for high-quality seeds is 100 yuan per mu, and the subsidy for forage machinery is 50% in total..." Guo Yang was surprised for a moment. The subsidy for good seeds was okay, but the subsidy for forage machinery reached 50%, which was a little more attractive. The reclamation area has a small population and a large amount of land, which is flat and continuous, and is very conducive to large-scale mechanized operations. For example, the largest farm in the reclamation area, Friendship Farm, has a cultivated land area of nearly 138 million mu and is known as the largest farm in the world. The shortcomings of the reclamation area are the low level of alfalfa industrialization, lack of harvesting machinery, poor storage capacity, and few high-quality varieties... These are Golden Harvest’s strengths. Guo Yang hesitated. After thinking for a long time, he still felt that making a large investment directly was not the best option. Alfalfa has two industrial highland areas, the Hexi Corridor and the Hetao region, supplemented by two advantageous production areas, Xinjiang Province and the Loess Plateau. It can control most of the global high-end alfalfa trade volume and earn the most lucrative profits. Others include the Horqin Sands, Yulin, Shaanxi, Liupanshan, Ningxia, the Yellow River Beach, Henan, the Bohai Bay, and the Yellow River Delta. It is left to followers such as Brilliance and Oasis, while Alfalfa earns profits from seeds, agricultural machinery, processing and other links. This is the optimal solution. Faced with Zhou Kai's cordial invitation, Guo Yang still refused. In the following days, alfalfa became the target of investment in major livestock-raising provinces. The main leaders of various provinces and cities led delegations to visit. After being tortured for several times, Guo Yang couldn't cope with it anymore. They had no choice but to let Xie Shijie take the lead, and Hexi and Fengkai participate, to organize partners such as Huihuang, Oasis, and Yasheng Tianyuan to conduct cooperation negotiations with major livestock provinces. Alfalfa Agriculture and Animal Husbandry is in control behind the scenes, several grass companies are taking the lead in investment, and various provinces and cities have also achieved the goal of developing the alfalfa industry. Almost all parties achieved their goals. While major livestock-raising provinces are busy restoring the dairy industry and developing the alfalfa industry, the coastal saline-alkali land presents a completely different picture. The wind carrying the salty smell of sea water swept across the wheat fields, giving the whole field a dreamy beauty. For growers, beauty is secondary, yield is the most important. In fact, the temperature this winter is relatively low and the soil moisture is also relatively average. However, after one year of improvement with Alfalfa No. 1, the land brought surprises to the farmers.
The soil is fertile and deep, the soil quality has been greatly improved, and the salinity has been reduced to below 3‰, combined with Tianhe's excellent wheat. The wheat is growing well now, it is green and full of vitality. Experienced farmers predict that if there are no problems with follow-up management, the wheat yield per mu will be stable at 400 to 500 kilograms, with an income of 600 to 700 yuan. Some fields that have been supplemented with organic fertilizers can be even taller. In addition, the market for alfalfa is bullish, there is a market and a price, and the payback period for improving saline-alkali land is shortened again. The enthusiasm of large households for land has been ignited once again, and the number and area of coastal saline-alkali land improvement projects have rapidly increased. The experience of Alfalfa Agriculture and Animal Husbandry is more intuitive. Alfalfa No. 500 seeds, priced at 1 yuan per pound, were sent to various places in bags. As the new year began, Jiahe’s funds began to flow back rapidly. (End of this chapter)