In 2011, visit Sanlu again

For the past two years, Wu Yongxing drove to the Hebei Provincial Women’s Prison in the southwestern suburbs of Shijiazhuang every month to visit his wife’s sister Tian Wenhua, former chairman of Sanlu Group. Wu operates a transportation company locally. In the past, Sanlu was its largest customer. The interview room is in the southeast corner of the prison area, which is a two-story building. The inmates can meet with their relatives once a month according to regulations. Wu Hetian uses a walkie-talkie to talk over a toughened glass wall. Most of the talks are short for parents and greetings from others. Tian has an independent unit here. “It’s good to eat. She likes to read books. Sometimes she asks about ternary (after the Sanlu’s arrival).” After smoking a cigarette, Wu Xiaoyan said slowly to “Global Entrepreneur”.

Tian Wenhua is undoubtedly the most famous prisoner here. When the Chinese dairy industry faced ethical and legal trials due to the melamine crisis, Tian He and her Sanlu Group were the first defendants. On January 22, 2009, Tian was sentenced to life imprisonment at the first trial; on March 27, the second instance upheld the original verdict. Sanlu Group was declared bankrupt on February 12 (for more information, please check “Who destroyed Sanlu” on Gemag.com.cn).

Over the past two years, many people are still paying the price for this crisis, trying to repair the pain. Sanlu’s joint venture party, New Zealand’s Fonterra Group, announced on February 3 last year that it would invest in the establishment of two new ranches in Hebei to re-arrange the Chinese market. Sanyuan Foods, the core asset purchaser after Sanlu’s bankruptcy, did not benefit as a result. After losing 129 million yuan in 2009, it still suffered a loss of 0.77 billion yuan in the first three quarters of last year. Sun Liping, general manager of Sanyuan, said: "I don't say whether Sanyuan's acquisition of Sanlu has been successful. I think Sanlu's acquisition is still beneficial to us, and the brand influence of at least $3 has increased a lot." "At least" benefits the national and Chinese dairy industry.

For many of Sanlu’s original employees, this crisis completely shattered their pride and dreams, and this once again made China’s largest milk powder producer history. "No one is a fairy. If such a result can be foreseen in advance, it will not be allowed to happen." Yuan Yunsheng, secretary general of the Sanluyuan middle-level manager and current secretary of the Hebei Dairy Association, told Global Entrepreneurs.

【Flow of collapse】

The middle-level meeting on September 14, 2008 was the last time that many senior executives of Sanlu had met Tian Wenhua. A participant recalled that Tian Qingming was probably aware of how serious the matter was. She took the initiative to take responsibility and apologized to her subordinates and employees. “Tian had said earlier, 'Just see where it broke the pustule.'” The source told Global Entrepreneur. Three days later, Tian was arrested.

When the melamine incident rose to a "major food safety accident," Sanlu executives hoped that the idea of ​​arranging the crisis with market public relations as in the past would be completely bankrupt. Sanlu has repeatedly encountered product quality complaints before, and there is a very complete handling procedure for this.

In 2004, Sanlu was more confident in his public relations ability after successfully handling the tainted milk powder in Fuyang, Anhui Province.

Adding fake dairy products is not new in the industry. After discovering that the melamine exceeded the standard, Sanlu had also found a clean source of milk throughout the country. The result was not found. “Later Tian felt that there was no way to set a standard of not more than 12 milligrams per kilogram for technicians.” Fu Xinjie, general manager of Sanlu’s former milk powder division, told Global Entrepreneurs that milk powder containing less than this amount was allowed to leave the factory. . Later in the trial, this internal standard became one of the important evidences of the prosecution.

Many Sanlu employees were passively involved in this unprecedented catastrophe. Zhang Liang, product controller at the Sanlu Six Workshop, recalled that at the time, he and his colleagues from various factories and subsidiaries received returning consumers in the company's headquarters complex and tried to explain to the latter price standards for returns. At the time, Sanlu’s internal refund prices were between the retail price and the wholesale price. Kaifeng’s milk powder was returned at half price. "The basic explanation is not clear," he said. The reception desk is crowded with people from morning to night, and angry consumers are sometimes angered and swatted, even overturning the table.

The main responsibility of Liu Zhong, the former director of Sanlu Processing Factory No.6, after the suspension of production was to protect the safety of the buildings and equipment in the factory area and prevent the property of the factory area from being taken away due to claims disputes. “My mission is to make sure that the door is not lost and things are not being removed,” said Liu.

Their fate, like this scandal, has since been reversed. The bankruptcy of Sanlu completely smashed the emotional and economic pillars of these people. "There are people who have special skills to go. There is nothing left to do," said an old employee.

When Sanyuan acquired Sanlu, it had made guarantees of “full acceptance”. However, due to the fact that the factory was underemployed, it was unable to employ all Sanlu employees normally. On May 1, 2009, Sanyuan, Hebei signed a formal contract with more than 2,500 Sanlu employees. For Sanlu employees who are unable to get jobs, they will be entitled to “withdrawals” from a certain age (male 55 and female 45) and receive a monthly allowance of around 600 yuan; if they are younger, they can only Waiting for work at home, receive a monthly allowance of around 400 yuan.

In order to help solve the employment problem of the old Sanlu employees, the Shijiazhuang government also approved an exception to Hebei Sanyuan to build a convenience milkhouse along Shijiazhuang Street. In August 2009, Hebei Sanyuan laid off nearly 300 staff to streamline the organization. Most of the employees were stationed at the milking pavilion.

Compared with those who have lost their jobs and livelihood security, Sanlu's bankruptcy has not affected the young employees with higher academic qualifications. “The production system is relatively stable and takes less.” Liu Zhong told the journal that the original Sanlu’s four core factories were not used except that one plant was abandoned due to aging plant equipment. The second, third and sixth plants were almost the same class. There are only a few job changes.

However, the backbone of the business and sales system has changed dramatically. Fu Xinjie said that the five former general managers of the Sanlu division, including him, have chosen to leave. Fu worked in Sanlu for 19 years and was promoted step by step from the bottom to the general manager of the Milk Powder Division. Fu sometimes sighs over the past grandeur. He still remembers clearly that in 2007, when Fonterra executives visited Sanlu, they had thumbs up to appreciate their modern production facilities and on-site management capabilities.

"It's the kind of thing that makes people feel bad," said Fu. After the bankruptcy of Sanlu, the three yuan executives had saved him, but he refused. Now, he himself registered a food company.

After Fu Xinjie and other senior executives left, some of the employees who had persisted were given opportunities for promotion. Li Jianliang, former director of Sanlu Branch, was promoted to Deputy General Manager of the Milk Powder Division. Due to his outstanding performance, Li was also awarded the "Three Ten Models" by Hebei Sanyuan in 2009. Unlike previous management, he still needs to manage operations and markets. "A bit faster to change the role, it is better to adapt." Lee told the publication.

【Three Ages】

In March 2009, Sanyuan acquired a multi-billion-dollar Sanlu core asset with 616.5 million yuan, which was once considered a very cost-effective transaction. After the acquisition, Sanyuan’s sales revenue doubled in the same year. However, the transcript paid by Sanyuan was far from satisfactory, with a loss of 129 million yuan. The annual report explained that the acquisition of Sanlu cost a lot of money. At the end of last year, Sanyuan would sell Beijing Huaguan Dairy Products Co., Ltd., one of the few profitable factories in China, for 350 million yuan to offset operating losses, hoping to avoid ST in the capital market.

"If we don't buy Sanlu, will we lose money in 2009?" said NiLi Liping, general manager of Sanyuan. Dairy expert Wang Dingmian told Global Entrepreneurs that he was not optimistic about the beginning of a transaction with obvious administrative intervention. “It's like a child carrying an adult.” An informed source close to three yuan executives revealed that the idea of ​​the three yuan executives at that time was that, even if it was to be acquired, three years later, Hebei Sanyuan would have to operate independently and not burden Beijing headquarters.

However, Wang Dingmian believes that the most valuable asset left by Sanlu is not the real estate of tens of billions of dollars, but the original market share and mature sales channels. The reason why Sanyuan did not achieve the desired purpose after the acquisition of Sanlu, but made it a burden, the most direct reason is that Sanyuan did not have an effective "acquisition" market share before Sanlu.

Sanyuan lacks experience and talents in the field of milk powder, while Sanluyuan’s management team retains the ambiguity. To make matters worse, Sanlu's suspension of production in the past six months has caused a serious loss of the original dealership network. After that, the bundled sales agreement also offended many dealers. A retailer in Shijiazhuang said that Sanlu’s original distributor policy was more flexible than Sanyuan’s, for example, products that were close to their shelf-life could be returned to factories for conversion, and Sanyuan abolished this practice. In the maintenance of dealer relations, Sanyuan basically starts from scratch.

The fact that the market did not open directly affected the release of production capacity. Sanlu’s former production equipment is now mostly idle. Some employees confirmed to the publication that, for example, the processing plant is still in an intermittent state of suspension. Six factories produce about 100 tons of powdered milk each day, sometimes even as low as tens of tons, and the daily output of Sanlu can reach more than 1,000 tons.

Last September, the Sanyuan Group made a major rectification of Hebei Sanyuan. Zhang Zhenling, former executive vice president of Sanlu, took over as Gao Qingshan, general manager of Hebei Sanyuan in 2009. At the same time, Hebei Sanyuan’s sales business is merged into Beijing Sanyuan, which is directly managed by various business units. Hebei Sanyuan is only responsible for the company’s peripheral businesses such as management and packaging factories.

Although the effect of the integration is not satisfactory, Liu Zhong, the director of the Liuzhou Plant, said that the confusion and the feeling of unsatisfactory psychology did not disappear before. This company seems to have returned to its initial stage, reminding him of his youth as he worked hard.