The Rise and Fall of Hongjiu Fruits: A Tale of Ambition, Mismanagement, and Legal Troubles
Hongjiu Fruits was once a legendary company in China's fruit industry, embodying the rags-to-riches story of its founder, Deng Hongjiu. From a small stall in Chongqing's Chaotianmen dock in 1987 to controlling 10% of China's durian market and becoming the "first fruit stock" listed on the Hong Kong Stock Exchange, Hongjiu Fruits' journey was nothing short of meteoric. However, less than three years after its market debut, the company's executives were placed under criminal investigations, and its headquarters were left deserted, marking the abrupt end of a once-glorious enterprise.
Deng Hongjiu's entrepreneurial journey began as a porter in Chongqing, where he discovered the profit opportunities in the fruit market. This keen sense for market gaps became the foundation of Hongjiu Fruits' future success. In the 1990s, he established a nationwide fruit distribution network, selling southern fruits like lychees from Guangxi to the northeast. In 2006, he capitalized on the news of zero tariffs for Taiwanese fruits entering the mainland, introducing them to the Chongqing market and achieving sales of 150 million yuan that year through partnerships with multiple supermarkets.
His next big bet was on imported fruits, particularly durians. In 2012, he invested 100 million Thai baht to build a durian processing factory in Thailand, secured contracts with 40,000 acres of orchards, and introduced sugar detection and weight grading equipment, reducing the industry's average loss rate from 15% to 5%. This "end-to-end" model, where fruits were sourced directly from orchards and delivered to Chinese retail terminals, enabled Hongjiu Fruits to control 10% of China's durian market by 2018, earning Deng the moniker "China's Durian King."
Between 2019 and 2022, the company's revenue soared from 2 billion to 15 billion yuan, culminating in its Hong Kong IPO in 2022. The company's market capitalization briefly reached 60 billion Hong Kong dollars, and Deng's family wealth peaked at 8.5 billion yuan, landing them on the Hurun China Rich List.
However, beneath the surface prosperity lay deep-rooted problems. Deng's prized "end-to-end" model had a fatal flaw: to ensure supply stability, the company had to pay for fruits months in advance, but they had to wait up to 188.5 days to get paid by business clients like supermarkets. This cash flow mismatch led to chronic financial struggles, with cumulative net outflows of 4.059 billion yuan from operating activities between 2019 and 2022.
Moreover, the "orchard-to-supermarket" model touted in its prospectus was largely a conceptual packaging, with 57.1% of revenue still dependent on traditional wholesale channels. This discrepancy foreshadowed the company's eventual collapse.
The situation worsened as Hongjiu Fruits' business clients collectively defaulted. By June 2023, the company's account receivables amounted to 10.151 billion yuan, with over 10 billion yuan facing recovery difficulties. The supermarket industry, hit by the pandemic and competition from community group-buying, struggled to stay afloat, directly disrupting Hongjiu's cash recovery chain. The company resorted to borrowing to sustain operations, with bank loans surging from 1.86 billion yuan in 2022 to 2.776 billion yuan in mid-2023, a 49.22% increase.
Facing the cash crunch, Hongjiu Fruits' management resorted to financial fraud, fabricating fruit purchase contracts to secure loans and using shell companies to create a fictitious upstream-downstream transaction chain. In 2023, the company paid 3.42 billion yuan in advance to several "shell suppliers," some with minimal registered capital or no employees, yet receiving funds far exceeding their qualifications.
These manipulations left numerous red flags in the company's 2023 financial report, indicating severe deterioration in cash recovery and operational efficiency.
The company's family-centric governance structure, with Deng at the helm, his wife as general manager, his nephew controlling channels, and his son overseeing the brand, exacerbated the crisis. This arrangement led to the misappropriation of company resources and the fabrication of purchase contracts, deviating sharply from corporate governance norms.
Hongjiu Fruits' implosion offers three key lessons. Firstly, the inherent high-risk nature of the fruit industry, characterized by high loss rates and strong seasonality, necessitates strict adherence to cash flow management. Hongjiu's rapid revenue growth, fueled by capital, was unsustainable and ultimately detrimental.
Secondly, market dynamics can be the final straw. The mass entry of domestic durians in 2023, causing prices to plummet, shattered the premium space for imported fruits, devastating Hongjiu's core business.
Lastly, corporate governance must evolve with the times. Family businesses must transition to modern corporate structures with checks and balances and professional division of labor to navigate complex market environments.
The rise and fall of Hongjiu Fruits serve as a stark reminder that sustainable business growth is built on respecting industry fundamentals, managing risks judiciously, and adhering to legal and ethical standards. As the business landscape rapidly evolves, the ongoing learning and adaptation of founders are paramount to navigating the complexities of capital, technology, and market dynamics.
英文改写自首席商业评论微信公众号文章
让同行眼红的水果大王，怎么就成了阶下囚？
