A year has passed and the attitude of the team towards enterprise reform has totally changed. In the past year, "difference" has become the theme of CR Snow. All employees of the company have been involved in a determined and in-depth reform. As a company with a history of more than 20 years, CR Snow replenished itself with incredible vigor and vitality through launching new brands and winning the heart of the young generation.
The determination of CR Snow in streamlining operations originates from an in-depth understanding of China's economic transition and the development path of CR Group as well as the accurate analysis of the future of the beer industry and the strengths and weaknesses of Snow Beer. China is in the middle of the transition from investment-driven, extensive economic model to an intensive one emphasizing quality, efficiency and profitability. Having gone through 80 years of ups and downs, CR Group has also entered the period of transition with "quality development" as the theme.
Changes in the industry made the pressure even more acute. The beer industry in China has been shrinking for 3 consecutive years with productive capacity far greater than demand. Therefore, the segmented and low-efficient productive capacity is in urgent need of integration. While the size of the industry is shrinking, its value is increasing with clear signs of consumption upgrade. The focus of market competition has shifted from mainstream beer to new generation products. With the post 1990s generation becoming the major consumers of beer, today's products need to cater to the need of the new generation growing up in the era of the internet in product design, brand promotion, marketing and interaction.
Looking back on the development of Snow Beer, large-scale M&A helped the company to expand the market with a 10-million-ton-level productive capacity. However, as the focus of market competition changes, problems began to emerge: large scale, low quality, the lack of mid-and-high end product lines and low overall profitability; inefficient small and middle-sized factories with limited resource integration and coordination capabilities created huge burden for the company; the lack of a future-oriented organizational structure and corporate culture made the company close-minded and self-satisfied. At the same time, major competitors from Snow Beer has also changed from Qingdao and Yanjing to Budweiser and Carlsberg. Compared with these international brands with high efficiency, diversified product mix and powerful organizational structure, Snow Beer have fatal weaknesses.
The management team of CR Snow identified that the market in transition has only left 5 to 10 years for Snow Beer.
"To achieve the same productive capacity, we need 90 factories while international brands need only 7. We have 1000 managers while they only need 100. We are selling Snow Draft Beer while they are selling high-end beer. Luckily, we still have the chance to change the situation as the race has just started. We need to act now!"
In April 2017, CR Snow Beer held a meeting discussing future strategies. A report titled Tomorrow Will Be Better identified three major focuses for management and 7 major strategic moves. The three focuses, namely quality business growth, transition upgrade and innovative development, aim at replacing "massive growth" with "quality growth". The 7 major strategies include organizational restructure, brand reshaping, productive capacity optimization, operational reform, channel transformation, glass bottle management and lean marketing. The report also set up a new goal for Snow Beer: double the profit and the market value in the coming 5 years.
"After 2 days of discussion, no one believes that we could realize the goal". The implementation of such an in-depth and extensive reform needs not only dreams and passion, but also solidarity, determination and action. After several rounds of motivation, still feeling unsure, the management team of Snow Beer with strong will and 20 years of rich experience, decided to address the challenges against all odds and step on a heroic journey of selftransformation and reshaping
It took 6 months for the company to complete the organizational restructure. With a fair and just system being established, 80% of the executive committee members finished rotation and nearly 100 high-level officers left their current position; 9 factories were closed as part of the productive capacity optimization efforts, significantly saving cost; the first core product launched under the brand reshaping strategy---Super X was doubled its initial production goal of 100,000 tons after winning market recognition. New product testing, design and marketing models challenged the capability of the team, demanding for fresh mindset for product and brand development. Operational reforms broke up the boundary among factories and realized the integration of production, logistics and marketing, making 90 factories an integrated large factory. Lean marketing, with an emphasis on the improvement in marketing capabilities and paradigm shift, drives sales not by low price, but by brand building and consumer experience. In spite of the huge burden when productive capacity optimization and operational reforms were met with obstacles, in spite of the frustration when brand reshaping and lean marketing were repeated challenged, the team was able to make all reform measures work. Most importantly, through these reforms, consensus is reaches, the team is more confident and synergy has been formed. Under the guidance of a clear development strategy, everyone knows his/her own position and future direction".
Internal reforms soon had a positive influence on business performance and share price. In 2017, against the 0.7% decrease in the overall sales of the beer industry, Snow Beer registered a 0.9% increase in sales with a year-on-year growth in revenue of 3.6%, higher than the industrial average. The percentage of middle-and-high end beer increased from 32% in 2015 to 47% in 2017. Closing factories, with short-term interruptions, could save cost by 140 million HKD annually in the long run. Productive capacity efficiency increased to 53% while marketing cost rate went down by 0.6 percentage points. The share price of CR Beer went all the way up from 15.4 HKD in the end of 2016 to 28.5 HKD in the end of 2017 and continued to reach 35 HKD in May, 2018. Now, the market value of the company has reached 112.7 billion HKD with the shareholder value being doubled.
In October, 2017, Snow Beer held 2018 Business Launch Meeting. The meeting made employees more confident and motivated. Another three strategies were added to the seven major strategies: the development of corporate culture, the upgrade of information technology and internet marketing. A report titled Marching into the New Era was published on the meeting to encourage the team to work hard for breakthroughs in 2018. It is planned that the team would focus on increasing the price of products, accelerating the closing of factories and launching Super X on the basis of the achievements made in 2017 to make a decisive turn for the future.
"For Snow Beer, realizing the long-term value of enterprises is the most important economic responsibility of a central enterprises."
In the value creation ecosystem developed by Snow Beer, the efforts made today are not only for good performance in 2018 or the three years to come, but for long-term value growth in the next decade or so. The efforts of the team today will lay the foundation for Snow Beer to realize its dreams and carry out its mission. Faced with the opportunities and the challenges of the future, Snow Beer, a company with 20 years of history, will move on with no fear.
Tremendous Responsibility Behind a Simple Story
CR Beer not only developed a new ecosystem for value creation that has become a "model" for pursuing high-quality development, but also gained the recognition and favor of the capital market through productive capacity optimization and product structural upgrade. In 2017, CR Group actively carried out shareholder responsibilities, implemented the strategy of "Innovation in transition and quality development" and promoted the transformation and upgrade of multiple business operations through improving traditional business, expanding new business, investing in new areas and improving the development of mechanisms for innovation. By nurturing new growth magnets, optimizing resource allocation, reducing surplus productive capacity, turning loss to profit, speeding up the management of zombie firms and significantly reducing accounts receivables and cost, CR Group was able to promote supply-side reforms and build up the competitiveness for the sustainable business development and facilitate high-quality development.
We take 80th birthday as the milestone of CR's development and a new starting point for the future. In accordance with the development concept of "innovation, coordination, green development, openness and mutual sharing", the general requirements of "steadily making progress" and the theme of "transformation, innovation and quality development", we dedicated to promoting quality transformation of the Group, enhancing innovation drive, accelerating business transformation, strengthening risk control and implementing national strategies, so as to striving for a world-class enterprise and striving for a century old CR.