Summary of Key Points
Traditional consumer giants such as Tongchen Best Health, Qipiwolf, and Lianhua Holdings are collectively shifting their focus to invest in high-tech fields (AI models, chips, computing power, etc.) due to the peak in growth of their main businesses and ample cash flows. This "diversion from their core businesses" is not accidental but a rational choice in response to concerns about their main industries. By investing their spare funds in the tech sector, they aim to diversify their assets and find new sources of growth. There are three main types of investment strategies:
1. "Lottery-style" investments: Pure financial investments with a hope for luck.
2. "Enabling" investments: Using AI to enhance the efficiency of their main businesses.
3. "Industry-oriented" investments: Directly entering the tech business itself.
Behind these moves is a desire for the benefits of technology and a desire to escape the intense competition within their existing markets.
Tongchen Best Health: The AI Transition of a Leading Health Product Company
Tongchen Best Health was once a dominant player in the domestic health product market, but its performance has declined in recent years (revenue decreased by 27% in 2024 and another 8% in 2025). As a result, the company has increased its investment in AI:
- What has it invested in? Within half a year, it invested in three major AI models (Yuezhiànmiàn, DeepSeek, JiéyuèXīngchéng) and two AI chip companies, covering the core areas of large-scale AI models, chips, and space computing, with a total investment of nearly 200 million yuan.
- How did it get into the top AI circles? Projects like DeepSeek, valued at 50 billion US dollars, are not accessible just by having money; the company also needs the founder's approval and a five-year commitment not to withdraw the investment. Tongchen Best Health used two approaches:
- Riding on fund partnerships: It invested in DeepSeek through LìsīXīnglíng Fund (managed by a former Sequoia Capital partner with state-backed support), holding only 0.04% but gaining entry.
- Family connections: It entered the markets for Yuezhiànmiàn and YuánlìBànzhìSemiconductor through family affiliates of the controlling shareholder, LiángYǔnchāo (through his mother-in-law and spouse's shareholdings).
- Why invest? With 2.3 billion yuan in cash and an asset-liability ratio of only 20%, investing a small percentage is like buying a lottery ticket. If successful, it could lead to substantial profits; if not, the loss would be manageable, and the company can still gain insights into cutting-edge technology.
The "Collective Anxiety" of Traditional Consumer Companies: Is Their Main Business Really Losing Its Appeal?
The reason these companies are diversifying is that their main businesses have reached a ceiling:
- Tongchen Best Health: Both its distribution channels and products are facing challenges. Offline pharmacies once accounted for 70% of its revenue, but cross-border e-commerce has allowed international brands like Swisse to enter without health product approvals, and live streaming has diverted online customers, resulting in a 17% decline in offline sales in 2025.
- Product obsolescence: Protein powders and glucosamine account for nearly 80% of its revenue, but these products are struggling to sell (sales of powder products decreased by 8%, and tablet products by 17% in 2025), while new products have not yet taken off.
- Qipiwolf: Its secondary businesses are generating more profit than its main business. In the first half of 2025, its main business's profit was less than 30 million yuan, while its investment in securities (such as Tencent and Moutai) yielded over 120 million yuan. It is now investing in AI chips and robotics to compensate for weaknesses in its main business.
- Lianhua Holdings: It has completely changed its focus, shifting from selling monosodium glutamate to providing computing power rental services (by purchasing 330 NVIDIA servers) and high-end materials, with its stock price rising by over 40% in half a year. The capital market rewards such strategic moves.
The Three Approaches to Cross-border Investments: Each with Their Own Calculations
Traditional companies' investments in technology are not random but fall into three categories:
1. "Lottery-style" investments: Purely speculative, using spare funds to invest in top AI projects with the hope of future profits, similar to buying a tech lottery ticket.
2. "Enabling" investments: Using AI to improve the efficiency of their main businesses, such as Anta and L'Oréal, which integrate AI into their operations (e.g., using the "Línglóng" model to transform sketches into design drafts in 15 seconds and the "Língxī" model to help customers try on clothes).
3. "Industry-oriented" investments: Directly entering the tech business, such as Lianhua Holdings and Wahaha, which use their cash flows to foster new industries, betting on them becoming new sources of growth.
Why Are They All Turning to the Tech Sector?
- Lack of good investment options for spare funds: Returns on financial products are declining, and investing in the stock market is risky. Tech investments, however, offer higher potential returns if they hit the right trends.
- Historical lessons: Missing out on the internet revolution was a costly mistake; AI is seen as the next major opportunity, and traditional companies don't want to repeat that.
- Intense competition in their main businesses: The consumer market is growing slowly, and price wars are common. Diversifying into emerging markets, despite the risks, is seen as a better option than competing in a stagnant market.
Risks and the Future
These cross-border investments are not guaranteed to be successful:
- Long investment cycles: It may take 5-10 years for AI companies to go public, and it's uncertain whether the initial investments will yield returns.
- Rapid technological changes: AI technology evolves quickly, and today's "unicorns" may become obsolete tomorrow.
- But risks are controllable: These companies are using only a small portion of their funds (less than 2% of their assets), so even if they lose money, it won't significantly impact their main businesses.
In summary, traditional companies' investments in technology are not a sign of neglecting their core businesses but a proactive attempt to adapt. Instead of competing endlessly in a stagnant market, they are using their spare funds to bet on a possible future. The outcome remains to be seen.
(The text is written in plain language to make it easy for non-experts to understand the logic behind these companies' decisions and the underlying concerns and hopes.