Summary in Plain Language
This is a typical case of a failed reform involving the hiring of a high-paid external professional manager in the fast-moving consumer goods (FMCG) industry. Junyao Health, a listed company that started with its “Weidongli” lactic acid bacteria product, spent the highest salary in the company to recruit Yu Wei in 2024—a man with a dazzling resume. Yu Wei had previously worked as a global partner at Bain & Company, the CMO of Shanghai Jahua, and the CEO of Xiangyi Bencao, making him one of the top professional managers in the FMCG sector. The company hoped that Yu Wei would help them break out of the predicament of struggling to sell their existing products and venture into higher-profit areas such as probiotics and cosmetics. However, after two years, they spent hundreds of millions without making a profit on the new businesses, and their core business declined even faster, resulting in consecutive years of huge losses. The financial report for the first half of 2026 showed a bizarre contrast: although the total profit on the books increased by 274%, the net profit attributable to all shareholders actually decreased by 40%. In the end, Yu Wei was replaced without even receiving the official thank-you letter he deserved when his predecessor left. His replacement was a long-serving employee with a financial background. Junyao Health has now completely halted its aggressive expansion and is focused on fixing the financial problems.
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Analysis of the Event from Four Perspectives
1. The Most Counterintuitive Financial Report
Many people might think the company has turned a corner when they see a 274% increase in total profit, but upon closer inspection, it’s all an illusion. It’s like running a fruit shop: if you lost 5,000 last year from selling fruits and then made 10,000 by selling an unused truck this year, your total profit on paper increases by 100%, but the actual profit from selling fruits is actually half less than last year. Junyao’s “surprising profit” came from non-core activities such as asset disposal and government subsidies, not from selling products. After deducting these non-relevant earnings, the core business only made 1.36 million—far less than what three fruit shops in the neighborhood could earn. What’s more alarming is that the company’s cash reserves have almost been depleted: cash on hand decreased by half, from 310 million to 149 million. Pre-orders (a key indicator of dealer confidence) also dropped by 70%, indicating that dealers are no longer willing to prepay for Junyao’s products, meaning the company’s revenue for the coming quarters is at risk.
2. Why Did a Top Executive with a Yearly Salary of 3.44 Million Lead the Company to Losses?
Yu Wei’s credentials are genuine, and he did achieve success in the cosmetics industry, but he made a common mistake for externally hired managers: he simply copied the successful strategies of his previous employer without adapting them to Junyao’s situation. The cosmetics industry has a high gross margin, allowing for significant investment in marketing. However, Yu Wei applied these strategies to Junyao, spending 175 million on advertising in 2025, with an online sales expense ratio of 71.72%. This means for every 100 yuan in product sales, 71 yuan went to advertising, not to cover production or shipping costs, resulting in even greater losses. Additionally, he neglected to manage the company’s core business, “Weidongli” lactic acid bacteria, which saw its revenue drop by 27%, weakening the company’s foundation. Most of the profits from the new businesses went to external shareholders, with the listed company bearing the losses. Given that Junyao Group, the major shareholder, holds 57% of the shares, it was impossible to grant full control to an external manager, leaving Yu Wei to bear the blame for the poor performance.
3. Replacing the External Manager with an In-house Finance Expert: A Complete Emergency Stop
The new general manager, Wang Jinglong, has no impressive external background and is not there to launch new businesses. It’s clear he was sent by the group to stabilize the situation. Having joined Junyao Group in 2002, he has a solid financial background and will focus on tightening financial controls. The company’s new hiring focuses on improving efficiency and reducing costs, rather than pursuing new ventures. This shift reflects a realization that the company’s previous aggressive strategies led to a dead end.
4. A Lesson for All Companies
Many traditional consumer goods companies in China have tried to shortcut their way to success by entering new markets. They often fail because the strategies from the cosmetics or internet industries don’t work in the FMCG sector. A company’s existing team, channels, and customer base are crucial, and relying on a single external manager is insufficient to turn things around. When the money runs out and the core business declines, the high-paid manager leaves, leaving the company to fix the mess. Junyao’s goal for the year is just to stop losing money, but they’ve already lost over 4 million in the first half of 2026. Whether cost-cutting measures will be enough to turn the situation around remains uncertain.
In summary, Junyao Health’s story serves as a cautionary tale for companies seeking quick success through cross-industry expansion. There are no shortcuts to success in the FMCG industry, and relying on external managers without adapting to the company’s specific circumstances often leads to disastrous consequences.