Summary of Key Points
The 34-year business empire founded by Xie Hong, the founder of Beinmei, has been completely wiped out. The holding platform for which he held 83.33% of the shares (formerly known as Beinmei Group) went bankrupt and was acquired by Jinhua Zhenhe, a subsidiary of the Jinhua State-owned Assets Supervision and Administration Commission, for 856 million yuan. In addition, Jinhua Zhenhe paid an additional 30 million yuan to help Xie Hong settle his guaranteed debts. The actual controller of Beinmei has now officially changed to the local state-owned assets. This company, which once had a market value of over 31 billion yuan in 2013 and held a larger market share than Yili Feihe, is now facing numerous challenges, including low-profit margin OEM operations, tight financial constraints, and accumulated losses of nearly 1 billion yuan. Although the market initially viewed the state-owned assets' involvement as a positive development, the company's actual financial situation is far less optimistic than its stock price suggests.
I. How Did Xie Hong Ruin the “Leading Milk Powder Company”?
Xie Hong’s decline was not sudden but a result of his own missteps:
- How glorious was the peak? In 2013, Beinmei had revenue of 6.1 billion yuan and a net profit of 720 million yuan, with a market value exceeding 31 billion yuan; it held a 7.4% market share, making it the leading domestic milk powder company.
- How rapid was the decline? From 2013 to 2016, revenue dropped from 6.1 billion yuan to 2.76 billion yuan, a nearly 60% decrease; in 2016-2017, it suffered losses of 1.8 billion yuan and was on the brink of delisting due to its ST status. Even worse, in 2016, its market share was overtaken by Feihe, which now holds a market share more than ten times that of Beinmei.
- Leverage crushed it: Starting in 2016, Xie Hong’s holding platform began to pledge its shares excessively—by 2018, the pledging rate had reached 99.99%! This was not for expansion but a cycle of using debt to pay off more debt, leading to an ever-wider hole. In 2018, Xie Hong claimed he wanted to return to the top with revenue of 30 billion yuan and a market value of 100 billion yuan, but eight years later, his holding platform went bankrupt, and he was even restricted from high-consumption activities due to a debt of 410,000 yuan.
- Financial ailments: Beinmei was known for its unreliable financial reports, with multiple corrections made, including adjustments to reports from 2022-2023 (a total of nearly ten periods). Even regulatory authorities issued warnings to Xie Hong, indicating the severity of poor management.
II. Why Only State-owned Assets Took Over? Assets Unattractive to Others
During the restructuring process, only Jinhua Zhenhe expressed interest in investing, with no bidding or competition. What does this indicate?
- Lack of asset attractiveness: Apart from 12.28% of Beinmei’s shares (98.85% of which were pledged and frozen), Xie Hong’s holding platform only contained three vehicles and office equipment, essentially leaving it an “empty shell.” Beinmei itself was full of problems, making it unattractive to other companies.
- State-owned assets as a support mechanism, not a bargain: Jinhua Zhenhe was a specially established platform for this acquisition (founded in February 2026 and took over within four months), backed by the Jinhua State-owned Assets Supervision and Administration Commission. In essence, this was an administrative intervention to prevent the local company from collapsing completely, preserving jobs and tax revenue, though it also suggests that the assets had little value.
III. Beinmei’s Actual Financial Situation: Revenue from OEMs, Profits from Cost-cutting
On the surface, Beinmei’s revenue increased by 9.7% in 2024, and its net profit more than doubled, but these figures are misleading:
- Half of the revenue comes from OEMs: In 2024, the company’s outsourcing/customization business generated 1.315 billion yuan, accounting for nearly 50% of total revenue. However, this segment had a gross margin of only 26.75%, far lower than the 64.71% of its distributor business, indicating that profits were derived from hard work without brand premium.
- Profits through cost-cutting: After Xie Hong returned to management, marketing expenses were reduced from 62% of revenue in 2016 to a single-digit percentage. For example, while Feihe spent 6 billion yuan on advertising to generate 21.3 billion yuan in revenue, Beinmei was reluctant to invest.
- Debt and losses: As of the third quarter of 2025, Beinmei’s asset-liability ratio was 55.94% (the industry average is 41%), with short-term loans amounting to 1.1 billion yuan. If banks do not renew these loans, the company could face financial distress. The accumulated losses of 966 million yuan (more than one-third of its paid-in capital) mean that dividends cannot be distributed until the losses are covered.
IV. Challenges for Jinhua Zhenhe After Taking Over
Jinhua Zhenhe has promised not to transfer the shares for 36 months and aims to maintain growth, but overcoming the problems left by Xie Hong is daunting:
- Recovering market share: Beinmei’s current market share is less than 2%, compared to Feihe’s 21% and Yili’s much higher figure. To regain market share, it would need to invest in marketing or research and development, both of which require funds—yet Beinmei does not even have the right to distribute dividends.
- Insufficient R&D investment: Over the years, Beinmei has failed to launch new products and relies on OEMs for revenue, weakening its brand strength. Whether state-owned assets will invest in R&D is uncertain.
- Strategic confusion: During Xie Hong’s tenure, the company’s focus shifted frequently between milk powder, maternal and infant e-commerce, and health products, leading to a lack of strategic direction. Can Jinhua Zhenhe establish a clear strategy after taking over?
- Debt and credit issues: The company’s credit rating has declined, increasing financing costs, and it faces significant short-term borrowing pressure. Although Jinhua Zhenhe has filled the holes left by Xie Hong’s holding platform, Beinmei still must bear its own debts.
Conclusion: Lessons from Beinmei’s Story
Beinmei’s fate is a classic example of the dangers of high leverage, poor management, and lack of strategic focus:
- Founders should not treat companies as money-making machines: Xie Hong’s use of shares as collateral to finance debt led to his own bankruptcy, ruining a 34-year business.
- Companies need to increase revenue rather than cut costs: Relying on cost-cutting for profits is short-sighted; investing in marketing and innovation (like Feihe) is the long-term solution. Without a strong brand, cost-cutting is ineffective.
- State-owned assets are not a panacea: While they can help with debt, whether a company can recover depends on its ability to manage effectively. Beinmei’s structural problems are more difficult to resolve than its financial ones.
For ordinary investors, the involvement of state-owned assets should not be blindly optimistic. It is essential to assess the company’s actual financial situation before making investment decisions, as not all companies rescued by state-owned assets see a turnaround.