Young people save the Bang Group
Zebra Consumer Shen Tuo
Whether Bawang shampoo can prevent hair loss is unknown, but the stock price of Bawang Group has indeed made investors lose all their hair.
Yesterday, the company disclosed its 2023 annual report, finally turning a profit after five consecutive years of losses. However, investors were not very supportive, causing the stock price to fluctuate wildly with just HKD 3,270 in trading volume. It eventually closed at HKD 0.044, with a market capitalization of HKD 139 million.
At its peak, Bawang Group's market capitalization once exceeded HKD 20 billion. The dioxane scandal, internal conflicts among founders, and intensified market competition nearly sank the company.
Chen Zhenghe, a 'post-80s' second-generation leader, took charge during the crisis. After six years of brand rejuvenation efforts, there is finally a glimmer of hope.
Turning the Tide
In 2023, Bawang Group (01338.HK) finally turned the tide, ending five consecutive years of embarrassing losses.
On April 25, the company disclosed its 2023 annual report, reporting revenue of RMB 238 million, a year-on-year decrease of 3.53%. Net profit attributable to shareholders was RMB 13.627 million, a significant improvement from the previous year's loss of RMB 19.321 million.
Last year, while traditional channel revenue fell by approximately 14.7%, the e-commerce channel generated revenue of RMB 126 million, a 9.1% increase year-on-year, becoming the only bright spot.
As one of the few domestic personal care companies focusing on natural plant-based ingredients, its three major brands remain in a slump.
The anti-hair loss brand Bawang generated revenue of RMB 232 million last year, accounting for 97.5% of the company's revenue, down 2.5% year-on-year. The herbal anti-dandruff brand Zhui Feng saw revenue drop 48.45% to RMB 20.43 million. The pure natural-based shampoo, body wash, and laundry detergent brand Li Tao reported revenue of RMB 38.92 million, down about 15.1% year-on-year.
In fact, since its IPO in 2009, Bawang Group's performance has consistently been poor. Over 15 years, it has only been profitable in four years, with losses in all other fiscal years.
In recent years, amid the rise of domestic personal care brands, Bawang Group has been striving to find a way out. The company has launched children's shampoo brand Little Bawang and skincare brand Ben Cao Tang, among others, with products gradually hitting the market and increased brand investment.
By the end of last year, the Bawang brand had 949 distributors and six key retailers nationwide, covering 27 provinces and four municipalities.
Bawang's Ups and Downs
In China's personal care industry, Bawang Group is an outlier.
The rags-to-riches story of co-founder Chen Qiyuan is well-known. His grandfather came from a family of traditional Chinese medicine practitioners and was a renowned doctor in western Guangdong. Despite this heritage, Chen Qiyuan initially made his fortune selling pesticides.
In the 1990s, inspired by the success of Ony shampoo, Chen Qiyuan decided to enter the personal care industry. His wife Wan Yuhua's former employer, the South China Botanical Research Institute, had developed an herbal shampoo formula. The couple purchased the formula and launched an herbal shampoo, naming it 'Bawang.'
Bawang shampoo, marketed with the slogan 'Traditional Chinese Medicine + Anti-Hair Loss,' quickly gained the trust of many suffering from hair loss.
In 2005, the company spent heavily to secure action star Jackie Chan as its spokesperson. Chan's iconic 'Duang' catchphrase went viral, boosting sales of Bawang shampoo. Over the next four years, Bawang became the top-selling herbal shampoo.
The company went public in Hong Kong in 2009, with annual revenue reaching RMB 1.756 billion and net profit of RMB 364 million. At its peak, its market capitalization exceeded HKD 20 billion, landing Chen Qiyuan and Wan Yuhua on the Hurun Rich List.
This success was short-lived. In 2010, media reports about carcinogenic dioxane in its products plunged Bawang Group into crisis, and its shampoo business collapsed.
The company sued the media outlet for HKD 600 million, initiating a six-year legal battle. In 2016, Bawang Group won the case but was awarded only HKD 3 million in damages.
During this period, the stock price fell from over HKD 6 to below HKD 1, and the company suffered consecutive annual losses. From 2010 to 2016, cumulative net losses exceeded RMB 1.8 billion.
Before the company could recover from the legal and PR battles, the founders' marital strife became public.
In late 2017, Wan Yuhua held a press conference to air their disputes and demanded the liquidation of the holding company, causing Bawang Group's stock price to drop below HKD 0.5.
Although the conflict was eventually resolved, the company was left deeply scarred. After 2018, it suffered another five consecutive years of losses.
The Second Generation Saves the Day
In 2023, Bawang Group finally returned to profitability, giving Chen Zhenghe a brief respite.
Chen Zhenghe, the eldest son of Chen Qiyuan and Wan Yuhua, took over as executive director and CEO in late 2015 at the age of 26 after Wan Yuhua resigned.
Chen Zhenghe had already been with the company for years. In 2007, he became a director of Bawang Group's Guangzhou subsidiary. In 2012, he was appointed assistant CEO, and in 2013, he took full charge of sales, marketing, and operations in Guangzhou.
With years of experience across various roles and a background in overseas business studies, Chen Zhenghe had his own vision for the brand and operations.
He has publicly stated that the company's core competitiveness lies in traditional Chinese medicine for hair care, skincare, and wellness, aiming to expand into niche markets to meet diverse needs. The company would also deepen its online and offline channels and explore overseas markets.
After taking full control, Chen Zhenghe led bold efforts to rejuvenate the brand. To reduce its reliance on Jackie Chan, the company hired rising star Mao Buyi as its spokesperson in 2018.
The company also ventured into gaming, collaborating with IPs like 'JX Online 3' to launch co-branded products. However, these initiatives failed to quickly boost performance.
Today, Bawang products are hard to find on supermarket shelves.
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