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    Capturing Consumer Demand and Pursuing Innovation and Change to Enhance Product Competitiveness

    Enhancing Market Competitiveness via Consumer-oriented Approaches and Continuous Product Lines Expansion

    We take the people’s desire for a healthy life as our goal. In the first half of 2019, the Group adhered to consumer-oriented concepts and expanded its product lines, introducing new products including Besunyen Miao Miao Jiao Enzyme Jelly, Besunyen Day and Night White Collagen Powder, Besunyen red bean and adlay tea and Besunyen lotus leaf green tea on the e-commerce platform.  Focusing  on  an  array  of  weight  management  product offerings and intestine healthcare product offerings, comprising “OTC drug +  Health  food  +  Ordinary  food”, the Group continues the development of “OTC drug + Health food + Ordinary food” under the product categories of dietary supplements as well as health and beauty products. The  Group captured consumer demand  while pursuing innovation and change to enable the continuous creation of popular products.

    Exploring New Branding Models and Broadening Brand Promotion Channels to Highlight Brand Value

    Leveraging Radio Platform to Increase Brand Exposure and Expand Brand Influence

    In the first half  of  2019,  the  Group  placed  frequent  advertisements  on  The  Voice  of  China  and  Music  Radio  of  China National Radio at different times of the day to create brand memory in a  short  period  of  time.  The  Group continued to use slogans  such  as  “Give  Your  Intestines  a  Bath”  to  awaken  the  brand  memory  of  the  audience, which  served  to  increase  brand  exposure  while  facilitating  product  sales.  The  Group  also  sponsored  the  “I  Want  to  Go  to  School  1200   Student  Aid   Programme”  jointly  promoted  by   the   China  Children  and   Teenagers’  Fund   and Music Radio of China  National  Radio  to  make  children’s  dreams  come  true,  thereby  sharing  social  responsibility, enhancing brand reputation and expanding its influence.

    Making Strategic Use of Elevator Media to Aim Precisely at Family Consumer Group for the Shift to New Operation Model

    In the first half of 2019, the Group made strategic use of elevator media to aim precisely at family users, and integrated offline terminals and online data to reshape  the  new  operation  model  of  “people,  goods  and  venues”.  Our advertisements were shown on  more than 300,000  elevator monitors in  nearly 70  cities to  delve   into the  pain points of users, resonate with the  target audience and  meet the  consumption demand of  families.  As socialisation becomes personalised and mobile, the new operation philosophy which integrates terminal-based advertising will usher in a simpler, more efficient and easier way for the circulation of goods, which  further  promoted the shift of the operation of the Group from a conventional model  to  a  new  operation  model  and further conducive to the Group’s promotion of the sales of offline pharmacy chains nationwide.

    Fully Upgrading Product Placement into Movies and Television Dramas to Create New Branding Models and Promoting Brand Rejuvenation

    Expanding Product Placement into Web Dramas and Variety Shows to Enhance Brand Competitiveness with Contents Marketing and Scenario Marketing

    In the first half of 2019, the Group fully  upgraded  its  brand  promotion  campaigns  to  create  new  branding  models of community dissemination and scenario marketing, actively promote brand rejuvenation and step up product placement into web dramas and  variety shows, which improved brand awareness among young internet  users and enhanced brand competitiveness with contents marketing and scenario marketing. In the  first half of  2019,  a  total of  two  dramas with placement have been confirmed and are  expected to  be  broadcast this year   and next year respectively. In addition, adhering to the principle of “brand  rejuvenation”,  a  number  of  online videos have been produced, and are distributed to younger active consumers over time.

    Increasing Joint Marketing Efforts to Keep Enhancing Brand Competitiveness

    The variety show Living It Up ( ), which was specially supported by Besunyen Slimming Tea, was broadcast on Dragon Television, iQiyi, Tencent and Youku concurrently, injecting the  audience  with  a  green, healthy and positive booster of weight management. The programme was produced by  Mr.  Yu  Fan, who  had  13  years of experience in making variety shows and was one of the  earliest  producers  of  reality  shows  which  featured amateurs in China. The 100-day life-changing stories of a group of 14  amateurs, who  were led by  the  skilful singer Will Liu, were filmed in the form of documentary. Meanwhile, the Group increased  its  joint  distribution efforts in the first half of 2019, gaining the enterprise a greater competitive advantage and more development opportunities.

    Joining Hands with Academy Award and Sponsoring “Besunyen Cup” Public Welfare Advertising Contest

    In  the  first  half of  2019,  the  Group  joined  hands  with  the  collection  activity  of   Academy   Award   of   Advertisement  and  Art  Festival  for  Chinese  College  Students  in  the  2019  spring  competition  and  held  “Besunyen Cup”  Public  Welfare  Advertising  Contest.  The  contest  spanned  30  provinces  and  cities  and  involved  40  colleges  and universities, with 18 creative lectures and 20 off-site product interactive experience  sessions.  The  official  proposition poster and strategy sheet covered more than 1,500 schools across the country.

    In the  current session of Academy Award, the  Group was  the  only enterprise which used public welfare as  its  main proposition. 2019 witnesses the 19th anniversary of  the  Group,  during  which  the  Group  launched  brand new “classic packages” for the Two Teas nationwide,  and  the  theme  of  “Classic  Beauty  and  Slimming  Tea”  was well received by the students. The zero-distance contact with university students during the current session of Academy Award gained the Group a sound and profound brand reputation among the youth, in the hope of maintaining popularity of the Besunyen brand among the existing and future target consumers.

    Adjusting Sales Team Structures and Functions and Focusing on Growth of Direct Sales to End Users

    Adjusting Sales Team Structures to Enhance Management Efficiency and Team Competitiveness

    In the first half of 2019, the Group adjusted its national sales systems, structures and functions. Under  the foundation of  the  existing three major regions in national offline retail, Key  Account (“KA”)  chain management  was added to formulate a “3+1” management model. All  of  them  compete  against  and  improve  each  other,  which stimulates their sense of ownership. This has  significantly improved the  work motivation of  the  sales team  and has enhanced the overall capability of  the sales team. To  further improve management efficiency as  well as  sale capability, all sales team have made efforts in innovation, such as improving team development, making significant progress in major retail chains, innovating marketing model, eliminating the lowest, developing membership base, introducing new models and new products, etc.

    Improving Distribution Penetration Rate for Offline Management, Enriching Terminal Promotion Modes and Enhancing Horizontal Growth

    Based on the  three major  regions,  in  the  first  half  of  2019,  the  Group’s  national  offline  management  has established 15 direct sales departments  and  business  departments  in  secondary  regions,  which  are  mainly responsible for  distribution  management  and  terminal  promotion  to  optimise  the  resources  of   distributors,  unblock circulation channels, establish a more reasonable distributor/sub-distributor portfolio and further improve distribution penetration rate.  Key  retail  terminal  works  such  as  prevention  of  supply  suspension,  price  maintenance, terminal display,  promotion  and  interception  of  competing  products  have  been  done  to  boost  the  rate of priority recommendation  of  the  Group’s  products,  enrich  terminal  promotion  modes,  cultivate  terminal  image and enhance horizontal growth.

    Improving Management and Operation of Chains for KA Management Department, Establishing Model Chains and Enhancing Vertical Growth

    In  the  first  half of  2019,  the  Group  established   KA   management   department   to   facilitate   centralised management of pharmacy chains for the improvement of overall operation of the chains. The KA  management  department is  mainly  responsible  for  refined  management  of  six  core  chains  across  the   country,   namely Dashenlin,  LBX,  Neptunus,  Yixintang,  Yifeng  and   Jianzhijia,  and   has   established  different  sales  policies  targeting   at the characteristics  of  different market  chains.  Vertical  growth  could  therefore  be  achieved  with  the  establishment of such model chains, penetration into non-core chains and launch of three-tier campaigns.

    Establishing New Performance Appraisal Orientation and Focusing on Growth of Direct Sales to End Users

    To make sales teams focus on the growth of direct sales to end users, eliminate  the  violation  of  the  Group’s management  policies  by  distributors/sub-distributors  and  avoid  the  sales  of  stockpile  in  the  market  at  low  price, the Group  connected  the  data  of  shipment  on  the  distributor/sub-distributor  side  and  the  data  of  terminal  sales, and  changed  the  performance  appraisal from  distributors’  shipment  appraisal  to  direct  sales  to  end  users  appraisal. By establishing direct sales to end users as a PK parameter for the sales personnel,  it  allows  the  sales  personnel to  completely  participate  in  terminal  management  and  maintenance  and   the   excessive   stockpile through the  distributions  has  been  avoided,  leading  to  more  solid  and  effective  terminal  management  and  terminal basic promotion.

    Enhancing Flow Management and Maintaining a Smooth Operating Order of Market

    In order to maintain the freshness of the products in the market and avoid obsolete products and returns  due  to  stockpiling, with respect to flow control of distributors, the Group  controlled  the  inventory  turnover  days  of  distributors  from  the  source,  upgraded  logistics  anti-counterfeiting  system  management  system,  and  monitored   the logistics information of distributors to further enhance the timely acquisition and  supervision  of  logistics  information. On the other hand, the Group made direct  connection  to  the  systems  of  distributors  and  sub-  distributors, which provided a real-time command of  data  such  as  stock-out,  stock-in  and  serial  number  of distributors and sub-distributors, allowed the acquisition of accurate flow data, avoided overstocking through the distributions and enabled better supervision of customers and distributions. Meanwhile, the Group strengthened regulation  on  product  pricing  and  adopted  a  series  of  measures  to   safeguard  the  price  stability.  The  confidence  of distributors/sub-distributors has  been  improved  and  this  will  be  beneficial  to  the  healthy  and  stable  development of the market.

    Keeping Abreast of the Industry Development Trend, Creating and Optimising New Products and Building an Operation Team with High Standards

    Implementing Refined Management and Adjusting Distribution Strategies

    In the first half of 2019, the  Group  implemented  refined  management,  enhanced  the  management  and  operation modes of e-commerce according to the type of goods and the scale of logistics, and conducted more standardised management for four stations (Beijing, Guangzhou, Hangzhou and drugs); to ensure the rapid development of e-commerce business; an e-commerce integrated marketing centre, supply chain group and sales support group were established; the original customer service team was upgraded to a customer service centre. Based on the e-commerce platform promotion policy, the Group fully  explored  and  analysed  the  purchasing  habits and feedback of platform users to track, analyse and  give  feedback  on  the  operation  and  promotion results, and linked up the management, contents and customer service team to adjust distribution strategies accordingly to  create a  better user experience, which effectively improved the total revenue of  the Two Teas,   drugs and new products and laid a solid foundation for the future development of the Group’s e-commerce distribution.

    Continuously Optimising New Products, Riding on the Trend of E-commerce and Improving the Operational Capabilities of the Team

    Focusing on  the  area of weight management, the  Group continued to  optimise its  product mix, expanded from  the traditional herbal slimming tea to the OTC  arena,  focused  on  improving  the  packages,  and  producing  graphics and videos of  old products (Besunyen Xian Xian Tea, meal replacement milk shake, etc.), and launched     the “dietary fibre” series of light meal  replacement  products  and  the  “collagen” series of  new  health  products for the health-savvy young consumers. Meanwhile, in face of continuous business hardship, the operation team became more mature and  mastered the rules of  each platform. The  amazing growth stories of  the  aggressive    and hardworking team were appraised as classic cases by Alibaba and Pinduoduo for many times. The  sales  campaign on  21  March in  cooperation with the  Alibaba Juhuasuan platform was  a  great success, and  the  brand  was put on  the key cultivation list by  Juhuasuan and others. The customer service centre grew from 14  people      last year to more than 70 people. A  sound  service  mechanism  was established  to  deepen  the  one-to-one  service, which accumulated a large number of regular customers and realised a  higher-than-average repurchase  rate. The Group’s products for e-commerce channels included the “Two Teas”, Orlistat and new products, which  performed well in this year’s “6 • 18  Mid-year Sales” on  major e-commerce platforms such as  Tmall and  JD.com.   The overall transaction volume surged to 122% compared with that of “Double 11” last year, resulting  in  an  explosive growth in product sales and brand exposure. “Besunyen’s new retail model has gradually shown its vitality,” China Economic Net and many other authoritative media  in  China  wrote  in  their  detailed  commentaries.

    Innovating R&D Philosophy, Strengthening External Development Cooperation and Continuing to Launch New Products

    In 2019, the research and development work  embraces  China’s  “Health  for  All”  principle  and  focuses  on  the  two healthcare functions of  weight management and intestinal health and expands herbal healthcare products     and strengthens external cooperation efforts. The research and development of new health food  products  for weight loss, defaecation, throat clearing and liver protection continued. Through the participation in the key  research and development program of the Ministry of Science and Technology named “Traditional  Chinese  Medicine Modernisation Project” and the cooperation with  renowned  research  institutes  such  as  Beijing University of Chinese Medicine on product research and development, the formula of the new laxative product  based on  the precise healthcare principle has entered the expert argumentation phrase and an  agreement has   been signed for related research and projects with regard to the marketed laxative healthcare products, namely Besunyen Runyuan Tea. The notices of evaluation comments for  the  renewal  of  registration  of  Besunyen  Runyuan Tea and Besunyen Changwuyin Granules have been  received.  Preparation  for  permit  issuance, production and market launch of Besunyen Yanyuan Granules have been completed. For  e-commerce common  food, the renewal of nutritious meal replacement milk shake, dietary fibre and collagen products has been completed and new products such as Besunyen Xian Xian Shake,  Miao  Miao  Jiao  Collagen  Jelly  and  Day  and  Night White Collagen Powder have been launched. Development  of  new  products  such  as  Besunyen  red  bean and adlay tea bag and lotus leaf green tea bag has been completed.

    In the first half of 2019, Zhongshan  Wanyuan  made  one  application  and  one  licencing  application  and  completed the supplementary research for two types of eye drops and submitted the supplementary research materials to the National Medical Products Administration. Zhongshan Wanhan made three invention patent applications and six licencing applications. On  1  April  2019,  Zhongshan  Wanhan  and  Zhongshan  Wanyuan  passed the certification of the intellectual property management system.


    According to the publication of National Bureau of Statistics,  China’s  economy  achieved  stable  and  healthy growth in 2019. China’s economy has transformed from rapid growth to a high-quality development phase. To improve the health of the general public,  China  has  put  forward  a  feasible  new  medical  reform  proposal  and the health development strategy of “Healthy China 2020” and advanced “Healthy and Powerful Country” to the national strategic level. The favourable policy will greatly encourage the development of  the big health industry.   The “Healthy China 2030 Strategy” also proposes higher requirements for  people’s  health,  health  service  capability and health system optimisation.

    The  Group will continue to  regulate and  manage its  business while highly focusing on  the  growth of  direct sales to end users in the market. Leveraging the current excellent market base and brand recognition, the Group will promote the development and launch of new products. Through establishment of  reasonable  new  product incentive policy, enrichment of product range, and continuous introduction of  new  products  based  on  independent research and development and outsourced processing, the Group will continue to develop its e-commerce business to achieve higher revenue growth.


Chairman and CEO
Zhao Yihong

Hong Kong, 23 August 2019

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