Finance and Economics Society reported on November 30th (Reporters Zhang Liangde, Liu Jian, Zhang Chenjing, Intern Reporter Dong Fangyu): As a time-honored company with a history of three hundred years, LBX Pharmacy Chain Joint Stock (600085.SH) has always focused on the production and sales of traditional Chinese medicine. "Stability" is the most common label given to the company by investors, but at the same time, stability is also a synonym for "conservative." However, in the past two years, a series of actions by the company in the capital markets, sales channels, and product layout may indicate that this long-established brand is quietly undergoing changes.

This Friday, Beijing Tongrentang Chairman Di Shubei officially took office as the group's general manager, while Di Shubei concurrently serves as the chairman of Tong Ren Tang Technology (01666.HK). The consistent management of key production-oriented executives in Tongrentang Group may reduce resistance to product and marketing reforms in the company.

He once candidly told investors at a shareholder meeting: "Tongrentang's strengths lie in product quality, brand, and production control, while weaknesses are in distribution and marketing."

At this juncture of transformation within the company, reporters from Finance and Economics Society conducted on-site research in multiple locations, visited the actual progress of the high-end Imperial Medicine series deployment, and deeply understood the sales of Tongrentang products through interactions with staff from various local chain pharmacies.

The high-end Imperial Medicine series has been running for a year and is "meeting expectations."

During discussions with the company and visits to various locations, reporters felt that Tongrentang is gradually strengthening its focus on the high-end premium series.

On the basis of keeping the original product specifications unchanged, Beijing Tongrentang plans to enhance the company's profitability through high-priced products by formulating differentiated promotion strategies.

Tong Ren Tang Technology first launched the "Imperial Medicine 300 Years" heritage series in the first half of 2023, including products such as Liuwei Dihuang Pills, Jinkui Shenqi Pills, and Zuo Gui Wan. Tong Ren Tang also introduced the "Imperial Medicine Legend Series" premium product specifications at the end of 2023, including products like Handmade Angong Niuhuang Pills, Tong Ren Niuhuang Qingxin Pills, and Ginseng Pills.

Di Shubing stated that Beijing Tongrentang has a significant advantage in producing premium products. In addition to the brand advantage, the group also has over 100 organic species planting bases. Before the products are launched in the market, the company conducts extensive market research.

Due to the relatively short time since the launch of this product series, at the mid-year Tong Ren Tang annual shareholders' meeting, the company management's statements to investors remain cautious. They mentioned that the Imperial Medicine Legend Series has been tested for sale in some proprietary retail terminals, and from the current market feedback, some products have responses that meet expectations, while some products still need some time.

Towards the second half of the year, the company's stance underwent certain changes. On the 29th of this month, the company stated in the investor relations activity record that the Imperial Medicine Legend Series has been test marketed in third-party stores in key provinces and cities, and the overall sales situation meets expectations.

While the company has stated that sales have taken place in third-party stores, these series products are still difficult to find in some chain pharmacies in certain first, second, and third-tier cities.

Caifeng journalist found through actual visits and phone interviews that the high-end series of Tongrentang is mainly sold in Tongrentang pharmacies. Shanghai, Guangzhou, Shijiazhuang, Kaifeng, and other first, second, and third-tier cities have Tongrentang self-operated pharmacies with sales and a relatively complete product range. However, third-party pharmacies have fewer products in stock. Journalists only saw some of the Yu medicine series products such as Liuwei Dihuang Wan, Zuo Ya Jian Shen Wan in core pharmacies like Shenwei Pharmacy and Lerentang Pharmacy in Shijiazhuang, but not in some third-party chain enterprises in Shanghai, Chongqing, Kunming, Zhengzhou, and Kaifeng.

A pharmacy manager in Zhengzhou told Caifeng journalists, "This Yu medicine high-end series may be a controlled product, not widely circulated, ordinary people may not come into contact with them often, targeting high-consumption groups."

At the shareholder meeting in mid-November, Di Shubing told investors, "The 'Yu Medicine Legend', including the 'Yu Medicine 300' series of technology companies, and new products, we are exploring sales based on the targets set at the beginning of the year. Currently, our sales team for the high-end series has achieved the expected progress, and to some extent exceeded it, the product pricing system is stable, and retail store sales enthusiasm is high."

With Tongrentang continuously promoting the three major development strategies of 'high-quality development strategy, fine product strategy, and large variety strategy,' the company's 'Yu Medicine Legend' and 'Yu Medicine 300' series may fill the gaps in the 'Ling Lan Misuo' and 'Qiong Zao Xin Zai' series product lines.

However, company officials also told investors that the overall sales of this series meet the company's expectations, but there may be differences from some shareholders' expectations. This series does not have explosive growth.

This is consistent with the actual situation learned by Caifeng journalists from interviews in offline pharmacies. Several pharmacy staff told Caifeng journalists, "Currently, Tongrentang still sells the cheap medicines fast, while the expensive ones sell slowly."

Beijing Tongrentang made a move into the medical market by acquiring Honghui Pharmaceutical.

In terms of the company's marketing weaknesses, 90% of the market share of LBX Pharmacy Chain Joint Stock is in the OTC market, with a noticeable absence in the in-hospital medical market. LBX Pharmacy Chain Joint Stock has also started to attempt a transformation. However, reporters also found during actual visits that in the large and medium-sized chain stores in the out-of-hospital market, there are still significant 'blank' areas for LBX Pharmacy Chain Joint Stock products.

Earlier this month, according to the announcement from the State Administration for Market Regulation, Beijing Tongrentang Commercial Investment Group Limited acquired the equity of Honghui Pharmaceutical Co., Ltd. (referred to as Honghui Pharmaceutical) unconditionally approved.

At the end of October, the board of directors of Beijing Tongrentang approved a resolution for its subsidiary, Beijing Tongrentang Commercial Investment Group Limited (referred to as Tongrentang Commercial), to propose paying 0.105 billion yuan to acquire 51% equity of Honghui Pharmaceutical held by Honghui Technology.

In the list of the top 100 pharmaceutical wholesale enterprises in 2023 released by the China Meheco Group, Honghui Pharmaceutical was ranked 86th.

In response to this, some investors are concerned about whether the company's emphasis on the medical market will affect the development focus in the out-of-hospital market or could potentially impact product profits due to centralized procurement or the 'Four Unifications' policy. If the company's products face price reductions due to entering centralized procurement, it will affect the selling price of out-of-hospital products and decrease profits at the same time.

Company officials stated: "The company has always been involved in the medical market, but the market share used to be relatively small. Now, the company feels the changes in the overall trend of future development. We will definitely continue to enter the medical market in the future, so we are starting to slowly accumulate and reserve in this market. At the same time, internally, the company is integrating these medical resources and products to focus on medical efforts, and externally, it has also made some investments for external expansion."

The main business sales area acquired by Tong Ren Tang this time is still focused on Beijing and surrounding areas. If the company wants to truly focus on the medical market in the future, it will need to continue to increase investment.

In addition to the layout in the medical market, Tong Ren Tang has also made some changes in its channels and marketing promotions in the out-of-hospital market.

In the past, Tong Ren Tang's various company products operated independently, but now Di Shubing serves as the chairman of both Tong Ren Tang and Tong Ren Tang Technology, two major manufacturing enterprises.

At the beginning of 2022, Di Shubing took office as the chairman of Tong Ren Tang; at the beginning of 2024, he took office as the chairman of Tong Ren Tang Technology; in addition, this Friday, Di Shubing officially took office as the general manager of Tong Ren Tang Group.

Di Shubing stated to investors that in recent years, the company has been strengthening its marketing, especially in terminal sales. Of course, there are still significant shortcomings, with a long way to go for full coverage, but progress is steady. On one hand, the construction of its own channels is continuously strengthening, and on the other hand, the company has enhanced cooperation through the integration of its own products with large chain enterprises.

However, reporters from Caijing Magazine found through visits to multiple locations that Tong Ren Tang products still have a significant "blank" market in large chain pharmacies. Caijing Magazine reporters did not see Tong Ren Tang products in many mainstream chain pharmacies in Chongqing and Shanghai. Only Tong Ren Tang Shengmai Drink was seen for sale in two Yixintang pharmacies in Kunming.

The company stated that it is willing to accept relevant suggestions, and at the same time, it mentioned that the marketing teams of beijing tongrentang and tong ren tang technology are currently focusing on a portion of major product categories. They will extract one or two key marketing points for each category based on efficacy, and use this method to screen the future core major product categories.