Credit terms as a forecast about the channel

In the third week of September 2008 I watched a queue form outside our office in Shanghai. The contamination of domestic infant formula with melamine had just become public, and distributors who had sold domestic brands for years arrived with cash, asking to buy imported formula from the China subsidiary of the Dutch dairy co-operative where I ran commercial finance. Our sales director wanted to open two hundred new distributors on sixty-day credit before competitors did. I argued that new accounts should pay in advance for their first year, because demand built on fear would not last as long as the credit. We settled on thirty days with deposits. Within three years about a third of those newcomers had failed or left as trust in domestic brands slowly returned. Our losses were RMB 19 million. Without the deposits I estimated they would have been four times that. I have thought of credit terms as a forecast about the channel ever since.

I grew up in Huzhou, in northern Zhejiang, and studied accounting at Weixi Institute of Finance and Commerce in Shanghai, graduating in 1998. I joined Jiaheng Certified Public Accountants, a Shanghai audit practice, and qualified as a certified public accountant in 2001. Most of my clients were food manufacturers, department stores and a supermarket chain. Audit taught me to count stock and to read contracts. It also taught me that rebates, slotting fees and returns were where consumer companies kept their judgement, usually in a spreadsheet the auditor saw last.

In 2003 I joined Veldhaven Dairy (China) Company Limited as a financial analyst. The subsidiary imported milk powder and infant formula from the Netherlands, paid for them in euros and sold them through distributors and mother-and-baby stores. I learnt how a currency move could erase a quarter's margin and how a distributor's payment record told you more than its order book. After 2008 our revenue roughly tripled in four years, and my job became making sure that growth was paid for.

In 2012 I became CFO of Mingxi Beverage Company Limited in Xiamen, a maker of tea drinks and not-from-concentrate juice, controlled by its founding family with a private-equity investor holding 38 per cent. We spent most of 2015 preparing a Hong Kong listing through an offshore holding company. When markets fell that summer the board withdrew the offering, and I learnt how much of a listing's cost is incurred before anyone knows whether it will happen. I also completed a weekend executive MBA at Puhai Business School during those years.

I came to Cuiling as deputy CFO in April 2016, responsible for commercial finance and treasury. I built the cabinet-level economics that changed how we place chilled cabinets in shops, consolidated twenty-three bank relationships into nine, wrote the board's first currency-hedging policy for imported powder and ran finance for the acquisition and integration of a Fuzhou yoghurt maker in 2019. When my predecessor retired in April 2021, the board appointed me CFO.

My first decision as CFO was the hardest one with our sales organisation. Distributor credit had grown to RMB 820 million, granted by regional sales heads, on terms of forty-five to sixty days for milk that lasted between seven and fifteen. I moved credit decisions to a finance-led committee and tied terms to shelf life. In the years since, I have recommended stepping back from the largest livestream anchors, honouring farm contracts during a surplus when the cheaper course was to cut intake, and deferring a Hong Kong listing that our chairman supported. None of these made the next quarter easier.

I lead 260 people across Hangzhou, the six plants, the ranches and a shared-service centre. Internal audit reports to the Audit Committee, not to me. I ask my team to reconcile what the channel says with what the warehouse says, and to bring me the difference before it becomes a provision. In board meetings I attend as a senior manager without a vote, and I have found that a state-linked board responds best to a paper that sets out the shareholder's interest, the minority's interest and the cost of each option in one table.

Inside the industry I am known for three convictions. Credit terms should never run longer than the product lasts. A livestream price is a public price, not a marketing expense. And a second listing has to answer a question about money before it answers one about status. I am now preparing to sit on the other side of an audit committee table, at a company where I have no commercial interest.

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