In-Depth Analysis of the Diversification Strategy Dilemma of Zhongshun Jierou

Based on the collected data and research materials, I will conduct an in-depth analysis for you on the root causes why Zhongshun Jierou’s diversification strategy failed to break through the 1% revenue share.

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As the “first stock of tissue paper”, Zhongshun Jierou (002511.SZ) officially launched its diversification transformation strategy in 2019, attempting to build a business layout with tissue paper as the core and personal care as the “second growth curve” [1]. The company has successively launched diversified product lines including Duolemi Sanitary Napkins (2019), adult incontinence care products (2023), Jieshijia Laundry Detergent (2024), and Yuejirou Hand Cream (2024) [2].

However, according to the 2024 semi-annual report data, the company’s personal care and other businesses achieved revenue of only RMB 49.65 million, accounting for only

of total operating revenue, a decline from 1.42% in the same period of 2023 [1]. This data stands in stark contrast to the company’s set diversification strategic goals.

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When Zhongshun Jierou entered the personal care market, the industry’s competitive landscape was basically solidified. In the sanitary napkin market, Hengan International’s “Space 7” accounts for about 10% of the market share, firmly occupying the leading position in the industry; Vinda International’s “Libresse” continues to leverage the group’s supply chain advantages [3]. In contrast, as a latecomer, Zhongshun Jierou’s “Duolemi” lacks brand accumulation and consumer awareness, making it difficult to gain an effective share in the mature market.

Company	Sanitary Napkin Business Revenue	Gross Profit Margin	Market Share
Hengan International (Space 7)	RMB 6.178 billion	63.8%	~10%
Zhongshun Jierou (Duolemi)	Not Disclosed	Not Disclosed	<1%

As the main raw material for tissue paper and personal care products, pulp accounts for

of production costs [4]. Zhongshun Jierou has obvious disadvantages in supply chain layout:

• Gold Hongye
  : Achieves pulp self-sufficiency by relying on Sinar Mas Group
• Vinda International
  : Acquired by Singapore’s Royal Golden Eagle Group in 2024, gaining support from the parent company’s upstream supply chain
• Hengan International
  : Although it has no pulp mill layout, it hedges cost risks through diversified businesses
• Zhongshun Jierou
  : Highly dependent on imported wood pulp, most affected by fluctuations in international pulp prices [4]

Since 2020, international wood pulp prices have remained high, leading to a substantial increase in Zhongshun Jierou’s raw material procurement costs, which directly erodes profit margins.

Zhongshun Jierou is facing the dilemma of four consecutive years of net profit decline:

• 2021
  : Net profit of RMB 581 million, a year-on-year decrease of 35.85%
• 2022
  : Net profit of RMB 350 million, a year-on-year decrease of 39.77%
• 2023
  : Net profit of RMB 333 million, a year-on-year decrease of 4.92%
• 2024
  : Net profit of RMB 77.18 million, a year-on-year decrease of 76.8% [1]

The continuous deterioration of the main business has made it difficult for the company to invest sufficient resources in the cultivation of diversified businesses. Financial reports show that in 2024, the company actively adjusted some inefficient businesses and adopted a conservative sales strategy, with revenue decreasing by 16.84% year-on-year to RMB 8.151 billion [1].

The tissue paper industry has severe overcapacity, with the industry concentration rate (CR4) of only about 33.8%, far lower than the 70% level in mature European and American markets [5]. Fierce price wars have put Zhongshun Jierou in a dilemma of “losing market share if not participating, and damaging profits if participating”.

Notably, Zhongshun Jierou’s promotion expenses far exceed those of its peers:

• 2023
  : Sales expenses of RMB 2.206 billion, including RMB 1.406 billion in product promotion expenses [5]
• 2022
  : Sales expenses of RMB 2.041 billion, including RMB 1.048 billion in product promotion expenses

After adjusted calculation, the company’s actual gross profit margin in 2023 was only 21.9%, which is equivalent to that of Hengan International, but the proportion of sales expenses invested is lower than that of Hengan International (about 14%) [5].

The “Jierou” brand has been strongly associated with tissue paper in consumers’ minds. Although the company emphasizes its brand concept of “Only Care About You” and attempts to extend to care products, the transformation of brand association cannot be achieved overnight [6]. In contrast, Hengan International’s extension from tissue paper to sanitary napkins is relatively smooth, because “Hearttex” (Xinxiangyin) and “Space 7” in its brand matrix have clear positioning differentiation.

Although Zhongshun Jierou has spared no effort in R&D investment (2023 R&D expenses of RMB 268 million, accounting for 3.2% of revenue), the R&D investment has not been effectively transformed into market competitiveness [5]. In the first half of 2024, the company’s R&D investment decreased by 36.68% year-on-year, reflecting resource constraints in the cultivation of new businesses [6].

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Dimension	Zhongshun Jierou	Hengan International	Vinda International
Tissue Paper Revenue Share	98.85%	~58%	~70%
Personal Care Revenue Share	1.15%	~40%	~30%
Sanitary Napkin Gross Profit Margin	Not Disclosed	63.8%	32.9%
Pulp Self-Sufficiency Capability	None	None	Yes (Supported by Parent Company)
Measures to Deal with Price Wars	Passive Response	Hedged by High-Margin Businesses	Reduce Costs Through Supply Chain Advantages

: Driven by the dual wheels of “tissue paper + sanitary napkins”, while sacrificing gross profit margin in the tissue paper business to participate in price wars, it relies on the high-margin (60%+) sanitary napkin business to make up for profit gaps [5]. This strategic synergy enables Hengan International to have stronger anti-cyclical capabilities.

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Zhongshun Jierou’s diversified layout shows the characteristic of “casting a wide net”, covering from sanitary napkins to laundry detergents and hand creams, lacking a clear focus direction. In contrast, competitors such as Hengan International deeply cultivate the female care field, and Vinda International focuses on a high-end strategy, while Zhongshun Jierou’s strategic clarity is obviously insufficient.

Against the background of continuous pressure on the main business, the company must not only maintain market share but also invest resources in cultivating new businesses, leading to scattered resource allocation. At the 2024 performance briefing, the company still emphasized “adhering to tissue paper as the core”, and the priority of the diversification strategy has been questioned [2].

In 2019, the company introduced a brand-side executive from Hengan International in an attempt to accelerate the development of its personal care business [4]. However, judging from the results, the construction of organizational capabilities failed to match its strategic ambitions.

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1. Focused Strategy
   : It is recommended that the company concentrate resources to cultivate 1-2 core categories (such as Duolemi Sanitary Napkins) instead of operating multiple lines simultaneously
2. Supply Chain Layout
   : Consider reducing the risk of raw material cost fluctuations through methods such as equity participation in pulp mills and futures hedging
3. Brand Restructuring
   : Establish an independent brand system for personal care businesses to avoid over-binding with “Jierou”
4. Channel Synergy
   : Make full use of existing tissue paper channel resources to achieve rapid distribution of personal care products

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[1] Beijing News - Jierou Pocket Tissue’s “Joint” Tape Exposes Quality Control Defects, Parent Company Faces Difficulties in Diversification Transformation (https://m.bjnews.com.cn/detail/1764733923168038.html)

[2] Xinhua News - Net Profit Declined for Four Consecutive Years, When Will the Transformation Pains of “Paper Champion” Zhongshun Jierou End? (http://www.news.cn/fashion/20250512/6e5fac53930c480084b9b61d6501c1a1/c.html)

[3] Oeeee.com - Three Giants in Tissue Paper Amid Promotion Price Wars: Vinda, Jierou, Hengan See Declining Net Profits (https://m.mp.oeeee.com/a/BAAFRD000020240514953033.html)

[4] Founder Mid-term Futures - Pulp Futures Semi-annual Report (https://www.founderfu.com/attached/file/20250623/20250512/6e5fac53930c480084b9b61d6501c1a1/c.html)

[5] Sina Finance - Why Did the Former “Paper Champion” Zhongshun Jierou Fall Behind? (https://www.xincai.com/article/nekhuek0998283)

[6] Yangcheng Evening News - Zhongshun Jierou’s Semi-annual Report Shows Recovery, But the Transformation Path is Still Thorny (https://news.ycwb.com/ikinvkctil/content_53632288.htm)

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: Jinling AI Financial Analysis Database [0]