By PANG Yu

In an act of bizarre corporate transformation, once-prominent sports brand, Guirenniao is now a food business, albeit a not very successful one. 

Guirenniao's problems are pretty ordinary. Competition is intense and small domestic sports brands aren't shipping enough goods. But most failing businesses don't change into completely different businesses overnight, so what's behind such an abrupt transition?

The story begins in July 2021. Guirenniao was restructuring to survive, when food magnate LI Zhihua acquired a 20 percent stake in the company and eventually became the controlling shareholder, and steering Guirenniao into the agriculture industry. Li quickly established multiple wholly-owned subsidiaries specializing in food manufacturing and processing.

Food contributed 250 million yuan (US$35 million) in to Guirenniao's revenue in 2021, and more than 1 billion yuan in 2022. Food is now the primary income driver.

When Guirenniao went public in 2014, it was one of the most prominent sports brands in the A-share market, with a market capitalization exceeding 40 billion yuan. Its founder, LIN Tianfu, even found a place on the Forbes China Billionaires List. However, the company's fortunes have since taken a drastic turn, with its current valuation now standing at less than 3 billion yuan.

The primary reason behind this downturn can be traced to an ill-conceived expansion strategy. During its peak, Guirenniao not only expanded rapidly but also made investments across various industries, mostly bad investments. As domestic competitors multiplied and international giants intensified their focus on the Chinese market, Guirenniao found itself entering bankruptcy restructuring in August 2020.

While the growth in the food sector led to a turnaround in 2021, Guirenniao slipped back into losses in the fourth quarter of the same year. 

Currently, the company remains on the brink of financial instability. To compound matters, several executives, including Chairman Li, have recently received warnings from regulatory authorities.