Betting on industrial hemp, the "First Domestic Milk Powder Stock" faces loss of control

On March 1st, the former “Number One Domestic Milk Powder Stock” Beingmate (002570.SZ) trended on social media. Originally aiming to carve out a new market with the industrial hemp concept, the “second growth curve” failed to materialize, and instead, it triggered a legal battle worth over 100 million yuan.

On February 24th, Beingmate issued an “Update on Major Litigation Matters,” revealing a dramatic turn in its patent contract dispute with Heilongjiang Fengyou Ma Lei Cultivation Co., Ltd. (hereinafter “Heilongjiang Fengyou”)—the plaintiff Beingmate not only failed to claim damages but was counter-sued for over 77 million yuan.

Once a leader in domestic milk powder after the melamine scandal, trusted by thousands of families as the “King of Milk Powder,” Beingmate is now entangled in high-stakes share pledges, pre-restructuring by its controlling shareholder, and a series of lawsuits, gradually slipping toward loss of control.

Plaintiff Turns Defendant

Adding cannabidiol (CBD) to produce milk powder that relieves prenatal and postpartum anxiety in pregnant women, Beingmate initially expected CBD to be edible and planned to purchase related patents. However, due to policy reasons, this was never realized, resulting in a prepaid patent licensing fee of 50 million yuan that went “down the drain.”

In December 2025, after failing to recover damages, Beingmate announced that it had sued Heilongjiang Fengyou, claiming it had purchased the rights to use a CBD-related patent to develop new products. However, Heilongjiang Fengyou failed to provide key documents, preventing the cooperation from progressing. The announcement stated that due to the patent contract dispute, Beingmate filed a lawsuit with the Hangzhou Intermediate People’s Court, with a claim amount of 56.85 million yuan (including interest losses calculated up to November 20, 2025).

However, the situation quickly reversed. On February 24, 2026, Beingmate released an update stating that Heilongjiang Fengyou, now the defendant in the case, had filed a counterclaim demanding Beingmate compensate for economic losses totaling 77.25 million yuan due to breach of contract, shifting Beingmate from plaintiff to counterclaim defendant.

Heilongjiang Fengyou detailed its case facts and reasons in the complaint. It disclosed that the two parties signed the “Exclusive Patent Licensing (Exclusive Operation) and Joint R&D Cooperation Agreement” and its supplementary agreement in November 2021 and January 2022, respectively.

Heilongjiang Fengyou claims it fully performed its core obligations: first, it fulfilled its rights assurance obligations by delivering all application documents related to three patents to Beingmate and successfully obtaining patent rights; second, it strictly adhered to its exclusivity commitments, ensuring Beingmate’s exclusive position in the mainland China market for maternity and infant milk powder and nutritional products; third, it remained ready to cooperate in R&D.

Heilongjiang Fengyou argues that after Beingmate received the patent documents and obtained a twenty-year exclusive operation right in mainland China, it failed to perform its main contractual obligations as the contract’s leading and demand side, constituting breach. To support Beingmate’s future plans for large-scale production of patented products and new R&D, Heilongjiang Fengyou made substantial unretractable preliminary investments, totaling approximately 77.25 million yuan in economic losses.

Currently, both cases have not yet gone to trial, and their future impact on Beingmate’s finances remains uncertain.

Misjudged Policy, Suffering the Consequences

From claiming 56.85 million yuan to paying 77.25 million yuan, a difference of 134 million yuan. Beingmate’s gamble on industrial hemp to open a new milk powder market segment has backfired due to misjudging policy directions.

In December 2021, Beingmate announced a strategic cooperation framework agreement with Zhongheng Yiyuan Investment Group Co., Ltd. (“Zhongheng Yiyuan”). The two planned to jointly develop functional and nutritional products for mothers, infants, and adults, including products to relieve prenatal and postpartum anxiety. Zhongheng Yiyuan is a major shareholder of Heilongjiang Fengyou. Beingmate claimed that Zhongheng Yiyuan had developed functional products with anti-anxiety and sleep aid effects.

A month earlier, in November 2021, Beingmate signed a cooperation agreement with Heilongjiang Fengyou, stipulating that Heilongjiang Fengyou would grant Beingmate exclusive licensing rights to its patents (including CBD) or patents with development rights in the field of maternity and infant milk powder and nutritional products. The license included R&D, production, and sales. Heilongjiang Fengyou agreed not to cooperate with other companies producing or selling similar products within this scope.

However, this cooperation could not be advanced. Beingmate stated that after signing the contract, it paid a 50 million yuan patent licensing deposit in November 2021. But Heilongjiang Fengyou failed to issue authorization documents, formal licensing contracts, or provide necessary technical materials and guidance, making it impossible for Beingmate to practically use the patents.

An internal source from Beingmate said that the initial cooperation was about applying CBD in anti-anxiety milk powder for pregnant women. The company expected policies to liberalize CBD consumption, but policy remained restrictive, stalling the development plan. As a result, they had to negotiate termination with Heilongjiang Fengyou, but the process was difficult, ultimately leading to mutual lawsuits.

Public information indicates that CBD is a substance extracted from cannabis plants. While it is used in medicines and foods abroad, domestically, there has been no legal allowance for edible use. In August 2024, the Ministry of Public Security, Ministry of Commerce, National Health Commission, Emergency Management Department, General Administration of Customs, and National Medical Products Administration jointly announced that seven substances, including CBD, would be classified as controlled psychoactive chemicals, marking the first official legal definition and inclusion of CBD into national controlled substances.

Analysts believe that Beingmate’s premature actions and assumptions about CBD legalization, without clear policy support, crossed legal boundaries. Fortunately, the products are still in R&D and have not impacted consumers.

A Decade of Performance Halved

Beingmate’s aggressive market expansion into industrial hemp stems from its own development difficulties.

In recent years, Beingmate has faced continuous trouble, with multiple high-value legal disputes. In December 2024, Beingmate’s relationship with key distributor Zhejiang Keluobao Food Co., Ltd. (“Keluobao”) broke down, leading to multiple lawsuits. Keluobao claimed about 185 million yuan in damages due to Beingmate’s early termination of cooperation; Beingmate counter-sued for approximately 202 million yuan.

On September 4, 2025, Beingmate announced that its wholly owned subsidiary, Hangzhou Beingmate Maternal & Infant Nutrition Co., Ltd., filed a lawsuit with the Jinhua Intermediate People’s Court in Zhejiang against Jinhua Wucheng Mingqiao Food Trading Co., Ltd., Zhejiang Keluobao Food Co., Ltd., Shanghai Jialupu Health Technology Co., Ltd., Jialupu (Jiangsu) Health Technology Co., Ltd., Yang Guomin, and a third party, Jiangsu Zhongchuang Supply Chain Service Co., Ltd., for trademark infringement and unfair competition, with a claim of 72.01 million yuan.

The disputes for Beingmate do not end there. Its controlling shareholder is also facing debt crises, potentially leading to a change in actual control and threatening the company’s ownership structure. According to Beingmate’s July 2025 announcement, its controlling shareholder, Zhejiang Xiaobei Damei Holding Co., Ltd. (formerly Beingmate Group), filed a pre-restructuring application with the Jinhua Intermediate Court, which accepted the case. Xiaobei Damei currently holds 133 million shares, accounting for 12.28% of the total, with 98.85% of those shares pledged or frozen.

Such a high pledge ratio means that if creditors exercise rights or shares are forcibly disposed of during restructuring, the controlling shareholder’s stake could be significantly diluted. Notably, in July 2024, the Hangzhou Intermediate Court transferred 48 million freely tradable shares (4.44%) of Beingmate Group to Ningbo Vibe as debt repayment, valued at 202 million yuan. Ningbo Vibe’s shareholding then reached 9.96%, just 2.32 percentage points below the controlling shareholder.

This delicate gap has caused market concern: if Xiaobei Damei’s restructuring fails and enters bankruptcy liquidation, a control battle is inevitable.

Performance is also bleak. Public data shows that Beingmate was listed in 2011 and once led the domestic infant formula industry. But due to strategic missteps, its performance declined from 2014 onward. Financial reports reveal multiple instances of “performance reversal,” with the company correcting several periods’ reports in April 2025 and receiving warnings from the Zhejiang Securities Regulatory Bureau.

Financial data shows that in the first three quarters of 2025, Beingmate’s revenue was 2.033 billion yuan, down 2.59% year-over-year; net profit attributable to shareholders was 106 million yuan, up 48.07%. Industry-wise, Beingmate’s 2024 revenue was 2.773 billion yuan, less than half of its peak of 6.1 billion yuan in 2013. Meanwhile, competitors like Feihe and Junlebao have surpassed 10 billion yuan in revenue, widening the gap. Amidst shrinking market share in infant formula, industry leaders continue to squeeze out smaller players, making Beingmate’s situation increasingly difficult.