Just announced its own liquidation. Who is JFT that maliciously unilaterally terminated the contract?

Just announced its own liquidation. Who is JFT that "maliciously unilaterally terminated the contract"?

The two supremes issued a self-liquidation announcement of Juste Electronic Technology (Dongguan) Co., Ltd. (hereinafter referred to as "Juste"), and the company stated that due to the malicious unilateral termination of the contract by its main foreign customer JFT Co., Ltd., it suffered a loss of more than 60 million yuan, which caused serious difficulties in the company's operation and management, and had to decide to liquidate. Who is JFT that caused the company to "have serious difficulties in operation and management"? What is its relationship with Juste?

 

On June 4, the two supremes issued a self-liquidation announcement of Juste Electronic Technology (Dongguan) Co., Ltd. (hereinafter referred to as "Juste"), and the company stated that due to the malicious unilateral termination of the contract by its main foreign customer JFT Co., Ltd., it suffered a loss of more than 60 million yuan, which caused serious difficulties in the company's operation and management, and had to decide to liquidate.

 

On the afternoon of June 5, JFT Co., Ltd. responded to the "self-liquidation of Juste Electronic Technology (Dongguan) Co., Ltd." JFT said that the reason for terminating the cooperation with Juste was that it was found that it had serious violations, including the actual controllers Liu XX, Ge XX and others privately set up affiliated companies to raise the price of raw material purchases and sell counterfeit "JUSTFOG" registered trademark products. These behaviors violated the principle of good faith cooperation, so it decided to terminate the cooperation.

 

Who is the Korean company JFT involved in this incident? What is its relationship with Juste?

 

When Juste announced liquidation, JFT released new products in South Korea

 

Two Supremes noted that JFT Co., Ltd. CEO Lee Hee-sung announced on June 3 that it would officially launch the refillable e-cigarette device "Glent" for its atomizing e-cigarette brand "Just Fog".

According to the company, the product is equipped with a 1500mAh large battery and a 3.5ml capacity cartridge, providing users with a long-term e-cigarette experience. The cartridge is available in 0.6 ohm and 1.0 ohm options. Glent uses a MESH atomizer core, which can be charged without removing the cartridge from the battery. It supports both automatic inhalation and manual inhalation by button, and is also equipped with multiple battery protection and safety functions such as short circuit protection, overheating protection, over-discharge protection, overcharge protection, and overvoltage charging protection.

 

On the same day that JFT announced the launch of the new product, the official account "Jaster Liquidation Group" issued a self-liquidation

announcement in the evening, announcing that from now on, Just Electronic Technology (Dongguan) Co., Ltd. will begin liquidation and stop all business activities. The reason is that "the main foreign customer JFT Co., Ltd. maliciously unilaterally terminated the contract and maliciously defaulted on the payment, causing the target company to incur losses of more than 60 million yuan, and the target company's operation and management encountered serious difficulties."

 

The mystery of JFT's background

 

The party involved in the "Jaster Liquidation Incident" this time, according to its official website, is "a Korean company that develops, manufactures and distributes electronic cigarette products... It has currently expanded its market to more than 46 countries in Europe, the Americas, Africa, Asia, the Middle East and Oceania."

 

Its headquarters is located in Seongdong District, Seoul, South Korea. According to the business registration information, it is mainly engaged in the development, manufacturing and export of electronic cigarette products. There are two manufacturing plants in China, namely Factory No. 1 in Chang'an Town, Dongguan City, China and Factory No. 2 in Qiufu Street, Dalang Town, Dongguan City, Guangdong Province.

 

The No. 2 factory here is the protagonist of this liquidation-Jaster Electronic Technology (Dongguan) Co., Ltd.

It said, "JUSTFOG is a global e-cigarette brand under JFT" and that three of its products are still on sale on its official website.

According to Tianyancha information, there are two applicants for the 34-tobacco cigarette of "JUSTFOG", namely JFT CO., LTD and JFT Co., Ltd., and the application dates are March 2020 and February 2013. JFT Co., Ltd. is the Chinese name of JFT CO., LTD. In other words, JFT is the legal owner of the trademark.

It is worth noting that JFT Co., Ltd. has been dissolved, but it owns three registered trademarks.

Towards the highlight moment

Two Supremacies According to the public information, JFT's CEO Lee Hee-sung is responsible for the contact between the local Chinese company (Factory No. 1 and Factory No. 2) and the Korean company, including business management, domestic sales, Chinese factories, marketing, and R&D centers.

The development timeline is as follows:

 

2009: The company began to have product development capabilities, established the JUSTFOG brand, and built the first production plant.

2014: JFT was officially established, further expanding its business scope.

2017: Expansion was carried out on the existing No. 1 factory to increase production capacity.

2019: A laboratory company was established in China, and a second production plant (Just Fog Electronic Technology (Dongguan) Co., Ltd.) was established, further enhancing R&D and production capabilities.

In 2009, JFT launched a vaporizing electronic cigarette device under the brand name Just Fog; in 2011, the brand had already attracted attention in the Korean market. According to Korean media reports in January 2011, Just Fog's product 'Shotgun' was reported, and Just Fog held a promotion as a marketing promotion for the new product.

Ten years later, in January 2019, Korean media Seoulfn reported that JFT announced that Just Fog's sales in the previous year reached 3.5 million sets, setting a record high, with a year-on-year sales increase of 162%. Among them, the best-selling product "Mini Fit" kit sales reached 1.5 million sets. It is reported that MiniFit is a small cartridge-changing electronic cigarette. The hot sales of the product led to a shortage of supply. At that time, JFT stated that the reservations for Just Fog had been completed until April of that year.

A JFT spokesperson said that in order to ensure a stable supply, JFT is building a second factory in China. Once completed, it is expected to increase production from the current $80 million to $200 million.

 

In 2019, e-cigarettes stepped out of the niche circle and "broke the circle" rapidly. New e-cigarette brands and companies started their globalization.

 

In May of the same year, Juul, a brand that occupies an almost monopolistic position in the United States, officially announced its entry into South Korea, and as a local brand in South Korea, JFT also started to go overseas.

 

According to etoday, it announced that it had signed an exclusive supply agreement with Euronics, a large European electronic distribution company. Euronics has more than 14,000 merchants in 34 countries in Europe, and has established global partnerships with Samsung, LG, Apple and Microsoft, with sales of 19.1 billion euros.

At that time, Just Fog had already launched a variety of atomizing electronic cigarette products such as Q16, Q14, and Mini Fit. JFT said that these products "are not only well received domestically, but also popular in the Middle East recently after the United States and Europe."

 

Encountering a "black swan", multi-product layout began

 

But the turning point occurred in October 2019, when the Korean Ministry of Health and Welfare held a press conference and "strongly recommended" the public to stop using such electronic cigarettes before the results of the test on the hazards of atomizing electronic cigarettes were released, and especially reminded specific groups such as teenagers, pregnant women, patients with respiratory diseases and non-smokers not to smoke atomizing electronic cigarettes.

 

Officials from the Ministry of Health and Welfare said at the press conference that there have been many cases of lung disease caused by atomizing electronic cigarettes in the United States recently, and suspected cases have also appeared in South Korea. Therefore, the government made a recommendation to stop using it, and at the same time, it will start to detect the hazards of electronic cigarettes.

Juul said their products do not contain harmful substances. Just Fog also responded. At the German tobacco expo Intertabac that year, JFT CEO Lee Hee-sung said: "The government's e-cigarette measures are part of the natural policy of public health.

 

We hope that reasonable and feasible e-cigarette regulations such as the EU TPD can be implemented quickly in South Korea."

 

But at the beginning of 2021, Lee Hee-sung told the media that his goal was to increase total overseas sales by 90% to 100 billion won.

 

Although JFT only produced atomizing e-cigarette equipment at the time, it planned to "enter the e-liquid manufacturing industry, which is the raw material of e-cigarettes" in the future.

Photos of Li Xicheng

 

"First, we will establish a production base in France, the largest Just Fog exporter in Europe... We will launch about 20 types of e-liquids this year, increasing sales by 60 billion won."

 

Lee Hee-sung said that just as printer manufacturers make profits from ink sales rather than printer sales, the e-cigarette market is likely to shift to a structure where future profits come mainly from e-liquid manufacturing rather than equipment manufacturing.

 

"The product cycle of e-cigarettes is short, and we need to launch several new products within a year."

 

Just Fog has been catching up with the trend of e-cigarettes. Just as the disposable e-cigarette category swept Europe and the United States, Just Fog launched a large-capacity disposable e-cigarette product Ko·Pop in October 2022. There are a total of six flavors of product lines, including "Rich" and "Cuban Cigars", with a product capacity of 9ml and can be inhaled about 4,500 times.

In June 2023, Just Fog launched a new e-liquid series "Kopop Liquid Series", which is only available in offline e-cigarette stores. The nicotine concentration is divided into two levels: 0.99% and 2%, with a capacity of 30ml.

Kopop Liquid

 

22 billion won worth of old shares were sold

 

It is worth mentioning that when the e-cigarette boom hit the United States in 2019, JFT sold 22 billion won (16 million U.S. dollars) worth of old shares to domestic venture capital and new technology business financial companies in April of that year. JFT CEO Lee Hee-seung, research director Lee Hee-min and other board members sold part of their shares. At that time, JFT's corporate value was assessed at 120 billion won (87.36 million U.S. dollars), and the selling price per share was set at 600,000 won (436 U.S. dollars).

 

The company's equity structure has also begun to emerge, with founder and CEO Lee Hee-seung owning 80% of the shares, including special relations. Lee Hee-seung is the largest shareholder, holding 55% of the shares, Lee Hee-seung's younger brother, research director Lee Hee-min, holds 15%, and Lee Hee-seung's spouse, marketing director Kim Eun-kyung, holds 10%. In addition, Director Lee Chang-hee (China Business) and Director Kim Hyo-jin (Overseas Sales Management), who are founding members, each hold 10% of the shares.

 

Executives sold about 5% to 1% of their shares, each receiving billions of won, and most of the company's issued shares were 100% owned by five key executives.

 

At the time, the media commented that this was JFT's way of obtaining capital turnover by selling shares (common shares).

 

But why did JFT go to the point of "maliciously unilaterally terminating the contract and maliciously defaulting on payments, causing the target company to incur losses of more than 60 million yuan"? Why did Juste Electronic Technology (Dongguan) Co., Ltd., originally the No. 2 factory, go to liquidation?

The Two Supremes will continue to pay attention to and follow up on this incident, so stay tuned.