This story is a part of Forbes’ protection of China’s Richest 2019. See the complete record right here.
When Zong Qinghou travels overseas, he likes to go to native supermarkets. The 74-year-old founding father of China’s largest privately held beverage firm Hangzhou Wahaha Group isn’t purchasing for himself, however doing somewhat firsthand market analysis. For instance, when Zong visited Singapore in October, he purchased packing containers of fruit-flavored beer. Staff again in China then research these samples to see in the event that they may very well be imported into China, or tailored to native tastes.
“Every new product can be used as a reference,” says Zong in an unique interview with Forbes Asia on the sidelines of the Forbes Global CEO convention final month in Singapore. Zong, who’s chairman of Wahaha, is now underneath stress to give you recent product concepts to rekindle shopper curiosity in his firm, that he’s spent greater than three a long time working.
The tycoon, who was China’s richest man in 2010, 2012 and 2013, noticed Wahaha’s gross sales slide from 78 billion yuan ($11 billion) in 2013 to 46 billion yuan in 2017 earlier than rebounding barely to 47 billion yuan final yr. His possession of the corporate nonetheless offers him a fortune of $eight.2 billion, however he’s not No. 1, rating as an alternative as China’s 31st richest individual.
One of the primary causes for the decline, say analysts, is that Wahaha hasn’t saved tempo with altering shopper tastes in China. Unlike their dad and mom’ era who grew up consuming Wahaha’s low cost however tasty merchandise similar to bottled water and milk drinks costing lower than 2 yuan, customers right now wish to spend extra for one thing revolutionary and new. “Wahaha is still very price-focused, and hasn’t captured the trading-up trend as well as it could have,” says Mark Tanner, founding father of Shanghai-based consultancy China Skinny.
Zong is unfazed. He vows to carry gross sales by a minimum of 50% subsequent yr, to 70 billion yuan. While he concedes that Wahaha’s merchandise was as soon as perceived as low cost and old style, he says he’s working to modernize his merchandise. The firm, whose title is supposed to imitate the sound of a kid’s chuckle, has not too long ago began a significant improve. Packaging has gotten a makeover to make use of brighter and extra trendy colours, whereas elements like nuts and quinoa have been added to new yogurt traces to enchantment to more healthy existence. Wahaha has additionally expanded into dietary tablets and meal substitute biscuits, which Zong says are in keeping with weight-reduction plan tendencies. He additionally plans to extend the present variety of 6,000 distributors to 10,000 by yr finish, to make sure higher distribution to each nook of China.
Yet maybe essentially the most notable change is Zong’s willingness to experiment with social media and e-commerce. In 2014, he famously pronounced at a convention that e-commerce was disrupting China’s “real economy.” The firm in consequence didn’t have a lot of an internet presence, at the same time as e-commerce exploded throughout China. “I don’t think traditional sales channels will change much,” Zong says. “People need to enjoy life, and to enjoy life, they need to go outside instead of staying at home hooked on their smartphones.”
Zong, actually, nonetheless expects most gross sales to happen in conventional brick-and-mortar shops. That stated, Wahaha has began to experiment with digital advertising and marketing for its merchandise. A collection of movies on the favored app TikTookay app reveals customers posting 15-second clips of themselves announcing Wahaha in numerous humorous methods. The clips have been considered nearly a million instances.
Some analysts hope Wahaha can do extra of such efforts. Jason Yu, a Shanghai-based common supervisor at analysis agency Kantar Worldpanel says, “It is very hard to get consumer attention today, and if you want to do that, you have to engage and interact with them nonstop.”
For instance, Wahaha’s competitor in bottled water, Nongfu Spring, has gained market share partially due to revolutionary promoting. One was a marketing campaign the place every bottle of Nongfu Spring water gave the customer the precise to forged one vote on-line for his or her favourite candidate in a preferred TV expertise competitors present. Nongfu Spring was primary in China’s bottled water market in 2018, with an 11% share versus Wahaha’s four% share, based on Euromonitor.
Zong’s ambitions, nevertheless, attain past China. He needs to start out producing and promoting Wahaha-branded yogurt and milk drinks abroad, after noticing that some Wahaha merchandise are being exported by third-party merchants. In the previous few years, Zong has visited Southeast Asia, and recognized Indonesia and Vietnam as two areas for factories to provide for native markets. Zong says, nevertheless, he needs to search out the precise native companion first earlier than he strikes ahead with any abroad enlargement.
China, he says, will at all times be Wahaha’s largest market. Consumption will proceed to develop, he says, as the center class expands and spends on every part from training to journey. “If we can firmly establish ourselves in this market of 1.4 billion people, we can grow very big,” he says.
Don’t low cost Zong. He has overcome many challenges in his lengthy profession. The entrepreneur didn’t enterprise into enterprise till 1987, when he was already in his 40s. He began by promoting snacks out of a canteen inside a neighborhood college in his native Hangzhou, then begin producing and distributing milk. In 1988, Zong launched a dietary drink for youngsters, which turned a nationwide hit. Three years later, he acquired a state-owned manufacturing unit, with gross sales reaching 400 million yuan the next yr.
One of his largest challenges was a tumultuous partnership began in 1996 with France’s meals and beverage big Danone. After preliminary success, the 2 had a falling out, and Zong ultimately agreed in 2009 to purchase out Danone’s 51% stake of their numerous ventures for an undisclosed worth, though one media outlet put it at roughly $380 million. “Only cooperation based on mutual benefits and mutual respect can last,” he says of the previous partnership.
Then in September 2013, he confronted one other problem when he was attacked by a knife-wielding man, disgruntled after Zong turned him down for a job. The attacker managed to chop the tendons and muscle on two of Zong’s fingers, however he was again at work only a few days later.
Another large problem is succession. Zong’s administration type is famously budget-conscious and detail-oriented. He typically eats on the firm canteen with employees, and is thought to fly financial system class. He personally approves the acquisition of all new firm vehicles.
Naturally, Zong has lengthy been his solely baby, daughter Kelly Zong, to switch him. She’s had loads of expertise, working at Wahaha since 2004. Now 37, the youthful Zong has additionally tried her hand at entrepreneurship, launching a juice model, KellyOne, three years in the past. In 2017, she tried to amass the Hong Kong-listed sweet agency China Candy, however was unable to amass 50% of the corporate’s voting rights. Kelly stated in a social media submit on the time that the unsuccessful bid had been a “positive and constructive exploration.”
Zong says he’ll hand over the reins to Kelly if she needs them. If not, he’ll groom skilled administration. “A lot of young people have studied abroad and have a broader vision, and they may not want to manage their parent’s business,” he says. “My daughter is overseeing some factories. Does she want to take on more? That I don’t know.” His transfer to do digital advertising and marketing, led by youthful expertise, was seen as a constructive step in direction of a brand new era having a larger position within the firm.
Zong says there’s nonetheless time to search out good skilled managers if Kelly needs to observe her personal path. He says Wahaha is contemplating a number of for future management, with out going into element. He can also be not ruling out an IPO, a transfer that will be a significant transfer for the corporate down the trail of diversifying administration.
Whatever path he takes, Zong is clearly serious about laying the foundations of sustainable success for Wahaha.