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E-mail China Daily, February 29, 2024
Zong Qinghou [File photo: Xinhua]
Bouquets of flowers have piled up in front of building No 160 at the headquarters of Hangzhou Wahaha Group, China's leading beverage maker, in tribute to its founder and chairman, Zong Qinghou, who passed away on Sunday at the age of 79. A memorial service was held for Zong in Hangzhou, Zhejiang province, on Tuesday.
Earlier, past and present employees as well as visitors paid their respects to the business leader at the gray, six-story building, where Zong, once China's richest man, conducted his daily work.
Among the bouquets were a pair of black cotton shoes, Zong's signature footwear, which reflected his simple and frugal lifestyle, along with a container of Wahaha AD Milk, a favorite drink of generations of consumers, especially in their childhood.
Leaders of private enterprises sent their regards. Geely Chairman Li Shufu praised Zong as a pioneer of innovation and entrepreneurship in the private sector who was representative of modern Zhejiang merchants and their hardworking spirit.
"You have opened up new territories for the rise and development of China's food and beverage industry, and you are a model for the first generation of Zhejiang businesspeople," Li wrote.
Lei Jun, founder and CEO of the technology giant Xiaomi Corp, hailed Zong as a true legend, citing his book on marketing in 2002 as a source of inspiration for over two decades.
Zhou Hongyi, founder of the cybersecurity company 360 Security Group, lauded Zong's marketing theories on selling beverages as words of wisdom for his own entrepreneurial journey. "I hope his spirit can continue to encourage more Chinese entrepreneurs to work together," Zhou said.
In 2012, Zong claimed the top spot on the Forbes List for the Chinese mainland with a fortune of $10 billion.
In 2020, he was named on the Hurun list as the richest man on the Chinese mainland. By March 2023, Zong ranked 121st on the 2023 Hurun Global Rich List with a wealth of $15 billion.
Despite his huge fortune, Zong led a modest life and diligently worked from 7:00 am to 11:00 pm. He slept in a bedroom located in the same building as his office and was known for his calm and soft-spoken demeanor.
He preferred simple meals like porridge and noodles from the company canteen. The tycoon often traveled alone on business trips carrying a single suitcase and once went second-class on a bullet train, chatting to and befriending other passengers.
Tough start
Born in 1945, Zong's early years were shaped by hard work at salt mines and tea farms in Zhoushan, Zhejiang. He once said the 15 years of menial labor had built his character and resilience.
Zong returned to Hangzhou in 1978, and in 1987, he took over a school shop and began selling sodas and ice creams. At about the same time he founded the Wahaha Group and teamed up with a nutrition expert at a local hospital to develop the company's first product, a nutritional drink for children.
The drink proved successful and led to the company's first major expansion. In 1991, with support from the Hangzhou government, the company acquired an indebted State-owned enterprise, the Hangzhou Canned Food Product Co.
Zong initially encountered opposition from the workers but won them over by explaining to them Wahaha's founding, how it operated and the benefits it would bring them. Three months later, the cannery began turning a profit.
Wahaha's early success was largely attributed to its sales system and vast distribution network. In 1994, when the country's credit system was still evolving, Wahaha began to foster strong financial links between producers and distributors.
The company's idea involved the upfront guarantee of money from the distributors to the producers, with the products delivered at a later date. This ensured a steady cash flow for the producers and fostered their loyalty to the distributors.
The money guarantee was usually the equivalent of 10 percent of estimated annual sales and was refunded with interest at year's end by the producers. This innovative risk-sharing model became a case study at many business schools.
Famous brand
At its peak, Wahaha boasted more than 7,000 distributors, over 100,000 wholesalers and 5 million sales outlets across China.
"Wahaha is one of the few private enterprises in China that has been active in the consumer market since the beginning of the market economy and it is still developing rapidly," said Jason Yu, general manager of Kantar Worldpanel China, a market research firm.
"It is also one of the few Chinese brands with strong penetration, ensuring mutual benefits for the brand and distributors," he said.
Wahaha's sales model allows it to penetrate millions of retail outlets in China, including in rural areas.
This wide distribution network is unmatched by many international giants and domestic companies, giving Wahaha an edge in maintaining steady revenue flows in the era of the internet, Yu said.
In 1996, the company extended its portfolio to include bottled water, which solidified its market presence. In 2013, the company made 78.2 billion yuan ($10.8 billion) in revenue, still the highest annual revenue recorded for China's beverage market.
"So far, no domestic beverage producer has surpassed that record," said Zhu Danpeng, a food and drink sector analyst.
Although consumers have more choices today, and many new brands achieve rapid breakthroughs using e-commerce, Wahaha has successfully maintained substantial revenue, Yu said.
Over the decades, Wahaha has also had many successful product innovations, such as Nutri-Express and AD Milk, which met the needs of consumers at the time and reflected Zong's profound insight into the domestic consumer market, Yu said.
