According to the official announcement released on Wahaha's Weibo: Zong Qinghou, the founder and chairman of Wahaha Group, passed away at 10:30 a.m. on February 25, 2024, due to illness that was unresponsive to treatment, at the age of 79.
The news was sudden but not without warning signs. On February 22, there was news that Wahaha's founder Zong Qinghou was undergoing treatment in the hospital's ICU. That evening, Wahaha Group issued an official statement on Weibo, stating: Mr. Zong Qinghou is indeed receiving treatment in the hospital due to health reasons, and his condition is currently stable, with all Wahaha Group's business operations running normally. According to local media reports in Hangzhou, Zong had been admitted to Sir Run Run Shaw Hospital before the Spring Festival due to serious lung cancer.
Born in 1945, Zong Qinghou turned 79 this year. He founded Wahaha in 1987 starting with selling water, and the group has grown over 30 years, from a start-up to a leading food and beverage enterprise. Zong Qinghou has often topped China's richest list, with a net worth of billions of dollars, and is often described by the outside world as being in high spirits, which is not common for his age.
But constant hands-on involvement inevitably leads to fatigue. Looking back, as the founder of Wahaha Group, Zong Qinghou led the group to glory. Now that he has left, the public mourns, but they are also more curious about the future direction of Wahaha Group.
With the second generation taking over and the old being replaced by the new, the question is whether the successor, Zong Fuli, can shoulder the heavy responsibility and lead Wahaha back to its former glory, which will take time to prove.
Starting a business is hard, but maintaining it is even harder
With the founding generation aging, the phenomenon of second-generation business leaders taking over is not uncommon. Wahaha, with its significant size, draws even more attention.
In the CCTV Finance 'Dialogue' program in 2023, Zong Qinghou discussed succession and stated, "I probably won't retire, but I will step back and let young people charge ahead. I will watch from behind, straightening things out when they go awry, and putting forth ideas." All along, Zong Qinghou has been the soul of Wahaha Group, deeply involved and highly respected, described by the media as a "patriarchal Chinese entrepreneur."
However, the inevitable shift between the old and new guards in an enterprise is bound to happen. Approaching his eighties, Zong Qinghou candidly shared in media interviews: For individuals, being thirty is youthful. But for businesses, thirty years is already old, and the diseases of big corporations have started to show.
Wahaha Group reached the peak of its performance in 2013 with a revenue of 78.28 billion yuan, propelling Zong Qinghou to the position of China's richest individual. Since then, Wahaha's performance has declined year by year, revealing the challenge of revenue growth for this established food and beverage giant.
The decrease in revenue is not due to a market downturn. There is still considerable market space for the beverage industry.
According to data from the National Bureau of Statistics, the production of beverages from January to November 2023 exceeded 160 million tons, a year-on-year increase of approximately 4%, showing strong industry resilience. Zong Qinghou also stated that the beverage industry will always be a sunrise industry.
The Engel coefficient has been rising slowly since 2019, and from January to October 2023, catering revenue increased by 18.5% year-on-year. The pursuit of quality has driven food consumption to rebound, with consumer demand always present.
In the past, Wahaha has also tried to launch new drinks, covering a variety of categories including protein beverages, carbonated drinks, tea drinks, fruit and vegetable juices, coffee beverages, plant-based drinks, and specialized drinks. It is evident that whether plant beverages or tea drinks, these are currently popular concepts and industry trends, yet it seems that none of these drinks have become national blockbusters.
Many people can't help but think that Wahaha's road to rejuvenation is not going smoothly, and descriptions like a "midlife crisis" or "old generals are past their prime" are often seen.
It is clear, starting a business is hard, but maintaining it is even harder.
The Path of Rejuvenation for Established Enterprises The reforms of Wahaha Group arrive quietly. In December 2021, Wahaha Group official announced that Zong Fuli was appointed as the Vice Chairman and General Manager of the group, while her father Zong Qinghou remains the Chairman. Since then, Zong Fuli is in charge of daily operations, while Zong Qinghou focuses on the overall strategic direction of the group. For Wahaha, rejuvenation and diversification are two crucial keywords. Even before Zong Fuli took on the new role, efforts were already made to advance the group's transformation towards youthfulness and multi-category coverage. During the 2022 sales strategy meeting, the newly appointed Zong Fuli proposed four major initiatives, planning to launch over 20 new products including tea beverages, coffee, and other niche market segments. Moreover, Fuli significantly shifted endorsement strategies, replacing Wang Leehom who had been endorsing Wahaha pure water for 20 years with popular icons such as Xu Guanghan and Gong Jun. From brand tone to product line innovation, Zong Fuli is the outstanding successor whom Zong Qinghou describes as "mature" and "more capable than me." In Zong Qinghou's biography "The Principle of Universal Attraction," Chi Yu Zhou described Zong Qinghou as a "gentle hawk." However, gentle reforms may be hard to trace under the leadership of Zong Fuli at Wahaha, with Zong Qinghou also once referring to his daughter Zong Fuli as "very strict" in an interview with Caixin magazine. The sharp work and management methods are difficult to judge but for the rapidly shifting consumer preferences and a highly competitive food and beverage industry, it might not be a bad thing. Wahaha has not had a national mega-hit for a long time; its Babao porridge, AD calcium milk, Nutritional Express, and pure water still occupy the majority of consumer brand impressions of Wahaha. As consumer preferences keep evolving, how brands can continuously meet market demands and rejuvenate themselves in the ever-innovating consumption field is a question Zong Qinghou and his successor Zong Fuli have been seeking to answer.Whether it’s launching new products, changing endorsers, or engaging in co-branding and cross-industry collaborations, Zong Fuli has made a series of innovations which may not have been overly significant, but she has her own logic: "(Wahaha) is a food and beverage brand, but I want to turn it into a consumer brand."
The public's perception of Wahaha is changing, and perhaps the above measures are the reason.
In the current food and beverage industry, the demand is still there, but it's getting harder for brands to capture consumers’ hearts with just one sub-category or flavor.
Industry insiders commonly believe that now, personalized consumption and experiential buying are likely to become new trends in the consumer market, and personalized and experiential means increasingly niche demands and more segmented scenarios.
Brands aiming to capture the market might find it difficult to maintain long-term growth with a single blockbuster product strategy, which is why new tea drink brands keep launching various new flavors and compete to create co-branded products. Functional beverages may be an exception, but it's hard to imagine Luckin Coffee can sustain its achievements solely on the merits of its coconut latte and cheese latte alone.
In foreseeable trends, consumers will pay more attention to personal expression and emotional experience. The positioning of "consumer brands" is more likely to meet the psychological needs of consumers.
Younger branding is not just a problem for Wahaha alone; for established corporations, seeking new opportunities and responding to changes in the entire food and beverage industry is not easy.
Fortunately, business itself is a process of constant trial and error and accumulation.
The diligence, self-discipline, and simplicity instilled by Zong Qinghou in over 30 years of management, combined with the second generation's aggressive and innovative approach to reform, may help this company break new ground.
【Disclaimer】The content of the article is for research and learning purposes only and does not constitute any investment advice.
