After bidding farewell to the era of Zong Qing, will Wahaha, which is ＂not bad for money＂, go public？

Zong Qinghou’s legendary business life ended.

On February 25, Wahaha released an obituary saying that Zong Qinghou, founder and chairperson of Wahaha Group, died at 10:30 on February 25, 2024 at the age of 79 due to ineffective medical treatment.

After hearing the news, many Hangzhou citizens spontaneously came to No. 160 Qingtai Street, the former headquarters of Wahaha, to lay flowers for the legendary entrepreneur. Among the many bouquets, someone brought him his favorite Wahaha products.

"There will be 1,000 Hamlets in the eyes of 1,000 people, and there will be 1,000 Wahaha in the eyes of 1,000 people," Zong Qinghou described the importance of Wahaha to him. "But for me, there is only one Wahaha. It is all the dreams of my whole life, all the meanings, values, labels and symbols, and it is the proof that I have existed in this world."

This gray six-story building has almost carried Zong Qinghou’s life. Since the "School-run Enterprise Distribution Department of Shangcheng District, Hangzhou" sign was hung up in 1987, Zong Qinghou has come to work here almost every day for the rest of his life without business trips. It is also an important meeting place for him. Media visits often find that Zong Qinghou has worked for more than an hour and slept in the office the night before.

This is the starting point of everything in Zong Qinghou, and it is also the beginning of the story of Wahaha.

At the age of 42, he started a business and created a beverage empire

Zong Qinghou first entered this small building in 1987.

In April 1987, 42-year-old Zong Qinghou with a courage, with 140,000 cash, contracted the uptown school-run enterprise distribution department, by dropshipping soda, popsicles and stationery paper earned a penny.

Many years later, Zong Qinghou recalled the scene at that time, because he did not dare to spend the only 140,000 yuan, the distribution department simply painted the walls, bought a few office desks and chairs, and opened.

This year was a turning point in Zong Qinghou’s life. In July 1987, Zong Qinghou used the sales payment of "China Pollen Oral Liquid" and a bank loan of 50,000 yuan as the original funds to establish Hangzhou Baoling Children’s Nutrition Food Factory, which processed "China Pollen Oral Liquid" for Hangzhou Baoling Company, and started Wahaha’s entrepreneurial process. At the end of November of the same year, the filling workshop with a daily output of 10,000 boxes was completed at No. 160 Qingtai Street, Shangcheng District. That year, the total sales volume was 4.36 million yuan, and the profit was 222,000 yuan. In 1990, Wahaha’s sales revenue exceeded the billion yuan mark, and the profit exceeded 20 million yuan.

Mr. Zong always described his success as "catching up with a good era."

In 1978, the Third Plenary Session of the Eleventh Central Committee was held, which opened the curtain on China’s reform and opening up. The surging tide came, and in the agitation brought countless opportunities to the times. At that time, Zong Qinghou was 33 years old. After more than 10 years of "manual work", he succeeded his mother to get a job in a school-run factory in Hangzhou.

Soon, the surging tide brought a big wave, rushing Zong Qinghou to the forefront of the times. In 1986, the state issued relevant regulations, proposing to "implement a variety of forms of management contract responsibility system to give operators full operating autonomy." The wave of reform and opening up was booming, and Zong Qinghou became the first to eat crabs.

In 1991, the small building at No. 160 Qingtai Street in Shangcheng District had a new name – Hangzhou Wahaha group company. Under the matchmaking of the Hangzhou Municipal Government, Zong Qinghou paid more than 80 million yuan to merge the old state-run factory with a factory area of 60,000 square meters and more than 2,000 employees – Hangzhou Canned Food Factory, creating a miracle of "small fish eat big fish". Three months after the company was established, the original loss of more than 40 million yuan of Hangzhou can factory turned into a profit, sales revenue, profits and taxes more than doubled, the second year sales reached 400 million yuan, net profit of more than 70 million yuan.

In that exciting era, everything was new. In 1994, Zong Qinghou proposed the "joint sales system" at the dealer conference, requiring first-level dealers to pay a "security deposit" in advance. After the payment is settled every month, Wahaha will continue to ship. After the sale, Wahaha returns the "security deposit" and gives dealers rebates. He also formulated a strict price difference system. Each first-level dealer must strictly implement the corresponding sales price, so that "everyone makes money".

Wahaha’s development trajectory has also become a microcosm of the big era.

In 2003, Wahaha’s revenue exceeded 10 billion yuan, making it the fifth largest beverage producer in the world. In 2012, Wahaha entered the revenue 50 billion club and reached its peak in 2013. According to public data, in 2013, Wahaha’s revenue was 78.20 billion yuan. In 2014, Zong Qinghou set a goal of 100 billion yuan. With the rapid development of Wahaha, Zong Qinghou became the richest man in China three times during 2010-2013.

Over the past 30 years, Wahaha has grown into a huge beverage empire. According to Wahaha’s official website, the cumulative sales in 35 years are 860.10 billion yuan, profits and taxes are 174 billion yuan, and taxes are 74.20 billion yuan. Wahaha has 81 production bases and 187 subsidiaries in 29 provinces, municipalities and autonomous regions across the country.

The products cover more than 200 varieties of packaged drinking water, protein beverages, carbonated beverages, tea beverages, fruit and vegetable juice beverages, coffee beverages, plant beverages, special-purpose beverages, canned food, dairy products, medical and health foods, among which purified water, AD calcium milk, nutrition fast line, eight treasure porridge are well-known national products.

"I’m not a capitalist, I’m an entrepreneur."

There are many entrepreneurs who have risen to the forefront and become trendsetters of the times, and Zong Qinghou is particularly different.

The financial writer Wu ****** once described meeting Zong Qinghou in the 1990s in "The Shanjia Man of Hangzhou": He had the face of a typical Hangzhou man, square, gentle and lacking in features. He spoke a little shyly, and when he liked someone, his only expression was to keep passing you cigarettes.

As a representative of Zhejiang businesspeople, Zong Qinghou was low-key and gentle. Even Wahaha seems to have inherited this trait from him.

In an interview with The Paper, Yang Yiqing, director of the Zhejiang Merchants Museum, believes that Wahaha’s corporate management model is very unique and can be summarized as "four nos" – that is, no loans, no listing, no vice president, and no real estate.

"He didn’t touch all the popular industries in various periods, including real estate, financial investment, and the Internet. The valuable thing is that Zong Qinghou has always adhered to his main business, and he is very confident. There is no unified model for enterprise management, and there is no standard answer. Only those that suit him are the best," Yang Yiqing said in an interview with the media.

On CCTV Finance’s "Dialogue" program, when asked why he did not choose to sell expensive products, Zong Qinghou, who is already in his 70s, answered 11 words: "I am not a capitalist, I am an entrepreneur." Referring to the reason why he did not choose to go public for so many years, he said that Wahaha is not short of money at present, and if there are projects that require large capital investment in the future, he will also consider going public. But if it goes public, it is necessary to be responsible to shareholders. It is not good for shareholders to raise money without increasing the efficiency of the enterprise.

In Zong Qinghou’s view, the real economy is the foundation of a country’s economy and the lifeblood of our country’s economy. The virtual economy is produced in the real economy and should also serve the real economy. Entrepreneurs should sink their hearts into doing business and lead the transformation and upgrading of the real economy with innovation.

Therefore, Zong Qinghou also had a famous economic dispute with Ma Yun.

In 2016, when discussing "the deep reasons why China’s manufacturing industry is facing a cold winter in 2016" and "how to revive the real economy" on the "Dialogue" program, Zong Qinghou was asked what he thought of the five major changes proposed by Ma Yun: "new retail, new manufacturing, new finance, new technology and new resources".

At that time, Zong Qinghou’s answer was: "Except for new technology, everything else is nonsense. [Ma Yun] himself is not [engaged in] the real economy, [can] make something." New technology is what the real economy should pursue, and can help the manufacturing industry from the low end to the high end.

Afterwards, when Ma Yun attended a political and business event in Nanjing, he also talked about the debate between the real economy and the virtual economy. He believes that the real economy and the virtual economy are not antagonistic relationships. Entrepreneurs must not live in yesterday and complain about tomorrow. "It is not technology that makes you eliminated, it is backward thinking that makes you eliminated, it is unwillingness to learn and self-righteousness that makes you eliminated… It is not that China’s real economy is not working, but your real economy is not working." This is considered Ma Yun’s response to Zong Qinghou’s criticism.

A month later, Zong Qinghou and Ma Yun publicly shook hands for a group photo, thus ending the "virtual and real economic dispute".

Just as Zong Qinghou chose to do the real economy, Zong Qinghou always has a sense of "down-to-earth" constancy. Since starting his business in 1987, Zong Qinghou has maintained a consistently diligent schedule for more than 30 years: working nearly 16 hours a day, going to work at 7 am, and leaving work at 11 pm.

Zong Qinghou’s early experience of working hard from the bottom also made him very thrifty. He is known for his deeds: personal consumption of 50,000 yuan per year, choosing economy class by plane, choosing a second-class seat by high-speed rail, and often not bringing secretaries and assistants on domestic business trips. Because he wears cloth shoes all year round, Zong Qinghou is also known as "the richest man in cloth shoes".

"If my’destiny ‘is to smooth the cracks and scars between the poor and the rich, if it is to present a kind of values and possibilities that enable young entrepreneurs to find their way and see even a glimmer of light, I will definitely feel that this is valuable and worth paying for without hesitation," Zong Qinghou said.

Looking for a new direction

However, in recent years, people have noticed that Zong Qinghou has undergone some changes.

Zong Qinghou, who had always claimed that he would not retire, began to take a back seat. Zong Qinghou, who had always said that he would "never go public", relented. Zong Qinghou, who had always refused E-commerce LIVE, not only started Douyin live broadcast, but also opened several e-commerce platforms at once.

At the same time as these changes, Wahaha "stagnated". In 2013, Wahaha’s revenue peaked at 78.30 billion yuan. However, just as Zong Qinghou announced in 2014 that he would hit the 100 billion target, Wahaha’s revenue plummeted to 49.40 billion yuan in 2015. Since then, Wahaha’s revenue has been hovering below 50 billion yuan, and it will not be until 2021 that Wahaha returns to the 50 billion yuan club.

In the process, Wahaha, a leader in the industry, gradually lost its advantage. In 2001, Nongfu Spring surpassed Wahaha in the market share of bottled water, and has been in the industry for many years since then. At other tracks, brands such as Wanglaoji, Jiaduobao, Master Kong, and Yili are eyeing each other, while new brands such as Yuan Qi Sen Lin have emerged with concepts such as "0 calories" and "0 sugar". Wahaha’s voice was drowned out.

Today, when it comes to Wahaha, the public’s impression is still mostly in Nutrition Express and AD calcium milk. Many people think that its products lack innovation and are not young enough. At the same time, Nongfu Spring has broken through the beverage circle with the Oriental Leaf series of tea drinks, gradually gaining the upper hand in the competition with Wahaha.

In the age of the internet economy, Zong Qinghou, who is in his infancy, seems to be getting farther and farther away from his consumers. Wahaha needs to change, and Zong Qinghou has to seek change and find a new way out.

For Wahaha, the addition of Zong Fuli is a kind of thing, and the establishment of an e-commerce platform is naturally the same.

In 2018, Zong Fuli took the initiative to join Wahaha Group as the head of the brand public relations department, in order to make Wahaha younger. Under Zong Fuli’s younger strategy, Wahaha replaced Wang Leehom, the spokesperson for more than 20 years, with a younger Xu Guanghan; Nutrition Express launched a limited colorful version and launched a limited makeup. Under Zong Fuli’s leadership, Wahaha began to cross the border and appear in more young people’s favorite circles. In recent years, Wahaha has launched AD calcium milk-flavored milk heart moon cakes, launched a joint juvenile ice cream with Zhong Xuegao, and launched a joint pH 9.0 soda with POP MART. It has also entered the e-sports circle and cooperated with League of Legends Professional League (LPL) officials and teams.

In order to keep up with the pace of the times, both Zong Qinghou and Zong Fuli have made many attempts, but the effect is not obvious. According to media statistics, in the past two or three years, Wahaha has launched more than 300 new products, but basically they cannot escape the fate of going offline at the speed of light. In recent years, Wahaha has been jokingly called the fastest company in the industry for "making babies" because of the fast speed of introducing new products. But the new big single product has not yet appeared.

Who will take over? Hangzhou state-owned assets once sought to withdraw

Zong Qinghou always had one wish – to turn Wahaha into a century-old store.

However, seeing his age getting older, Zong Qinghou began to think about the issue of succession. In 2023, on the CCTV financial "Dialogue" program, Zong Qinghou once again talked about the issue of succession: "You always have to train young people and successors. After I leave, he can continue to let Wahaha develop healthily and become a century-old store." Because it is impossible for me to keep it a century-old store. "

At the end of 2021, Zong Fuli became the vice chairperson and general manager of Wahaha Group, responsible for daily work, and Zong Qinghou remains the chairperson of the group. For Zong Qinghou, he is still waiting for a more mature opportunity.

On the show, Mr. Zong revealed that he was already gradually preparing for the shift. "Why do I have to revamp the process, the post responsibility system, and modify and improve the rules and regulations?" he said. "It is to let every employee know what he should do, to what extent, what he cannot do, what responsibilities he should take, and what compensation he can get."

In the eyes of the outside world, it is a foregone conclusion that Zong Fuli will inherit the Wahaha business empire left by Zong Qing.

On February 23, Hangzhou Wahaha E-commerce Co., Ltd. underwent an industrial and commercial change, and Zong Fuli succeeded Zong Qinghou as the company’s legal representative, executive director, and manager. Earlier, in 2021 and 2022, Zong Fuli began to serve as directors of related companies in succession. After entering 2023, Zong Fuli served as directors of related companies under 14 Wahaha Group.

From the perspective of shareholding structure, Zong Qinghou is the founder and chairperson of Wahaha Group, but he is not the largest shareholder of Wahaha.

According to Tianyancha, Hangzhou Shangcheng District Wenshang Travel Investment Holding Group Co., Ltd. holds 46% of Wahaha Group’s shares, making it the largest shareholder of Wahaha Group. Behind it is the State-owned Assets Supervision and Administration Commission of Hangzhou Shangcheng District. Zong Qinghou himself holds 29.4% of the shares, and the remaining 24.6% of the shares are held by the Wahaha employee shareholding platform. As Zong Qinghou’s only daughter, Zong Fuli has the opportunity to inherit the 29.4% stake held by her father. But she is still not the largest shareholder of Wahaha, and the matter of taking power requires the cooperation of the Wahaha employee shareholding platform.

In fact, as early as May 2006, Zong Qinghou said that it was not difficult to negotiate with the Hangzhou State-owned Assets Administration about the exit of his 46% stake in Wahaha Group. However, due to the "Dawa dispute", the talks between the two sides were forced to be suspended.

In 2023, there is a signal that Hangzhou state-owned assets intend to withdraw again. According to the bidding information inquiry platform Xunbiaobao information, in July 2023, Hangzhou Shangcheng State-owned Investment Holding Group invited tenders for the equity value evaluation and legal services of the 46% equity held by Hangzhou Wahaha Group. Among them, Wanbang Asset Appraisal won the bidding for the equity value evaluation service, while Guohao Law Firm won the bidding for the legal services of equity disposal. It is not yet known whether Wahaha Group is still negotiating this part of the equity. If this part of the equity is taken over by an external institution, Zong Fuli will take over, or it will face greater challenges.

Will Wahaha, which is "not short of money", go public?

When the owner of Wahaha Group changed from Zong Qinghou to Zong Fuli, whether Wahaha would go public became another outstanding issue.

Compared to her father, who went to the United States to study in junior high school until she graduated from college, Zong Fuli has her own way of dealing with the world – directly and insisting on herself. In company management, she attaches more importance to systems and rules and does not exclude listing.

In May 2017, China Candy, a former Hong Kong-listed company, announced that New Baili Financing would make a voluntary conditional cash offer for and on behalf of the offeror Ever Maple Flavors and Fragrances Holdings Limited (Hengfeng Holdings) to acquire all the shares in the entire issued share capital of China Candy. The only ultimate beneficial owner of the offeror, Hengfeng Holdings, is Zong Fuli. This move was also interpreted by the outside world as Zong Fuli’s attempt to go public. This also triggered speculation about the listing of Wahaha Group. Wahaha Group denied this and said that the acquisition was Zong Fuli’s personal behavior and had nothing to do with the company.

However, the offer ultimately lapsed. On July 14, 2017, Zong Fuli posted a statement on her Weibo about the "lapse of the cash offer with China Confectionery Holdings Co., Ltd." The statement said that for the company, this was a positive and constructive exploration, which provided valuable experience for the company’s future layout in related fields.

On different occasions, Zong Fuli talked about the issue of listing with an open attitude. In 2019, Zong Fuli, who is the chairperson of Hongsheng Beverage Group and the head of Wahaha Group’s brand public relations department, once again responded to her views on listing when participating in the People’s Daily Online "Ask" program. "If you are not a listed company, people will have doubts about your investment. Although we are also a big brand company, others will think that a listed company is a company with a clear and standardized process, and will be more at ease to negotiate with you. Because we have never encountered a process of capital integration. In the current market and industry environment, any large-scale development of an enterprise is operated through capital means."

Zong Fuli believes that in the future, only by combining with capital markets will it go further, which is what every company has to do. "I also want to see what capital means can bring us."

In recent years, with Zong Qinghou’s relaxation, Wahaha Group’s listing has attracted more attention, but each time Wahaha Group has denied the listing rumors.

In fact, in the current shareholding structure, it is difficult for Wahaha Group to go public. According to public information, since Wahaha implemented the employee shareholding plan in 1999, the number of shareholding shareholders has exceeded 15,000. According to the relevant regulations of IPO, when the company to be listed applies for listing, the employee shareholding plan needs to be penetrated by shareholders, and the final number of shareholders after penetration shall not exceed 200. Under the background of Wahaha Group’s "family culture", it is conceivable that it is difficult to optimize the number of shareholding of 15,000 people to less than 200 people.

Wahaha is still 63 years away from becoming a century-old store, and its road is still long.