China Broadcasting Network Beijing February 26 news (reporter Cao Qian, intern Gao Jiashuang)At noon on February 25, Hangzhou Wahaha Group Co., Ltd. (hereinafter referred to as "Wahaha") issued an obituary, claiming the death of Zong Qinghou, the founder and chairperson of Wahaha Group.
While mourning a generation of "Zong" teachers, all walks of life naturally turn their attention to Wahaha, which Zong Qinghou "brought up". In the 37 years since its establishment, Wahaha has gone through one industry cycle after another, growing from a school-run enterprise distribution department to a leading brand in China’s beverage industry, which can be called an "evergreen tree" among Chinese private enterprises. In 2023, the last full fiscal year before Zong Qinghou’s death, Wahaha’s main business revenue and profit still achieved double growth.
Unlike other big consumer beverage giants that actively embrace capital markets, Wahaha has not been listed under the "four nos" strategy that Zong Qinghou insists on. Nongfu Spring, which compares with Wahaha, has achieved a jump in market value of 700 billion Hong Kong dollars in its second year of listing.
The sudden death of Zong Qinghou has added uncertainty to Wahaha’s future. The three major challenges lie ahead: the new performance increase point is not clear, the head has not really handed over, and the family transformation has not been completed. In this context, as the successor of overseas study, how will Zong Fuli write the "post-Zong Qinghou era"? Will it be re-examined and considered for listing?
Many experts pointed out to CGR Capital that it depends on the attitude of the new leader towards the capital markets. After listing, it is indeed a positive bonus for the company’s development, but it is not a "necessary option" for Wahaha.
Experts believe that listing can bring development funds to enterprises, a standardized corporate governance structure, and provide convenient channels for wealth appreciation and realization of relevant personnel such as actual controllers and executives, which can better attract high-end talents to join. But it does not mean that Wahaha will definitely achieve better performance and development after going public.
Where should the successor go?
Due to the death of Zong Qinghou, Wahaha, which was founded in 1987, has triggered many new conjectures. How will Zong Fuli, who has been officially in the forefront for more than two years, write a new era without Zong Qinghou?
For the 37-year-old Wahaha, the highlight of its "life" appeared in 2013. According to public information, Wahaha’s annual revenue reached 78.30 billion yuan in this year, which is the most brilliant year since its establishment. Zong Qinghou also won the title of the richest man in Forbes Chinese mainland three times in a row (2010, 2012, 2013).
But since 2014, Wahaha’s performance has continued to enter a downward channel. Public information shows that from 2014 to 2017, Wahaha’s revenue was 72.80 billion yuan, 67.70 billion yuan, 52.90 billion yuan and 45.60 billion yuan respectively.
In this regard, Zhu Danpeng, a Chinese food industry analyst, said in an interview with the media that the aging of Wahaha’s brand and products is a fatal injury to the beverage market. For many years, Wahaha’s product line has been mainly imitated and followed, with insufficient innovation, and there have been not many explosions to speak of.
Although Zong Qinghou’s daughter Zong Fuli became the vice chairman and general manager of the group in 2021, Zong Qinghou is still the chairman of the group. But Wahaha seems to have never really come out of the "Zong Qinghou era".
The industry has summarized the three major challenges that have plagued Wahaha, including the lack of clarity on new performance growth points, the fact that the handover between the old and new leaders has not yet been completed, and the transformation of the family business is still in progress.
After Zong Qinghou took a back seat, the scene of the baton handover did not really come. There are rumors that Zong Qinghou is "hands-on" in the company, and Zong Fuli, who returned from overseas study, has a big disagreement with her father on this point.
Now that Zong Qinghou has withdrawn from the historical stage of Wahaha, how should these three challenges be broken?
A number of experts pointed out to Central Broadcasting Capital that to solve the fundamental problem, first, we need to start from the internal management and strategic level, and second, we need to create new products in new categories according to the current market changes, so as to find a second growth curve for Wahaha.
"The most important thing is to get the support of the company’s core management. In the eyes of these veteran core management, Zong Qinghou is the soul of Wahaha. How to win the support and recognition of the core management in the fastest time is Zong Fuli’s current more difficult challenge." Zhan Junhao, a well-known strategic positioning expert and founder of Fujian Huace Brand Positioning Consulting, believes that at the internal management level, Zong Fuli should reach a consensus with the company’s senior management as soon as possible and complete the relay.
At the external strategic level, Qu Fang, an investment consultant at Wanlian Securities, believes that the future development direction of Wahaha is still to improve channels and promote new products.
"Wahaha’s advantage in the distributor channel is second to none among domestic beverage companies, but its TOC performance has been just passable." Qu Fang pointed out that at a time when emerging drinks continue to be launched and consumers gradually shift from traditional leading companies to personalized emerging brands, Wahaha needs to strengthen the launch of its new products that are more suitable for market demand.
Cao Zhe, chief investment officer of Aiwen Zhilue, also pointed out that Wahaha has accumulated a number of knock-out products that are deeply rooted in the hearts of the people, but consumers have a new mentality in beverages. Therefore, Wahaha should launch new products in a timely manner, meet new changes, and keep up with the trend of the times while adhering to its basic market.
"Wahaha has strong strength. As long as we adjust our business thinking and introduce the right talents, there are still many opportunities to achieve better results. Just like a sleeping lion, as long as it wakes up, it will surprise the market."
"Not listed" wins or loses?
Looking at the entire consumption track, Wahaha is one of the few unlisted beverage giants in China. Unlike many listed and financed beverage companies, Wahaha has not chosen to enter the capital markets for many years. The "four nos" strategy was Zong Qinghou’s consistent insistence in the early days, that is, no debt, no bonds, no loans and no listing.
In China’s capital markets, there are many listed companies in the beverage industry, including Nongfu Spring, Master Kong, Dongpeng Beverage, Yangyuan Beverage and other giants. And many new brands and innovative categories are also actively embracing capital markets. New tea brands Nayuki and HEYTEA will be listed on the Hong Kong Stock Exchange around 2021. Now, Mixue Bingcheng, Tea Baidao, Shanghai Auntie and many other companies are also queuing up to apply for listing.
Among the above brands, Nongfu Spring has always been regarded by the industry as the most representative benchmarking enterprise of Wahaha.
The founder of Nongfu Spring, Zhong Shanyuan, and Zong Qinghou are both from Zhejiang. The "contest" between the two Zhejiang businesspeople gradually diverged with the landing of Nongfu Spring on the Hong Kong Stock Exchange and the blessing of capital markets.
Over the years, Zong Qinghou has publicly stated many times: "Wahaha is not short of money, and there is no need to go public. Going public requires responsibility to shareholders. If the stock finally falls, causing ordinary people to lose a lot of money, I don’t think it is appropriate."
On the same track, Nongfu Spring took a diametrically opposite path and became a newcomer to the industry with the help of capital markets.
Since the listing of Nongfu Spring on the Hong Kong Stock Exchange in 2020, the market value of Nongfu Spring has reached 700 billion Hong Kong dollars on January 5, 2021. The founder Zhong Liangxuan’s net worth has thus charged 93 billion US dollars, not only squeezing out Ma Yun and Pony Ma to sit on the throne of the newly richest man in Asia, but also surpassing Warren Buffett to become the sixth richest man in the world. Since then, with the fluctuations of capital markets, Zhong Liangxuan has been the richest man in China several times and has also become the focus of capital markets.
"Zhong Xuanyuan, who started a business in the same city as Zong Qinghou, founded Nongfu Spring after Wahaha whether it started or became famous. But at present, Nongfu Spring is far above Wahaha in terms of scale and profit," Cao Zhe told CCTV Capital Eye.
Public data show that the total profit of Wahaha in 2021 is 6.219 billion yuan, and the after-tax profit of Nongfu Spring in the same year is 7.162 billion yuan.
In recent years, although Zong Qinghou is still on the rich list, he has fallen far short of Zhong Shansui.
In November 2022, Zong Qinghou ranked 45th on the 2022 Forbes Chinese mainland rich list with a wealth of 6.95 billion US dollars. On the Hurun Rich List in 2023, Zong Qinghou ranked 31st with a wealth of 95 billion yuan. During the same period, Zhong Yinyi became the richest man in China for the third time with a wealth of 450 billion yuan.
But did Wahaha really "lose" to Nongfu Spring? There seems to be no absolute conclusion.
According to the financial report, from 2021 to the first half of 2023, the total revenue of Nongfu Spring was 29.696 billion yuan, 33.239 billion yuan and 20.462 billion yuan respectively, far less than Wahaha’s 50 billion "record". According to the data of the All-China Federation of Industry and Commerce and Wahaha Group’s 2023 annual summary and commendation conference, Wahaha has maintained a total revenue of more than 50 billion yuan for three consecutive years.
In the "Top 500 Chinese Private Enterprises in 2023" list released by the All-China Federation of Industry and Commerce, Wahaha and Nongfu Spring, which entered the list in the beverage industry, ranked 227th and 374 respectively, Wahaha is 147 places ahead of Nongfu Spring.
This inevitably raises the question, if Wahaha is willing to enter the capital markets, will it develop better than it does now?
Looking at the future listing is still not a "mandatory option"
In fact, on the issue of listing, Zong Qinghou, who has adhered to the "four nos" strategy for many years, has not been "shaken".
According to public reports, in 2017, at the 30th anniversary celebration of Wahaha’s founding, Zong Qinghou changed his tone about the listing. He said: "After the listing, it can speed up the development of the enterprise, and it will be considered at an appropriate time."
Since then, Wahaha has repeatedly expressed its position to the outside world that it may consider going public in the future.
In March 2018, Zong Qinghou publicly expressed his desire to develop another enterprise, and he may also achieve greater development by listing proceeds raised in the future.
In February 2019, after Zong Fuli became the head of the brand public relations department of Wahaha Group, she also responded to the media for Wahaha’s IPO time table, saying that Wahaha’s listing is a very normal move, because the entire enterprise can achieve upstream and downstream integration through listing.
Along with the change of tone, Wahaha also has many suspected listing signals. The first news that Wahaha is going public is related to an announcement.
In April 2017, Hong Kong-listed China Candy announced that major shareholders such as Jiaqing entered into a letter of intent with potential buyers, who intended to make a possible voluntary offer to acquire at least 50% of the company’s voting rights. The ultimate actual owner of the potential buyer was Zong Fuli, the daughter of Zong Qing Hou.
For a time, speculation about Wahaha’s backdoor listing was everywhere.
On April 12 of that year, the relevant person in charge of Wahaha Group denied the speculation and said that the acquisition was Zong Fuli’s personal behavior and had nothing to do with the company. On the evening of July 13 of the same year, China Candy announced that the offer had not been made. Zong Fuli also released a statement on her personal Weibo saying that the company will continue to uphold its own development strategy in the future and continue to explore related fields in a positive and healthy commercial value orientation.
In April 2018, Wahaha’s repurchase of employee shares once again triggered rumors of a listing.
According to media reports at that time, some Wahaha old employees revealed that the company launched employee equity repurchase after the Spring Festival that year, but a new equity allocation plan has not yet been formed. On April 14 of the same year, Wahaha responded that the repurchase of employee shares was not for listing, but to "allocate shares more scientifically". Since then, Wahaha has no substantive listing action.
So in the future, is Wahaha still necessary to sprint to the capital markets?
Many experts pointed out to CGR Capital that it depends on the attitude of the new leader towards the capital markets. After listing, it is indeed a positive bonus for the company’s development, but it is not a "necessary option" for Wahaha.
Cao Zhe believes that listing can bring development funds to enterprises, standardize the corporate governance structure, and provide convenient channels for the wealth appreciation and monetization of relevant personnel such as actual controllers and executives, which can better attract high-end talents to join. The disadvantage is that the operation and management of enterprises after listing are subject to public supervision and to a certain extent are restricted by other aspects, and the behavior of actual controllers is subject to many restrictions.
Zhan Junhao also said that listing can provide more funds and resources for the company. For example, Nongfu Spring and Coca-Cola are representatives of expanding business, improving branding impression and increasing market share through listing financing. But there is no guarantee that Wahaha will achieve better performance and development after listing.
"Wahaha’s current main dilemma is the aging of the brand. Among the new consumer groups, Wahaha is the drink of the older generation. If this cognitive dilemma cannot be broken through, even if it is successfully listed, it will not bring substantive development to the company." Zhan Junhao said that for Wahaha, going public is not the only way to develop. The key is to find a differentiated brand positioning, formulate and implement the right strategy, and keep pace with the times to adapt to today’s changes in consumer demand.
In fact, the current shareholding structure of Wahaha does not comply with the listing regulations.
Public information shows that Wahaha since the implementation of the employee stock ownership plan in 1999, the number of shareholders has exceeded 15,000. According to the relevant provisions of the IPO, when the company to be listed applies for listing, the employee stock ownership plan needs to be penetrated by shareholders, and the final number of shareholders after penetration shall not exceed 200.
Professional analysis, the number of 15,000 shareholders optimized to less than 200 people, the difficulty can be imagined.
Qu Fang believes that even if Wahaha has not been listed, it is reasonable.
"Wahaha is not going public because it has abundant cash flow and does not want to dilute its equity through listing. Judging from its current operating conditions and IPO policy, it is neither necessary for listing nor in line with existing listing policies."
Qu Fang explained that, on the one hand, Wahaha has sufficient cash flow and limited listing promotion effect; on the other hand, the beverage industry belongs to the class A share IPO red line, even if the listing is also likely to choose Hong Kong stocks, but the current valuation of Hong Kong stocks is low, the market will not give a higher valuation.(Central Guangzhou Capital Eye)
