Tycoon’s rags-to-riches story echoes the rise of the nation

Zong Qinghou (File photo: Xinhua)

Bouquets of flowers piled up in front of Building No. 160 of the headquarters of Hangzhou Wahaha Group, China’s leading beverage producer, in tribute to its founder and chairman, Zong Qinghou, who died on Sunday at the age of 79. took place on Tuesday for Zong in Hangzhou, Zhejiang province.

Earlier, past and present employees and visitors paid their respects to the business leader in the six-story gray building, where Zong, once China’s richest man, did his daily work.

Among the bouquets were a pair of black cotton shoes, Zong’s signature shoes, which reflected his simple and frugal lifestyle, as well as a container of Wahaha AD milk, a favorite drink of generations of consumers, especially in their childhood.

Executives of private companies sent their greetings. Geely Chairman Li Shufu praised Zong as a pioneer of innovation and entrepreneurship in the private sector, representative of Zhejiang’s modern merchants and their hard-working spirit.

“You have opened up new territories for the rise and development of China’s food and beverage industry, and you are a role model for the first generation of businessmen in Zhejiang,” Li wrote.

Lei Jun, founder and CEO of tech giant Xiaomi Corp, hailed Zong as a true legend, citing his 2002 book on marketing as a source of inspiration for more than two decades.

Zhou Hongyi, founder of cybersecurity company 360 Security Group, hailed Zong’s marketing theories on beverage sales 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 mainland China with a fortune of $10 billion.

In 2020, he was named to the Hurun List as the richest man on the Chinese mainland. As of March 2023, Zong ranked 121st on the Hurun Global Rich List 2023 with a wealth of $15 billion.

Despite his immense wealth, Zong led a modest life and worked diligently from 7:00 a.m. to 11:00 p.m. He slept in a room located in the same building as his office and was known for his calm and gentle demeanor.

He preferred simple meals like porridge and noodles from the company canteen. The tycoon often traveled alone on business trips with just one suitcase and once traveled second class on a high-speed train, chatting and befriending other passengers.

Difficult start

Born in 1945, Zong’s early years were marked by hard work in the salt mines and tea plantations of Zhoushan, Zhejiang. He once said that the 15 years of menial labor built his character and resilience.

Zong returned to Hangzhou in 1978, and in 1987 he took over a school store and began selling soda and ice cream. Around 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 the support of the Hangzhou government, the company acquired a debt-ridden state-owned enterprise, Hangzhou Canned Food Product Co.

Zong initially faced opposition from the workers, but convinced them by explaining the creation of Wahaha, how it would work and the benefits it would bring them. Three months later, the cannery began to turn a profit.

Wahaha’s early successes were largely attributed to its sales system and extensive distribution network. In 1994, while the country’s credit system was still evolving, Wahaha began fostering strong financial ties between producers and distributors.

The idea of ​​the business involved the initial guarantee of money from distributors to producers, with the products delivered at a later date. This guaranteed a stable cash flow for producers and promoted their loyalty to distributors.

The monetary guarantee was generally equivalent to 10 percent of estimated annual sales and was repaid with interest at the end of the year by producers. This innovative risk-sharing model has become a case study in many business schools.

Famous brand

At its peak, Wahaha had more than 7,000 distributors, more than 100,000 wholesalers and 5 million sales outlets across China.

“Wahaha is one of the few private companies in China that has been active in the consumer market since the beginning of the market economy and continues to grow rapidly,” said Jason Yu, general manager of Kantar Worldpanel China, a market research company.

“It is also one of the few Chinese brands with high penetration, ensuring mutual benefits for the brand and distributors,” he said.

Wahaha’s business model allows it to penetrate millions of retail outlets in China, including in rural areas.

This vast distribution network is unmatched by many international giants and domestic companies, giving Wahaha an advantage in maintaining stable revenue streams in the Internet age, Yu said.

In 1996, the company expanded its portfolio to include bottled water, strengthening its presence in the market. In 2013, the company achieved revenue of 78.2 billion yuan ($10.8 billion), which remains the highest annual revenue recorded for the Chinese beverage market.

“So far, no domestic beverage producer has surpassed this record,” said Zhu Danpeng, a food and beverage industry analyst.

Although consumers today have more choices and many new brands are making rapid breakthroughs through e-commerce, Wahaha has managed to maintain substantial revenues, 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 deep knowledge of the domestic consumer market, said Yu.