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Kelly Zong Leads Wahaha into New Age amidst Market Dynamics

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Michael Chen

March 28, 2024 - 00:34 am

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Kelly Zong Fuli Ascends to Power as Wahaha's 'Princess' Grapples with Market Shifts

In the shadows of her father, the esteemed beverage magnate Zong Qinghou, Kelly Zong Fuli has spent nearly two decades honing her business acumen. With the recent passing of her father, Kelly has emerged from the background as the new face of leadership for Hangzhou Wahaha Group Co. This transition marks a significant milestone for the company as it navigates through tumultuous market conditions.

Rising to the Challenge

For Kelly, at 42 years old, the path forward as heir to the Wahaha empire is fraught with challenges. The market landscape that her father once dominated has drastically evolved, now teeming with fierce competition. In the wake of Zong Qinghou's demise, attention is squarely on the "Princess of Wahaha" and her ability to steer the conglomerate towards future prosperity.

Industry expert Suheng Wu, a business analyst at Daxue Consulting in Shanghai, outlines the predicament facing Kelly. He reports that with shifting consumer demands and a burgeoning pool of both domestic and international competitors, the task ahead is indeed daunting.

Wahaha, whose name translates to "laughing child" in Mandarin, has seemingly stumbled in keeping pace with the changing inclinations of its customer base. The company's gradual adaptation has resulted in a setback due to the widespread adoption of online shopping. As newer brands innovate and capture public interest, Wahaha has found its newer products struggling to resonate with consumers.

A Tale of Declining Fortunes

The company's sales trajectory illustrates this story of declining fortunes. Since reaching its peak in 2013, Wahaha has witnessed a 35% dip in sales, with revenues dwindling to 51.2 billion yuan (approximately $7.1 billion) in 2022, as reported by the All-China Federation of Industry and Commerce. In stark contrast, rivals like Nongfu Spring Co., who celebrated their Hong Kong initial public offering in 2020 with considerable hype, saw their revenue soar by 62% in the five years leading up to 2022, with an additional 28% increase in 2023, amassing 42.7 billion yuan.

Image of Wahaha revenue decline

For the Zong family, the stakes involve not merely the direction of their business empire but also their personal wealth. The Bloomberg Billionaires Index suggests the family is currently worth a modest $2.2 billion—a stark drop from the $20 billion valuation in 2012. This evaluation is tied to Qinghou's 29.4% stake in Wahaha, which remains officially unaltered since his recent death, and to Kelly's full ownership of Hongsheng Group—a side venture she has been nurturing since 2007 and which has spawned her proprietary tea drink line, KellyOne.

While it's likely that the Zong family's actual net worth is greater once personal investments, properties, and cash dividends amassed over the years are accounted for, concrete figures are yet to be ascertained.

The Silence from Wahaha

At this juncture, Wahaha has refrained from issuing public comments regarding these developments.

Kelly Zong's Strategy: Courting the Young and Health-Conscious

Educated at Pepperdine University, Kelly Zong, equipped with a degree in international business, launched her career within the family business by learning the ropes at a Wahaha factory. Her trajectory saw her swiftly ascending to positions of increasing responsibility, eventually culminating as vice chair and general manager in December 2021. Lately, her focus has shifted towards developing marketing strategies that resonate with the younger demographic—a group she aims to captivate by signing new brand ambassadors, showcasing products on popular television shows, and harnessing the influence of social media personalities to spotlight Wahaha's offerings.

Now, as the sole progeny of Zong Qinghou, Kelly is anticipated to inherit her father's prestigious role as chair—a position he maintained until his passing.

Navigating a New Era of Entrepreneurship

The succession within the Zong family is reflective of a broader wave currently washing over China. The nation's inaugural generation of private-sector entrepreneurs is gradually receding, yielding ground to their progeny. Numerous tycoons are preemptively grooming their children to assume the helms of their enterprises, often at younger ages than previously thought customary. The outcome is a smattering of millennials and Gen-Z heirs primed for board positions within some of China's most influential companies.

The Legacy of Zong Qinghou

Zong Qinghou's monumental journey began in 1987 with a modest $22,000 loan from his family. His entrepreneurial spirit catalyzed the transformation of that initial investment into a behemoth of the beverage industry, largely during China's economic surge that fostered the ballooning middle class. Wahaha's dairy-based beverages particularly resonated throughout the 1990s among parents eager to enrich their lone children's diets with nutritious offerings. By 1996, Zong senior had embarked on multiple joint ventures with Danone, the French dairy colossus.

However, an entanglement of legal strife soon ensued between the partners, culminating in a series of lawsuits and government interventions. When the dust settled at the close of 2009, Zong Qinghou came out on top, acquiring Danone's stake and propelling his wealth—the highest in China at more than $20 billion.

Current Struggles and Future Aspirations

Despite its foray into creating carbonated beverages and canned congee, Wahaha’s innovations have not mirrored the success of their earlier staples. Other drink manufacturers have latched onto trends like bubble tea and coffee—an obsession across the region with numerous bubble tea franchises lining up to list in Hong Kong—yet Wahaha has largely remained a distant observer.

Barely a fortnight post her father's death, Kelly Zong attended the annual gala of the China Beverage Industry Association, marking her first public outing as the company's torchbearer. She referred to herself in her speech as both an experienced industry player and a "new general" in corporate operation. She highlighted Wahaha's strategic shift towards creating low-sugar, health-oriented beverages that align with current consumer preferences, as reported by local media.

Wahaha's established distribution network presently skews more towards lower-tier cities, locales that have yet to fully embrace the upswing towards healthier options. Nevertheless, the company is poised to push boundaries to entice new customers and foster trust. Harry Han, a research analyst at Euromonitor International, considers this initiative a significant yet gutsy endeavor to rejuvenate the brand's image. He believes that the careful expansion of offline shelf presence and the introduction of new products coupled with strategic marketing could well secure a steadier footing for Wahaha in the years to come.

Assistance and Acknowledgment

In crafting this coverage, contributions were made by Pui Gwen Yeung and Daniela Wei, whose assistance was invaluable in presenting a comprehensive perspective on Wahaha's current landscape.

Read the insightful Bloomberg article for more detailed information on the subject.

©2024 Bloomberg L.P.