Zong Fuli has never stood at the center of power
On February 25th, Zong Qinghou, former chairman of Wahaha, passed away. At the memorial service for Zong Qinghou, daughter Zong Fuli tearfully said, 'I will continue my father's unfinished career.'. A month later, the official website of Wahaha reprinted a related report, in which Zong Fuli's identity was the General Manager of Hangzhou Wahaha Group and the President of Hongsheng Beverage Group.
Just as the outside world thought everything had already settled, on July 18th, a widely circulated resignation letter from Zong Fuli was like a giant rock thrown into the water, causing a huge uproar. The Pengpai News quoted insiders as saying that the resignation of Zong Fuli is true, but the incident occurred suddenly and the company's executives were not aware of it before. Currently, the company's shareholders and management are further negotiating and handling the matter.
After the incident, Wahaha's fate seems to be standing at a historic turning point. Zong Qinghou has been steadfast in his post for more than 30 years, and Wahaha has grown into a popular national brand. Now, the first generation of legends has just come to an end, while the second generation is struggling to stay at the center of the storm.
Under the interweaving of dual identities of family and enterprise, how will Zong Fuli cope with challenges, and where will Wahaha go from?
1. Never stood at the center of power
A letter signed by Zong Fuli to all employees of Wahaha Group exploded on the internet on July 18th, pushing keywords such as "Wahaha" and "Zong Fuli" onto the hot search lists of major social media platforms.
In this resignation statement, Zong Fuli said, "The Shangcheng District Government of Hangzhou and some shareholders of Wahaha Group have questioned the rationality of my management of Wahaha Group since the death of Chairman Zong Qinghou, which has prevented me from continuing to fulfill my management responsibilities for Wahaha Group and its holding companies
Amidst the overwhelming rumors of resignation, the attitudes of the parties involved in the incident are intriguing. On July 18th, the largest shareholder, Hangzhou Shangcheng District Wen Yu Shang Investment Holding Group, did not respond to the authenticity of the incident, but instead informed "First Financial News" to "ask Wahaha". Among the various offices under the group, Wahaha Liaoning Office and Hangzhou Office have the same attitude, stating that they have "not heard of" and "not received".
Although relevant parties are keeping it a secret, the appearance of the resignation letter is not surprising. According to Caixin News Agency, a Wahaha distributor manager said, "Originally, Zong Fuli and Wahaha Group shareholders and senior management have been playing games and negotiating, mainly about equity issues. We have known about this matter for more than a month, and now (negotiations) have not been resolved
From the perspective of equity structure, people are surprised to find that Zong Fuli has never truly stood at the center of power.
According to Qichacha, the legal representative of Wahaha Group is still Zong Qinghou, and the group is mainly composed of three major shareholders: Hangzhou Shangcheng District Investment Holding Group Co., Ltd. holds 46% of the shares, Zong Qinghou holds 29.4% of the shares, and Wahaha Group Grassroots Trade Union Joint Committee holds 24.6% of the shares. The Hangzhou Shangcheng District Investment Holding Group Co., Ltd., which holds the highest shareholding, is controlled by the Hangzhou Shangcheng District State owned Capital Operation Group.
Since the death of Zong Qinghou nearly five months ago, there has been no adjustment to Wahaha's equity structure, which indirectly indicates that the prospects for equity distribution within the group are uncertain. Many people believe that Wahaha is a private enterprise, but in reality, its largest shareholder is a state-owned enterprise, and the Zong family's ownership has no advantage.
Even if all 29.4% of Zong Qinghou's shares are inherited by Zong Fuli, if she cannot obtain the support of other shareholders, or even if there is a situation where the other two major shareholders unite, Zong Fuli's situation will be relatively weak.
At present, regarding the issue of equity distribution, according to Pengbai News, the bidding information query platform Zhaobiaobao Information shows that in July 2023, the state-owned investment holding group in Shangcheng District, Hangzhou, conducted a bidding for the evaluation of the equity value and legal services of the 46% equity held in Hangzhou Wahaha Group. Although the negotiation process cannot be known, it undoubtedly adds more uncertainty to the event.
Meanwhile, Zong Fuli's position within Wahaha has undergone frequent changes since the beginning of this year. According to Tianyancha, from January to July 17, 2024, there were as many as 124 job changes for Zong Fuli, in sharp contrast to only 16 changes for the entire year of 2023.
Amidst frequent changes, the current 'internal strife' may have been foreshadowed earlier. No matter what the future holds, it is not easy for Zong Fuli to take over her father's career amidst the twists and turns of the tripartite relationship.
2. Different from my father's style
Zong Qinghou has discussed the issue of succession on multiple occasions, and he has publicly expressed to the media more than once that he will not force his daughter to take over and let her do what she likes.
Zong Qinghou highly recognizes her daughter's abilities and once gave Zong Fuli a score of 90, but deducted 10 points due to a lack of social skills. In an interview with Harvard Business Review in 2013, Zong Qinghou revealed that two generations have completely different styles of handling and managing things.
Zong Qinghou believed that his work style was too refined and his employees relied too heavily on him. In contrast, Zong Qinghou's evaluation of Zong Fuli is' she is stronger than me '. Zong Qinghou once secretly took back the dismissed employees after his daughter dismissed them.
Zong Fuli, who went to study in the United States at the age of 14, entered Pepperdine University in Los Angeles to study international business after finishing high school in the United States. After returning to China in 2004, Zong Fuli started working in the workshop of Wahaha Xiaoshan No.2 Base, accumulating production management experience. In 2007, she took charge of Hongsheng Beverage Group and in 2018, she became the head of the public relations department of Wahaha brand.
During Zong Fuli's tenure, almost all of the initiatives she promoted revolved around youthfulness and trend oriented changes. In 2016, facing the mature bottled water and beverage market, she led Hongsheng Beverage to incubate the "KellyOne" fruit and vegetable juice brand, accurately targeting the young high-end consumer group. After 2018, Zong Fuli continuously explored cross-border cooperation and even replaced Wang Leehom, choosing 90s actor Wang Yibo and others as new spokespersons.
Although these measures did not achieve immediate results, it can be seen that Zong Fuli advocates efficiency and change.
In 2021, with Zong Qinghou stepping down as the General Manager of Wahaha Group, Zong Fuli took over as Vice Chairman and General Manager, which is widely seen as a sign of power transfer by the outside world. However, at this time, Zong Fuli did not leave her father's protection. Outside of her daily work, Zong Qinghou was the navigator behind the scenes. Until February 25, 2024, Zong Fuli officially became the helm of Wahaha.
However, as Zong Qinghou said, Zong Fuli's strong and unfriendly traits are not conducive to establishing a foothold in a traditional enterprise with tangled relationships.
Recently, there have been frequent reports of personnel turmoil within Wahaha. According to sources cited by First Financial News, there has been a staff turnover at the top of Wahaha recently. In a report by The Paper, it was mentioned that some Wahaha distributors have expressed that there are certain conflicts and differences within the senior management, and the team reform that Zong Fuli intends to promote has encountered resistance.
Previously, there were reports circulating online that the Hongsheng Group controlled by Zong Fuli was suspected of embezzling state-owned assets of Wahaha, accusing it of manipulating the management and embezzling public funds. Regarding this, officials from the State owned Assets Supervision and Administration Commission of Hangzhou and the Shangcheng District Government of Hangzhou have stated that they are still unclear and unable to distinguish between authenticity.
From various indications, Zong Fuli's "radical" reforms may have touched the interests of some people, leading to strong resistance within the group.
On July 19th, the day after the controversy surrounding Zong Fuli's resignation escalated, Zong Zehou, the younger brother of Zong Qinghou, believed on social media that it was a good thing. In the screenshots circulating online, Zong Zehou believes that Zong Fuli's biggest problem is how to gain recognition from everyone after taking over, rather than expanding the scale and changing the status quo. He also stated that Wahaha is a state-owned enterprise, and Zong Fuli can only play the role of a professional manager.
In the situation where multi-party games are about to erupt, Zong Fuli's style of action is completely different from that of her predecessors, and she may adopt a strategy of retreat as progress. Behind this controversy, a more profound competition may be quietly unfolding, and the future direction of Zong Fuli and Wahaha is full of variables.
3. Will Nongfu Spring win?
In this hot summer, competition in the bottled water market is fierce, with Nongfu Spring taking the lead in launching a price war, forcing other competitors to join passively. Meanwhile, Wahaha's internal changes at this time have brought new variables to the market landscape.
When it comes to Wahaha, it is difficult to ignore its long-term competition with Nongfu Spring. At the beginning of the year, the death of Zong Qinghou led to a temporary increase in sales for Wahaha, but also caused Nongfu Spring and its founder Zhong Suisui to face a public opinion vortex, resulting in a double decline in the brand's sales and stock price.
In order to calm the storm, Nongfu Spring has launched promotional activities nationwide, even significantly reducing prices. The retail price of Nongfu Spring's red natural water was originally 2 yuan per bottle, but after this incident, the retail price of some supermarkets has dropped to 1.1 yuan. At the same time, Wahaha has seen a short-term increase in sales.
Zong Fuli, who yearns for change, sees an opportunity in this wave of traffic. In order to increase brand exposure, she started working on offline channels in first and second tier cities, increasing the investment in larger supermarket freezers and encouraging agents to increase sales; Expand sales channels and strengthen cooperation with offline stores. However, the good times did not last long. Since mid March, Wahaha's sales momentum began to weaken.
Nongfu Spring, on the other hand, has launched multiple price reductions since March and was the first to lower the price of bottled water to below 1 yuan in May of this year. Not long ago, several supermarkets offered 12 bottles of Nongfu Spring drinking water for only 9.9 yuan, with a price of only 0.825 yuan per bottle. In the fierce competition of the existing market, other brands can only "compete", and the prices of drinking water such as Wahaha and Kangshifu have all dropped to within 1 yuan.
In the increasingly competitive environment of the packaged drinking water market, China Resources Beverages, the parent company of another giant, Yibao, is preparing for a Hong Kong stock listing and has obtained a listing filing notice. The listing plan is steadily moving forward.
The top five giants in the domestic packaged drinking water market in 2023 are Nongfu Spring, Yibao, Jingtian, Wahaha, and Kangshifu. According to a report by Zhuoshi Consulting, Nongfu Spring leads the market with a market share of 23.6%, followed closely by Yibao, Jingtian, Wahaha, and Kangshifu, with respective shares of 18.4%, 6.1%, 5.6%, and 4.9%.
With the escalation of the price war and the IPO plan of Yibao, the domestic bottled water industry is facing unprecedented changes. Zong Fuli's future not only concerns the fate of Wahaha, but also has the potential to reshape the entire industry landscape.
Returning to Wahaha itself, Zong Fuli, who proposed to resign, is a strong opponent. According to Qichacha, Zong Fuli currently serves as the legal representative of 37 companies and holds positions in 178 companies, most of which are in existence. Since taking office this year, she has taken over nearly 28 companies left by her father, covering key industrial chain links such as packaging, printing, food and beverage of Wahaha Group, all of which are fully controlled by her.
Can Zong Fuli seize the initiative in the invisible war? How will this turbulence rewrite the future of the packaged drinking water market? Everything is yet to be revealed.
