Zong Qinghou.

Zong Qinghou works with technicians.

Today Wahaha is the nation’s largest beverage company, and it may come as a surprise to some that Zong’s business empire originated 21 years ago from a small school-owned sales department with registered capital of 200,000 yuan. In 2007, Wahaha earned 25.8 billion yuan. And for 10 years the company has successively topped its domestic counterparts in output, profit and total assets.

Letter of a Lifetime

In Wahaha’s exhibition hall is displayed a faded letter of appointment issued on April 6, 1987.

That year Zong became manager of the sales department under the Education Commission of Shangcheng District, Hangzhou City. At that time the department was on the verge of bankruptcy, and the new manager had to achieve profits of no less than 40,000 yuan in the first year. Due to his many years of experience in running school-owned enterprises, Zong was considered to be the best candidate for the position. At age 42, Zong accepted the appointment and pledged to realize profits of 100,000 yuan in the first year.

Typically, Chinese people in their 40s prefer a stable life. But, Zong chose to lead a life full of challenge.

“The letter of appointment marked a turning point of my life,” Zong recalled. “The Education Commission of Shangcheng District appointed me as the manager of its sales department. This actually provided me with a platform to show my talent.”

In 1987, Shangcheng School-Owned Sales Department, the predecessor of Wahaha Group, went into operation.

Seizing Opportunity

Soon after his appointment, Zong began to implement measures that would lead to the Wahaha business miracle.

Zong conducted a survey among 3,000 pupils in Hangzhou, which indicated that nearly half of students suffered from malnutrition. He then consulted Professor Zhu Shoumin with the Nutrition Department of Zhejiang Medical University, in hopes of developing a kind of oral nutritional liquid for children based on traditional Chinese medicine.

In November 1988, Wahaha launched China’s first oral nutritional liquid for children. The slogan, “Drink Wahaha to have a good appetite,” became well known across the nation. Wahaha earned 4.88 million yuan from sales in the first year after the product went on the market; the figure increased to 27.12 million yuan in the second year, and exceeded 100 million yuan in the third year.

In April 1989, the Hangzhou Baoling Children Nutritional Food Factory was renamed as the Hangzhou Wahaha Nutritional Food Factory, heralding the beginning of the company’s launch into the Chinese beverage market.

“In fact, many other companies produced nutritional liquid when Wahaha set foot in the field,” Zong recalled. “But I found none of them produced oral liquid especially for children. This was the reason we succeeded.”

Since the 1990s, Zhejiang Province has encouraged the development of a nonpublic economy. In this conducive environment, Wahaha realized another opportunity to advance.

In 1991, with the support of the Hangzhou municipal government, Wahaha Nutritional Food Factory, then with 100 employees and deposits of 60 million yuan, acquired the Hangzhou Canning Food Factory at a price of 80 million yuan. At this time, the latter had more than 2,000 employees and a workshop area of 60,000 square meters, but its total assets were less than its debts.

The Hangzhou Wahaha Group Corporation was formed. Benefiting from its advantage in products, funds and market occupancy, in only three months the group was made profitable operating in the former food cannery. In the year that followed, Wahaha’s sales revenue and pre-tax profit increased by 100 percent.

From the Country to the City

The release of Future Cola marked a major success in the history of Wahaha. The century-old Coca-Cola and Pepsi are undisputed leaders in the global beverage market. They moved into China later in the 1970s, and soon held 50 percent of the nation’s beverage market.

However, Zong saw opportunity when he realized the two multinational beverage giants neglected the rural market.

In 1998, Wahaha launched its Future Cola to directly compete with Coke and Pepsi. Due to its lower price and favorable policy for distributors, Wahaha sold 620,000 tons of Future Cola in 2002, accounting for 12 percent of China’s carbonated beverage market. This was close to the market share of Pepsi in China. While Coke and Pepsi dominated the urban areas of China, Future Cola controlled the nation’s countryside.

Today Wahaha is ranked among China’s top 500 industrial enterprises in pre-tax profit volume.

“I’m an ordinary person living in an unprecedented age,” Zong said. “Poverty forced me to discontinue my education after graduating from middle school. Then I was sent to the countryside to be a farmer. It was the reform and opening policy that allowed me to grow into an entrepreneur and the head of a nationwide famous enterprise, and Wahaha developed from a school-owned factory into China’s largest nonpublic beverage company. Now it’s time for me to return something to society. I try my best to enable as many people as possible to benefit from the reform and opening policy.”

(Photos courtesy of Hangzhou Wahaha Group Co., Ltd.)