Weekend Long Read: The Late Zong Qinghou on How He Built a Beverage Empire

To celebrate Caixin's 15-year anniversary, a series of past interviews with influential figures in China are being republished, highlighting issues like climate change and the China-U.S. tech war [para. 1].

Zong Qinghou, founder and chairman of Wahaha Group, demonstrated a relentless work ethic throughout his career. In a 2013 interview, despite acknowledging health concerns, he showcased his unique approach to management [para. 2]. Zong passed away on February 25, 2024, leaving a significant legacy as a pioneering private entrepreneur in China. His death prompted widespread mourning [para. 3]. Zong's centralized management style, though often criticized, was integral to his leadership at Wahaha [para. 4].

At 42, Zong began his journey in business by selling cold drinks. He eventually founded Wahaha in 1989, building it into China's largest beverage producer. Despite his wealth, he often mentioned his humble beginnings [para. 5]. As Wahaha faced intense competition in the beverage sector, Zong aimed to expand into retail with plans to open shopping centers in smaller cities [para. 6].

By 2021, Zong's daughter, Zong Fuli, played a key role in the company's transition but faced challenges in diversification. This suggested internal tensions within the company [para. 7]. Following Zong's death, Wahaha's sales unexpectedly surged due to a nationalist backlash against a rival brand, highlighting his enduring influence [para. 8]. In July 2024, Zong Fuli briefly resigned amidst internal conflicts, stirring speculation about power struggles within Wahaha [para. 9].

Insight into Zong's mindset during a crucial period in Wahaha's history is offered in a republished Caixin Weekly interview from July 2013 [para. 10]. Explaining the beverage industry's potential, he noted a 20.1% growth reported by the National Bureau of Statistics and identified a shift towards healthier drinks as a key growth driver [para. 11]. He emphasized Wahaha's preference for fair competition and differentiation as critical strategies [para. 12][para. 13].

Challenges in 2012 were attributed to counterfeit products, compelling Wahaha to focus on intellectual property protection [para. 14]. Zong highlighted the company's solid R&D investment as essential for sustained product development and market responsiveness [para. 15][para. 16]. He reflected nostalgically on the simpler and more effective marketing strategies of the past compared to the complexities of modern advertising [para. 17].

In discussing future marketing expenses, Zong mentioned the benefits of Wahaha’s in-house production capabilities, which help control costs [para. 18]. Zong attributed Wahaha's leadership in China's beverage market to a superior understanding of local distribution channels over foreign competitors [para. 19][para. 20]. While expanding Wahaha’s distribution network, Zong acknowledged the limits of individual dealers and planned to introduce a secondary network [para. 21].

Despite not borrowing from banks, Zong highlighted a stable financial footing and a cautious approach to business diversification [para. 22][para. 23]. He expressed no regrets about avoiding the real estate market, aligning decisions with Wahaha’s long-term stability [para. 24]. Plans for Wahaha's commercial venture possibly going public were hinted as needing capital for significant retail expansions [para. 25].

Zong emphasized focus and teamwork as keys to Wahaha’s diversified growth into machinery, biological engineering, and retail [para. 26]. The goal of opening 100 shopping centers was seen as strategic scale-building for future competitive pricing [para. 27][para. 28]. While international expansion was on the horizon, Zong remained cautious about high-risk markets [para. 29].

The interview touched on a generational shift in Chinese entrepreneurship, with the second generation, like Zong’s daughter, pursuing varied paths based on different educational backgrounds [para. 30][para. 31]. Zong admired Ren Zhengfei of Huawei for maintaining business focus amidst broader expansion [para. 32]. He pointed out the disadvantages private enterprises face compared to SOEs, particularly in accessing financial resources [para. 33][para. 34].

Zong advocated for reforming China's administrative approval system to eliminate unnecessary bureaucratic barriers [para. 35][para. 36]. Finally, Zong stressed the importance of a respectful yet non-influencial relationship with the government, cautioning against the risks of overly cozy ties with officials [para. 37][para. 38].