Cover Story | The Truth Behind the Wahaha Inheritance Dispute: A Prolonged Battle Involving Multiple Parties, Far More Than a Palace Intrigue (AI Translation)

封面报道｜娃哈哈争产案幕后真相 各方缠斗已久不只是宫斗剧

In July 2024, a high-profile inheritance lawsuit in Hong Kong brought China's well-known beverage brand Wahaha (娃哈哈) into the spotlight. Three individuals, claiming to be the children of founder Zong Qinghou from outside his marriage, sued his acknowledged heir and widely regarded only child, Zong Fuli, seeking to freeze $1.8 billion in suspected family trust assets. This case exposed complex issues surrounding Wahaha's ownership, internal family and company dynamics, and the role of the state-owned investor, placing all under public scrutiny [para. 1][para. 2].

Upon Zong Qinghou's sudden death in February 2024, succession seemed straightforward, with his “sole daughter” Zong Fuli expected to take over. At the time, Wahaha's largest shareholder was a state-owned group with 46%, Zong Qinghou himself held 29.4%, and the employees' shareholding association held 24.6% [para. 2]. Zong Fuli filed for legal inheritance of her father’s shares. By April, she sought to transfer crucial sales staff and management from Wahaha to Hongsheng Group, under her sole control. However, resistance from employees—whose dividends and participation rights would be lost in the transfer—caused delays and disputes [para. 2].

Further turmoil erupted in July when rumors of Zong Fuli’s resignation surfaced, prompted by allegations of state asset misappropriation and an official inquiry. A week later, Wahaha announced her return after negotiations, signaling compromise but also highlighting the fragility of the group’s succession and governance [para. 2]. By mid-August, Zong Fuli cemented control, officially inheriting her father’s stake and replacing much of the board with her loyalists [para. 2]. The shareholder structure and employee benefits underwent significant changes, sparking over 50 lawsuits from aggrieved employees—many seeking restoration of their shareholdings [para. 2].

The heritage dispute reached a climax when three U.S. citizens—Zong Jichang, Zong Jieli, and Zong Jisheng (children of Wahaha's former executive Du Jianying)—publicly claimed their share, contending that Zong Qinghou had intended them to benefit from offshore trust assets, while onshore company control was left to Zong Fuli [para. 2][para. 5]. The rift shattered Zong Qinghou's “honorable, family-oriented entrepreneur” image and raised questions about the company’s handling of employee rights and asset transfers [para. 2][para. 5].

The details of Wahaha’s transformation reflect broader issues: since 1999, its mixed-ownership reform gave employees and managers substantial stakes and dividends. But in 2018, a “second reform” replaced share dividends with “dry share” dividends, reducing employee rights and centralizing control with the Zong family [para. 6]. Following Zong Fuli’s ascension, employee welfare was further eroded, leading to significant wage cuts and litigation [para. 6].

Meanwhile, restructuring moved profits from company operations (“inside Wahaha”) to Fuli’s wholly-owned entities (“outside Wahaha”). Profitable business units and brand assets were shifted to Hongsheng-controlled companies, subsequently reducing the dividend base for employee shareholders and the state [para. 7]. Notably, an attempted transfer of the “Wahaha” trademark was ultimately blocked [para. 7].

The Hong Kong inheritance lawsuit revealed that the offshore account in question held $1.8 billion, allegedly promised by Zong Qinghou to his children by Du Jianying. The trust’s validity, structure, and asset legality have become focal points in what is likely a drawn-out legal battle [para. 8]. Observers note that if not mediated, the conflict could escalate—potentially destabilizing Wahaha’s operations, affecting all stakeholders [para. 9].

In sum, the Wahaha dispute encapsulates the challenges of succession, corporate governance, and wealth transfer faced by major Chinese family businesses, with a dramatic convergence of family rivalry, employee rights, and cross-border finance playing out under intense public and regulatory scrutiny [para. 1][para. 2][para. 5][para. 6][para. 7][para. 8][para. 9].