Click to read the original article for details Lishi Introduction From a state-owned small factory ranked second from bottom nationally, producing only soap, to leading China's detergent market with sales exceeding 10 billion yuan, how did Nice Group successfully overtake strong domestic and international brands? With the passing of the mythical figure Zhuang Qichuan and the criticized blood-stained contract responsibility system, what hidden worries lie behind Nice's prosperity? The president of Procter & Gamble once said: "Where water doesn't flow, Diao brand washing powder has been sold in." The creator of this myth is Zhuang Qichuan. As the creator of Diao, Super, and Nice, he not only broke the industry monopoly of P&G and Unilever, achieving the top position nationally, but also steadily won in P&G's "Eagle Shooting Action," causing P&G to lose 30 million yuan and withdraw from China's third- and fourth-tier markets. From a state-owned small factory ranked second from bottom nationally, producing only soap, to once leading China's detergent market with sales exceeding 10 billion yuan, how did Nice overtake strong domestic and international brands? Why does Nice, ranked second in sales, have higher brand value than the top-ranked Liby? With the unfortunate passing of the mythical figure Zhuang Qichuan, coupled with the criticized blood-stained contract responsibility system, what hidden worries does Nice face behind its prosperity? The Rise of Nice The FMCG industry was one of the earliest market sectors opened to the outside world in China. In the 1980s, as China's reform and opening entered a new era, the world's four major detergent giants—P&G, Unilever, Henkel, and Kao—rushed to occupy the Chinese market. At that time, the individual economy began to flourish but had not yet formed a climate. Traditional manufacturers, still benefiting from the planned economy's unified production and sales, had weak awareness of independent brands. Under such circumstances, foreign FMCG giants entered as if no one was there, almost monopolizing the domestic detergent market. In the early 1990s, China introduced the "state retreats, private advances" strategy. Many state-owned enterprises withdrew from business operations, introducing large amounts of foreign capital, and local FMCG enterprises "collectively fell." Facing strong foreign brands, China's washing and care market was volatile, but today, the Chinese enterprises with sales exceeding 10 billion yuan and absolute advantage in the washing and care market are Liby and Nice. Both companies once led the industry, but their backgrounds are completely different. One is a model of the individual economy in the reform wave, while the other is an innovative model of successful transformation of a state-owned factory. Nice belongs to the latter. Nice originated in 1968 during the Cultural Revolution when several veteran cadres built this local state-owned Lishui Wuyi Chemical Factory, which only produced soap. It is no exaggeration to describe this enterprise as poorly managed. Among the 118 designated soap production factories nationwide under the Ministry of Light Industry, Nice was ranked second from bottom among local state-owned factories. In 1971, 19-year-old Zhuang Qichuan entered this chemical factory as an ordinary worker. No one would have thought that this young man would change this dismal small factory and lead it to the top of China's detergent market. With only a junior high school diploma, Zhuang Qichuan started as a worker and successively served as supply and marketing clerk, team leader, deputy section chief, section chief, and deputy factory director. Over more than a decade, he grew gradually from the grassroots. It wasn't until 1985 that the times and opportunities pushed him and Nice into a new chapter. In January 1985, when the Lishui Chemical Factory held democratic elections for factory director, amidst the prevailing "diploma fever," the workers chose Zhuang Qichuan, who had only a junior high school education. What the workers valued was this young man's stubbornness to strive for first place in everything. In 1986, unlike many enterprises, Nice did not cling to the planned economy. It entered the market to do OEM processing for Shanghai Soap Factory, signing a three-year contract, intending to learn their manufacturing technology and develop new products later. This move, one step ahead of the market, not only brought the enterprise 1.2 million yuan in processing fees, helping it survive a critical juncture, but also accumulated innovative capacity. However, Zhuang Qichuan said that doing OEM meant "living under someone else's roof, which was too humiliating. I will strive to be as proud as I was humiliated, and I must create my own brand." In 1989, due to tight coal supply, many soap factories were forced to stop production for lack of fuel. How could Zhuang Qichuan easily admit defeat? He decided to use firewood instead of coal. In the cold winter, workers with blood blisters on their hands persisted in chopping wood, keeping the boiler red-hot. The stubborn factory director and employees became an important guarantee for the enterprise's rise to the top. The following year, the international market slowed, the domestic market was weak, the state canceled financial subsidies for oil and soap purchases, and import tariffs on oils increased. A series of blows pushed Zhuang Qichuan into a self-rescue journey of independent innovation. During a visit to Hong Kong, Zhuang Qichuan learned that a British soap had gained market favor with its unique fragrance and appearance. In 1991, upon returning to the factory, he immediately organized technical research. The products produced were comparable to "Lux" in many indicators but sold at only half the price. Legend has it that Zhuang Qichuan was left-handed, and his thinking was completely different from ordinary people. After creating Nice soap, Zhuang Qichuan borrowed 2 million yuan, not for market and channel development, but for advertising. The gambler bet correctly, and Nice soap achieved a great victory. In 1992, Nice and Hong Kong Likang Company invested to establish NICE (Nice) Daily Chemical Co., Ltd. The same year, Nice made a disruptive technical transformation of soap, not only eliminating the odor but also increasing decontamination ability by three to four times, and changing the color of soap that Chinese people were accustomed to from earthy yellow to blue—thus Diao brand Super soap was born. As an enterprise with profits of less than 1 million yuan, Zhuang Qichuan decided to spend 1 million yuan on giveaways. Nice placed an advertisement in Zhejiang Daily, where readers could cut out the coupon and get a free piece of Super soap. The effect was surprisingly good. In June 1993, Zhuang Qichuan invested 5 million yuan in CCTV. With the advertisement "Soap, I always use Diao," the blue soap completely captured the market. By 1994, "Nice soap" and "Diao brand Super soap" had been ranked first in national sales for several consecutive years. Nice not only secured the top position nationally but also captured over 90% of the profits in the soap market. At that time, Liby had just rented an office in Guangzhou and started OEM business for washing powder. In contrast, Nice, which had been making soap for decades, spent more effort transitioning from soap to washing powder. In 1997, Liby's washing powder sales reached 1 billion yuan, firmly ranking first in Guangzhou. In the national market, the urban battlefield had P&G, Henkel, Unilever, etc., competing, while the lower-tier market was dominated by "Qiqiang." The market structure was basically stable, and all parties were eyeing each other. In 1998, when the market was nearly saturated, Zhuang Qichuan said he had discovered new opportunities, and then Nice entered the washing powder market. Although Nice did not enter the washing powder market early, its mass production time was not late. In 1999, China's largest single-tower washing powder project was successfully put into operation at Nice, and Nice also became an OEM processor for international brands such as Henkel and P&G. To avoid encirclement by foreign giants, Nice, like Liby, chose third- and fourth-tier cities as its main battlefield, directly competing with local brands that were weaker in scale and capability. "Work with me, and profits will double in three months!" Nice, located in Lishui, Zhejiang, relied on more than 2,000 wholesalers in Yiwu Small Commodity Market to sell products nationwide. The mature wholesale network brought explosive growth to Diao, buying valuable time for its rapid occupation of the Chinese market. At the same time, Diao adopted a low-price strategy, reducing washing powder prices to 29 yuan per box, with retail prices as low as 2 yuan per bag. This not only suited the preferences of lower-tier market users but also created profit space for distributors. Compared with Liby, which built its own marketing network, Nice's sales system was more likely to achieve explosive growth, but it was slightly inferior in stability and endurance. At that time, product homogenization was severe. Zhuang Qichuan discovered that people only knew they needed to buy washing powder, without brand awareness, and no product had captured consumer minds. He seized this opportunity and launched a marketing offensive. Amid the social wave of layoffs, the 1999 Diao washing powder advertisement hit the social pain point. A little girl's words, "Mom, I can help you with work," instantly formed an emotional connection with laid-off workers, touching the softest part of the public. Under the combined effects of price, marketing, and emotion, in 2000, Nice's washing powder sales exceeded 40 tons, becoming the number one in the washing powder industry after laundry soap. Soon, P&G came to seek cooperation, but Zhuang Qichuan decisively refused. Facing this "time bomb," P&G's "Eagle Shooting Action" was launched. Tide washing powder also adopted a low-price strategy, reducing prices from over 3 yuan to over 1 yuan, and followed from cities into lower-tier market small shops and farmers' markets. Wherever Diao was present, Tide followed closely, engaging in hand-to-hand combat. Zhuang Qichuan did not show weakness, reducing washing powder prices to a freezing low of 1.5 yuan. His confidence lay in Nice's six major production bases in Lishui (Zhejiang), Yiyang (Hunan), Chengdu (Sichuan), Zhengding (Hebei), Siping (Jilin), and Urumqi (Xinjiang). By laying out sales networks near production sites, costs were greatly reduced, while P&G, relying on OEM, naturally had no cost advantage. Within just half a year, Tide washing powder lost 30 million yuan. Finally, it had to restore original prices and completely withdraw from the rural market. Diao's market share only dropped 3.8 percentage points, still ranking first in the industry. According to some articles, in 2002, Diao washing powder held a 39.63% market share, and its total product profits accounted for 99.31% of the industry, equivalent to five times the total sales of all multinational companies in China. At this point, Diao entered 31 provinces, more than 2,300 counties, and 4.5 million stores nationwide, truly pervasive. For this reason, the president of P&G China once lamented, "Where water doesn't flow, Diao brand washing powder has been sold in." In 2003, Nice's "Diao brand transparent soap" achieved a 67.1% market share nationally, and washing powder reached 42%, ranking among the top eight in the world's washing products. Nice Group evolved from the world's largest soap production base to the largest washing products production base. The Path of Product Category and Added Value Expansion The initial low-cost strategy and reliance on technological imitation and introduction allowed Nice to quickly occupy a place at the low end of the value chain, but its success was temporary and could not bring sustainable competitiveness. Although Nice obtained most of the industry's profits through product scale and OEM business, in a low-margin track, Nice could not achieve substantial profits. Undifferentiated, low-value-added products make it difficult for an enterprise to gain market dominance, so reform was urgent. To this end, Zhuang Qichuan invested 200 million yuan to develop high-end washing products and expand into 5 series with 13 major products. In 2003, Nice launched a toothpaste emphasizing "nutrition," with transparent packaging and paste that differentiated it from all previous toothpastes, quickly gaining market recognition. In 2004, the launch of Diao brand dishwashing liquid saw sales grow 25% for two consecutive years, becoming another industry first after soap and washing powder. Then in 2006, it turned its attention to the children's market, launching the highly segmented Yayale toothpaste rich in VC. This brand remains the number one brand in the children's toothpaste market today. The same year, Nice also launched a high-end washing product—Super natural soap powder—which received a good market response due to its unique product positioning and relatively high-end brand image, and the product also stood out in the market. With the transformation of product structure and economic growth model, Nice Group began to enter the mid-end market with high profitability and large user capacity—the personal care products market. Entering the personal care market through hands-on, from-scratch methods would be slow, and Liby had invested heavily in early attempts but unfortunately failed. To quickly enter the personal care market, acquisition was the only choice. In 2006, Nice acquired three companies under British Zhongshi Company—Yuyang, Aoni, and Lairan—pioneering the acquisition of foreign companies by private enterprises. Through the acquisition, the group obtained ownership or exclusive usage rights of three famous brands: "Century Runfa," "Xiyasi," and "Aoni," along with 83 trademarks. In 2008, Nice spent 500 million yuan to secure the naming rights for CCTV's special theater, and Century Runfa's monthly sales exceeded 10 million. Driven by multiple categories, Nice achieved sales revenue of 9.17 billion yuan, with Liby following closely. In 2008, after Blue Moon ignited the laundry detergent category with a single product, Nice quickly followed up with Super laundry detergent, seizing the market with the slogan "Super women use Super." In 2010, Nice launched YOU ARE YOU, Mailian conditioner, and other daily chemical products, but compared to the previous Nice that produced a hit with every launch, it began to lose its touch, and market reactions no longer had the former glory. In 2015, Nice acquired Miao Guan Jia for $70 million, becoming the largest acquisition project by mainland China in Taiwan to date. Nice hoped to continue expanding its product categories with Miao Guan Jia and leverage its international penetration to open up the international market. Competition in the FMCG industry became increasingly fierce. Liby rose rapidly and became the sales champion in the washing market in 2012. Foreign FMCG giants also continued to make efforts in lower-tier markets and online sales. Nice chose to cooperate comprehensively with Fortune 500 companies such as Switzerland's Givaudan and the United States' Walmart, making efforts both online and offline to promote rapid sales growth. After years of cultivation, Nice developed steadily in the mid-to-high-end market. By 2015, its high-value-added products accounted for 67% of output value. At the same time, sales exceeded 19 billion yuan, ranking fifth in the world in daily chemicals. Although Liby surpassed Nice in 2012 to become the national first and world fourth, and has been leading the industry, in comparison, Nice indeed has an advantage in product added value and brand tone, which is more beneficial for long-term development. Since Super laundry detergent, Nice has focused more on the personal care track. Century Runfa disappeared after a brief period of glory, and subsequent self-innovation and acquisitions failed to reverse the decline. Nice's new products and hits decreased. Seemingly entering a stage of resting on its laurels, in 2016 Nice imitated foreign competitors and launched Super laundry detergent pods ahead of domestic peers. Although it gained a certain first-mover advantage, the market had not yet been cultivated, and Super pods did not become a new internet-famous product. But there is no doubt that Nice's high-value-added new products account for more than 80% of total sales. Compared with domestic washing brands, even the leader Liby, Nice still leads in product structure and future development momentum. In the "2018 China Brand Value Ranking," Nice Group ranked first in the daily chemical industry, and in the "China Light Industry Top 100 Enterprises Ranking," it also ranked first in the industry. However, behind Nice's prosperity, there are also deep worries. The Blood-Stained Contract System: Hidden Worries in Corporate Value In 2014, the country carried out deleveraging and structural adjustment at the cost of sacrificing economic growth speed, and the development speed of various domestic industries slowed significantly. To regain vitality, Blue Moon's idea was to reduce display fees in stores, but unfortunately, negotiations with Auchan, RT-Mart, and other brands broke down, leading to a comprehensive removal from shelves. Blue Moon, which moved entirely online, never regained its dominance in the laundry detergent market. Nice's strategy was to stimulate the enthusiasm of branch company personnel, thereby bringing about a significant increase in sales. This was the contract system introduced in 2015. An article titled "High Inventory, Chaotic Prices, Hundreds of Employees Leaving in Tears, Who Is Destroying Nice" conducted an in-depth analysis of the contract system. The contract system meant that the company set sales tasks based on 2014 sales and sold products to contractors at low prices in one lump sum. In principle, the original person in charge of the branch was given priority as the contractor, but if a non-person in charge wanted to contract, they could also do so, provided they undertook a larger sales volume. The original intention of the contract system was to let more capable people in, while reducing company risk and releasing employee enthusiasm. To avoid market chaos, contractors also needed to pay a large deposit. A completion rate of 112% was considered completing the task without deducting the deposit. If the completion rate was below 100%, not only would the deposit be deducted, but the contractor would also be automatically dismissed. In 2014, the top performer in the entire company achieved a rate of 118%, so in 2015, the task completion rates for receiving commissions were divided into three levels: 118%, 126%, and 132%. But when other company investments remained unchanged, and the market was already saturated or even fiercely competitive, it was indeed unrealistic for Nice, which was not the industry leader, to rely solely on the enthusiasm of employees to recreate another Nice. With increasing upward pressure on major brands, even P&G saw a significant decline in performance. Achieving a huge leap in performance was no easy task. By the fourth quarter, more than 92% of branch companies had basically no hope of completing the 118% task to receive commissions. In the fourth quarter, Nice's sales suddenly experienced explosive growth. By the end of 2015, only 4 branch companies had failed to complete the 118% task, and the company-wide completion rate was 125%. That year, Nice's annual sales exceeded 19 billion yuan, ranking fifth in the world. But with such sudden explosive growth, whether these goods were actually sold or accumulated in the channel, Nice should have calmly considered this. Under such "gratifying" performance, the headquarters budgeted 80 million yuan for commissions, but ultimately distributed 200 million yuan. In 2016, Zhuang Qichuan's confidence doubled, and he proposed the goal of "creating another Nice," aiming to cover in one year the path that had taken 47 years to traverse. The slogan had already been shouted, but rewarding in this way would be unsustainable for the company, so the 2016 contract system changed every few months. The company used so-called internal purchase meetings and exclusive events for disguised promotions. These intensive promotions caused extreme price chaos, severe inventory backlog, and increasingly poor business enthusiasm. Moreover, the performance overdrawn in 2015 would eventually have to be repaid. In the end, only two or three companies completed their tasks by year-end, and the situation was expected to worsen. From Nice's perspective, poor performance is not necessarily a bad thing, so there is no need to worry. If fewer people complete tasks, the reward amount does not need to be large. The company's interests are not positively correlated with sales like employees' interests. In this activity, the company had already calculated clearly and distanced itself, with contractors bearing the blame. For the company, the more people involved in contracting, the more people were put under a spell. If successful, the company profits; if unsuccessful, the company has the deposit. This strategy of being safe in all weather seemed to have no reason not to expand. A financial game far from the original intention thus unfolded, where the dealer only needed to develop more downlines to reap profits. In 2018, the contract system was finally extended to all employees of the company. Every employee had to pay a certain fee as a contract deposit, and even management trainees were not exempt. The contract deposit was directly deducted from the commissions that should have been issued in 2017, allowing the company to issue the minimum amount of rewards. Moreover, the deposit would only not be deducted when all employees in the branch achieved 120% of sales. Compared with the overall growth rate of the environment, this figure was basically a pipe dream. To make this money even harder to obtain, the company even stipulated a collective punishment system: if one person in the branch failed to meet the target, everyone was affected. Even if the task was completed, the money could not be easily obtained; the company needed to assess the branch's various expense usage before exercising the right. After four years of the contract system, employees' wages did not increase much, while risks grew. The market became increasingly difficult, and some employees still had not recovered their 2015 deposits. Under such pressure, employees inevitably complained and considered resigning. But resigning was not easy. Many people found that their 2017 commission rewards were insufficient to pay the 2018 deposit, and they needed to pay the 2018 contract deposit to regain their "freedom." In a generally poor market environment, even P&G was facing declining sales. As a non-industry leader, Nice achieving 10% growth during the 2014 industry inflection point was already commendable. What made Nice confident that its employees could achieve 120% of sales? This looked more like a capital game with ulterior motives. Conclusion The article "High Inventory, Chaotic Prices, Hundreds of Employees Leaving in Tears, Who Is Destroying Nice" not only listed the above problems but also attracted comments from employees of many companies below the article. The road to rights protection was tortuous and long, and employees described this farce as "tears without voice." It was the employees who filled the firewood with blood blisters on their hands that brought about Nice's rise, and it was the continuous efforts of these employees that led to Nice's prosperity. But using such a system to put a spell on employees, making them work hard and bear the blame, is not the attitude a kind enterprise should have. The article was published on June 6, 2018. At the end of the article, it was mentioned that Zhuang Qichuan, then 66, had reached retirement age. Zhuang Qichuan, who wanted to retire early, made employees feel even more insecure. Just a month later, on July 11, Zhuang Qichuan, founder and chairman of Nice Group, passed away due to illness. Although the negative impact of the contract system still exists, under many articles commemorating this spiritual leader of Nice, we still see people's admiration and respect for this legendary figure. It has been more than a year since Zhuang Qichuan's death, and Nice's exposure in the media has gradually faded. We do not know where Nice will go in the future. But Nice's brand value and high-value-added product proportion are still worthy of recognition. Although there have been few hit products since 2010, with the future upgrade of consumption, Nice still has hope to create another miracle by riding the market's tailwind. However, all this can only be achieved if Nice sincerely changes its corporate attitude and achieves mutual benefit and win-win with customers, employees, and channel partners. The reason Chinese enterprises can stand out in the fierce market competition when facing foreign companies is, on the one hand, the low-price competition brought by imitation and cost advantages, and on the other hand, the efforts and thoughtfulness in channels. These enterprises succeed because they fully consider the interests of customers, employees, and channel partners, and then carry out product innovation, employee training, and channel-friendly strategies, achieving self-value on the basis of altruism. The real economy cannot tolerate any falsification. Those superficial articles and external prosperity will eventually be exposed under the test of time and market. The real economy market is like a mirror, reflecting the efforts of every enterprise. Whether they are attentive in channels, make efforts in products, invest in management, or capture people's minds in marketing, these will ultimately be reflected in the market. Without the coordinated development of all links in the closed loop, the "prosperity" formed by relying solely on a sudden change in one link will eventually be beaten back to its original form by the market. And behind all this, there is a root that supports the evergreen foundation of an enterprise, and that is the kindness of the enterprise. Only a kind enterprise that understands respect and care for others can ultimately gain market recognition. Source: Lishi Business Review (ID: libusiness)