He founded a nationally renowned food enterprise group. Over fifteen years, he expanded Jinmailang Group's scale and comprehensive strength by more than 1,000 times, creating the astonishing 'Hualong Speed' which the economic community dubbed the 'Hualong Phenomenon'. He is the founder of the former Hualong Group and the current chairman of Jinmailang - Fan Xianguo.
01 'Restless' Entrepreneurship In 1960, Fan Xianguo was born in Longyao, Hebei. Longyao is located in the hinterland of the North China Plain, where wheat and corn have been abundant for thousands of years, and it also boasts more than ten specialty agricultural products. 'Heilonggang chili peppers have thin skin, thick flesh, and a strong spiciness; Zepan white lotus roots are pure white and flawless, with one large and six small holes, and were a tribute item to the imperial court in the Ming Dynasty.' Unfortunately, Fan Xianguo was born at the wrong time. During the three years of natural disasters, his parents could only eat wild vegetable roots to stave off hunger, and when extremely hungry, they would swallow 'guanyin soil'. Poor Fan Xianguo never tasted white flour steamed buns as a child; having corn porridge once a week was considered a treat. Not only were they hungry, but they also had to smelt steel. Fan Xianguo, only 1.3 meters tall, followed his father to stoke the boiler every day, 'with coal slag under his fingernails.' The problem was that stoking the boiler consumed energy, and the more he stoked, the hungrier he got. Fan Xianguo often felt dizzy from hunger. Once, he collapsed right next to the boiler, scaring his father half to death. After graduating from high school, Fan Xianguo failed the college entrance exam. Unlike his father, he did not work in the fields. Because he was clever and considered educated with a high school diploma, he noticed that some villagers were processing white sugar into large 'old rock sugar' blocks, which yielded better returns than farming. In 1984, at the age of 24, he borrowed some money from relatives and friends, took out a bank loan, and pooled together tens of thousands of yuan to start producing 'old rock sugar' at home. Although the work was hard, it was profitable. After eight years, he had accumulated over 200,000 yuan. In 1992, 200,000 yuan was an astronomical figure in rural Hebei. At that time, a bureau chief in Longyao County earned only about 500 yuan a month. If Fan Xianguo had been content with small success like many other small business owners, 'Hualong' would not be what it is today. In 1992, Fan Xianguo made another restless decision: he joined with more than ten other shareholders to found 'Tianshuai Group' to produce monocrystalline rock sugar. A year later, 'Tianshuai' began producing instant noodles. At that time, there were over 1,200 instant noodle manufacturers nationwide with more than 1,800 production lines. Except for a few large enterprises like 'Master Kong', most had only one or two production lines, with low product quality and fierce competition. However, 'Tianshuai', with its two lines, not only survived but also turned a profit, which satisfied most shareholders.
02 Understanding the Market and Starting Anew Fan Xianguo studied the instant noodle market at the time and found severe polarization. Over 1,200 small enterprises were fighting fiercely in the low-end market, with low product quality and no brand recognition. 'Master Kong' and 'Uni-President' had already captured the majority of the high-end instant noodle market in China, and their market share was solid. Meanwhile, there was a gap in the market for mid-quality, low-priced instant noodles aimed at urban commoners and the vast rural population. Fan Xianguo proposed that 'Tianshuai' rapidly expand its scale to stand out in the melee of small brands and seize the gap in the mid-range noodle market. However, most shareholders of 'Tianshuai' were satisfied with their current returns and were unwilling to risk their savings. Four shareholders of 'Tianshuai' agreed with Fan Xianguo's analysis and were willing to start a new venture with him, and three new people also joined. In the spring of 1984, they jointly invested 2.18 million yuan to establish 'Hualong Group' and put forward the slogan 'Work hard for 5 years to become the number one in Hebei'. To produce instant noodles, the first issue was raw materials. This was not a problem for Fan Xianguo. Longyao is a national high-quality wheat production base, with arable land of 850,000 mu. 'The gluten strength of the flour is 4 percentage points higher than other regions!' Afterwards, Fan Xianguo used local materials, selecting local specialty agricultural products for the seasoning packets. 'In the braised beef flavor, add Heilonggang chili peppers; in the braised pork ribs flavor, add some chicken leg onions; and use Zepan white lotus roots and small crispy fish as the base for the seafood flavor sauce packet.' With the flour and seasoning packets sorted, the rest was easy! Soon, Hualong instant noodles were launched. But how to break into the market? At that time, although there were over 1,200 instant noodle manufacturers in China, they were basically supporting roles to Master Kong and Uni-President. The two giants, with their brand and capital advantages, held over 80% of the market share, while the other small brands could only watch them make money. Competing head-on in first-tier cities like Beijing, Shanghai, Guangzhou, and Shenzhen would be a dead end, with no chance of success. However, the vast rural areas had plenty of space, and many counties and cities were not covered by Master Kong or Uni-President at all. 'So we'll start from the rural areas!' But to open up the rural market, they had to focus on low prices. Fan Xianguo thus established a three-step strategy: 'Mass-market noodles to capture the market, mid-range noodles to generate profits, and high-end noodles to build the brand image.' Compared to Master Kong's 3.5 yuan and Uni-President's 2.2 yuan low-priced products, Fan Xianguo launched Hualong Xiaozai at a price as low as 0.55 yuan. He also specifically marked 'Braised Beef Noodles', 'Braised Pork Ribs Noodles', and 'Seafood Noodles' on the packaging, using different colored packaging bags to distinguish them.
03 'The Noodles Are Chewy, the Sauce Packet Is Delicious, and It's Cheap!' By the end of the year, Hualong's revenue broke through 5 million yuan. Fan Xianguo was confident and successively expanded to 8 production lines and 3 packaging lines. 'Attention to detail is key, and low price is most important.' So the question was: why could Hualong be so cheap? First, proximity to raw material sources Fan Xianguo built the production base in Longyao, surrounded by tens of thousands of mu of wheat planting areas. Wheat was sourced locally, and workers could buy flour just outside the factory, saving 50% on transportation costs. Moreover, 20,000 growers became loyal supporters of Fan Xianguo. Second, deep processing of seasonings In addition to wheat, the local one-stop deep processing of seasonings saved Fan Xianguo over 2 million yuan in processing fees. In June 1996, more than 20 local chili growers formed a processing alliance. After harvesting, they processed the chilies centrally into chili powder and sold it to Hualong's seasoning factory. 'The growers' income increased by 20%, and Fan Xianguo saved 50% on processing costs.' Finally, low labor costs By the end of 1996, Fan Xianguo had built Noodle Factory 2 and Factory 3, increasing annual production to 216 tons. Need manpower? His second uncle in his hometown was a village head, and he immediately recruited over 200 laborers from the village. As family, they didn't stand on ceremony. Fan Xianguo's wages were once the lowest in all of Hebei. The villagers didn't complain: 'No rush, no rush. If you make money, you won't treat us badly!' Indeed, with the cost advantage, Fan Xianguo was invincible in the rural market, with annual revenue exceeding 50 million yuan, quickly becoming the number one seller in Hebei and Shanxi. By 1997, Fan Xianguo had set the 'Marketing 600' plan: 'Establish 600 wide-reaching, dense, and fixed distributors north of the Yangtze River to lay the foundation for entering North China, East China, the three northeastern provinces, and the Central Plains.' In May of that year, Fan Xianguo decisively sent 182 marketing personnel to more than 20 provinces across the country. 'For distributors, focus on the big and let go of the small; for terminal markets, focus on the small and let go of the big.' With low prices and promotions, he established over 600 sales networks.
04 Abandoning Hualong, Creating Jinmailang In just four years, Hualong products covered 30 provinces and 1,918 counties, selling over 100 million packs of instant noodles annually, completing the strategic concept of 'encircling the cities from the countryside.' The time had come to 'capture the cities.' However, Master Kong and Uni-President had not been idle during these years and had already captured 70% of the urban market share. How could he compete with the big brothers in the high-end market surrounded by strong competitors? It was no easy task. But Fan Xianguo had his own way. He decided to abandon the Hualong brand. The sales director was anxious: 'Hualong is so well-known now; it would be a waste not to use it!' 'No, using it would be a waste of time.' Why? Over the years, Hualong's advertising had covered second- and third-tier counties and cities nationwide, establishing a low-to-mid-end positioning that was deeply impressed on consumers. So Fan Xianguo was determined to innovate products and let urban consumers get to know Hualong anew. 'Rural consumers value practicality, seeking cheap, convenient, and filling food. In cities, consumers care most about texture, taste, and psychological feeling.' So in early 2002, Fan Xianguo decided to produce a new product made from pure wheat flour, named Jinmailang, 'meaning golden wheat waves.' The noodles featured 'elasticity' as their hallmark, 'resistant to cooking, resistant to soaking, and with good chewiness.' More importantly, Jinmailang broke through the 'nutritional bottleneck' of instant noodles: 'Adding trace elements to the flour and natural bone extract to the seasoning and sauce packets.' This time, Fan Xianguo raised the banner of nutrition and advanced into the cities. In July 2002, Fan Xianguo invested 20 million yuan at once to build the Jinmailang production base. 'The annual wheat conversion equals the output of 60 surrounding counties, solving employment for 100,000 local people.' Near the base, a specialized vegetable planting area of over 100,000 mu drove the development of the processing industry. 'One county opened eight chili processing plants, producing 3,000 tons of dried chili and 150 tons of chili pigment annually.' With the right approach, within just one year, Jinmailang's sales in major cities exceeded 100 million yuan. Then Fan Xianguo began spending heavily on promotion. He made a bold investment of 20 million yuan in intensive advertising on CCTV. The slogan 'Bounces well, bounces wonderfully, bounces with great taste' resounded across the country, and Jinmailang's sales broke through 1 billion yuan. Subsequently, Fan Xianguo entered the international market through sports marketing. At the end of 2004, he invested 50 million yuan to support a scientific expedition team's assault on Antarctica's 'Dome A'. The National Polar Expedition Office officially cooperated with Hualong, and 'Jinmailang Bone Soup Elastic Noodles became the exclusive noodles for Chinese Antarctic expedition members.' Fan Xianguo spent 1.6 million yuan to produce a one-minute Antarctic advertisement that aired during CCTV's prime time. 'When expedition members eat Bone Soup Elastic Noodles, it is equivalent to drinking 600 grams of fresh bone soup.' With 100 million yuan invested in advertising, the results were remarkable. Jinmailang wrested 30% of the market share from the two giants, and annual revenue exceeded 2 billion yuan. After that, Fan Xianguo also opened a ramen restaurant. In 2006, he opened a Jinmailang Bone Soup Ramen restaurant in his hometown of Longyao, 'featuring specialty bone soup ramen as the main dish, using fresh ramen noodles and pork bone white soup, with an open kitchen and on-site preparation.' Today, Hualong has 17 production bases across the country, with an annual output exceeding 12 billion packs, employing over 26,000 staff. The brand value of Jinmailang has reached 8 billion yuan. 'The world is changed by passion and impulse, and maintained by calmness and reason.' That is Fan Xianguo.
The Third (CFIC) China FMCG + Internet Conference will be held in Chongqing in November 2017. The conference will closely focus on the theme 'New Forces, New Ecology', inviting domestic 1,000+ distributors, 500+ brand owners, 200+ B2B platform founders, and 100+ investment and financing institutions to jointly explore a new chapter of cross-border integration! Core topics of this conference:
How can the FMCG industry achieve new growth opportunities through B2B
How to build the new supply chain behind new retail
How can intra-city logistics help B2B achieve leapfrog development
Highlights of this conference:
The industry's first '2017 China FMCG B2B Industry Competitiveness White Paper'
Case sharing of excellent transforming and upgrading distributors
Conference + exhibition upgrade, Hall 6 Internet Technology Exhibition strengthens connections
Alibaba Retail Link, ProLogis Finance, Eternal Asia Supply Chain, Best Store Plus, Yijiupi, Haiding - leaders from various fields will deliver speeches and share pioneering views.
Registration is now open. Long press the QR code below or click 'Read Original' to register. Add friend and note 'Conference Registration'. Click the link below to review the highlights of the first and second FMCG + Internet conferences: 2016 'FMCG + Internet' Summit Forum -END-