In the condiment market, categories like soy sauce, vinegar, spices, and sauces each have two or three strong brands and dozens of regional ones, but in the 'chicken essence' category, most consumers only recognize TotoLe. Note: This article is about 3,500 words and takes about 9 minutes to read. It was precisely because TotoLe pioneered chicken essence as a seasoning that it attracted the attention of Swiss food giant Nestlé. In 1994, Nestlé acquired 80% of TotoLe's shares. Over more than a decade, TotoLe did not decline like other domestic brands acquired by foreign companies, but truly achieved the goal of 'making it easier for 1.3 billion ordinary families to experience umami,' and Nestlé's return on investment in TotoLe over 15 years reached an astonishing 23 times. How did Rong Yaozhong, the founder of TotoLe and always its manager, known as the 'Father of Chicken Essence,' view the goals and strategies of the enterprise at different development stages? Perhaps this is the reason TotoLe was able to overcome the disadvantages of equity disputes and ultimately realize its corporate vision.
Entrepreneurial period: Here there are only chickens, so use chickens to start a business Today's housewives and chefs know that chicken essence is a substitute for MSG, used to enhance the freshness of dishes. But initially, chicken essence did not exist; like MSG, it was obtained through artificial extraction. Rong Yaozhong is the inventor of chicken essence and the one who turned this invention into a product. In 1984, a young Rong Yaozhong was seconded to the China Food Industry Association and led a poverty alleviation team to Nanle County, Henan Province, a national-level impoverished county, starting this 'chicken' fate. Because in this impoverished county, transportation was blocked and life was poor, with no other agricultural products, but it was rich in free-range chickens, which were very cheap, only a few mao each. At that time, the old secretary said to them, 'Can you help us sell the chickens?' Rong Yaozhong thought it over. As a scientific worker, becoming a chicken vendor to sell chickens was not realistic, but making chickens into a product with some technological content was possible. Rong Yaozhong and his team returned and began developing a umami seasoning using chicken as the raw material, deep-processing the free-range chickens to develop the local economy. By the second half of 1984, Rong Yaozhong finally used fresh chicken as a raw material to produce a preliminary chicken essence product, which was tested and appraised in Guangxi, initially producing a new composite umami seasoning 'chicken essence' that was superior to traditional MSG. The establishment of TotoLe was a product of reform and opening up. Later, Rong Yaozhong decided to start his own business. After more than three years of research and development, overcoming the lack of raw and auxiliary materials, no ready-made equipment, and starting from scratch in processing techniques, they finally developed a granular chicken essence made from fresh chicken through multiple fine processing steps and mixing with other ingredients. TotoLe only began mass production at the end of 1992 and in 1993. Establishment period: Set the highest standards, conquer urban household, rural, and online markets separately For many people, mentioning 'essence' evokes associations with chemicals, industry, synthesis, and toxicity. Many catering professionals also emphasize 'no MSG' and 'original flavor.' Especially in China, where the food safety environment is worrying, a rumor can bring a crisis to an industry. For example, the rumor that 'crayfish were brought to China by the Japanese to handle corpses' silenced the crayfish industry for a long time; 'The chicken essence you eat has no chicken in it' might refer to some unscrupulous merchants, but it also put the 'leader' TotoLe in an awkward position. In fact, an important component of chicken essence comes from chicken, and chicken does have an impact on chicken essence. In TotoLe's chicken essence production workshop, 50,000 chickens are processed daily. These chickens come from large upstream suppliers in Fujian and Shandong that meet export standards to Europe and the US, and they must pass three inspections and quarantines before entering the factory. Through steaming, the chicken and chicken broth are separated. The chicken is finely processed, mixed, and undergoes a Maillard reaction to form granules. Only then can a chicken become chicken essence seasoning. So, on the contrary, for chickens raised by farmers themselves, the source is uncontrollable, and factors such as the use of therapeutic drugs and vaccinations in farming are uncontrollable. Therefore, in the later stage, TotoLe stopped buying chickens from farmers. TotoLe chicken essence broke through a world-class problem in production technology by using fresh raw materials, directly processing fresh ingredients, thus better preserving the color, aroma, taste, and nutritional components of the fresh chicken and other raw materials; it also better suits Chinese consumers' tastes; and in various quality indicators such as hygiene, shelf life, and microbial indicators, it has reached advanced levels among world peers. According to surveys, the chicken essence market was originally chaotic, with counterfeit and shoddy products flooding the market, but without standards, it was impossible to manage. As the pioneer of the chicken essence industry, TotoLe took the lead, spending three years and about 3 million yuan to achieve a preliminary industry standard for chicken essence, and is now also responsible for formulating the national standard for chicken essence. When formulating China's national standard, Rong Yaozhong also checked similar product standards worldwide and found that the Chinese standard was higher than foreign ones. Initially, when TotoLe chicken essence was expanding the market, the simplest method was used: let consumers taste it. No matter what dish was cooked, adding a little would make it more delicious, which was the main marketing method. From TotoLe's media advertisements, it can also be seen that other seasonings may focus on catering with household as secondary, while TotoLe focuses on household with catering as secondary. In terms of sales distribution, TotoLe's big cities account for over 60%. Internally, the market is vividly called 'three parts of the world': the big city world, the rural world, and the online world. After market segmentation, TotoLe's target users changed from 1.3 billion to 'three 400 millions': the old customer group of 400 million 'aunties,' the new customer group of 400 million farmers, and the even newer 400 million netizens. Ten years ago, TotoLe's rural sales were only 5%. Now, urban growth is gradually saturating, but rural areas have seen relatively large growth. However, with the rise of online consumption, TotoLe has not yet fully entered this channel. To address this, TotoLe has developed the 'Tian Tian Wang' product for the rural market, as well as products that are lazier, more convenient, more delicious, and more suitable for online marketing. Comprehensive growth period: Nestlé acquires TotoLe, win-win through giving At that time, TotoLe was already the number one chicken essence brand in the Chinese market. Selling 80% of its shares to Nestlé was hard for outsiders to understand. But in Rong Yaozhong's understanding, an entrepreneur treating the enterprise as his own son has limitations; it should be treated as his own work, the most satisfactory work, recognized worldwide. As chicken essence gradually gained market acceptance, production capacity needed to be expanded. Rong Yaozhong decided to undertake a 50 million ton project, but this required a large amount of capital. Since 1988, the government launched the 'Torch Plan,' which was market-oriented, promoting the commercialization of high-tech achievements, the industrialization of high-tech products, and the internationalization of high-tech industries. TotoLe chicken essence applied for a loan and began building a factory. But with the Asian financial crisis starting in 1997, the Torch Plan stopped, and TotoLe's building was half-built. When they needed money most, the loan was cut off. In 1995, TotoLe had prepared to list in Hong Kong, but its sponsor, Trident Securities, went bankrupt. Later, Rong Yaozhong found Peregrine, but Peregrine also went bankrupt. The enterprise faced various difficulties in its growth. Rong Yaozhong almost sold his villa to provide working capital for the enterprise. To ensure TotoLe's survival and 'let 1.3 billion people taste a more delicious flavor,' in 1998, TotoLe and Nestlé formed a joint venture. Rong Yaozhong lost 80% of the company's shares but gained the funds urgently needed for development, and maintained the stability of the original management team, with Rong Yaozhong still as the full-authority management leader. However, local brands acquired by foreign companies have mostly had a rough fate. In 2000, Danone acquired Robust, and the Robust brand and products gradually shrank; L'Oréal acquired Mininurse and stopped investing in it; Johnson & Johnson acquired Dabao for 2.3 billion yuan, and after packaging changes, the market did not change much; Coca-Cola attempted to acquire Huiyuan, but it was halted, and Huiyuan's business declined. At the same time, Nestlé is known as an 'acquisition maniac.' According to statistics, in China, in 1999, Nestlé acquired 97% of Guangzhou Frozen Food Company, taking over its ice cream brand Guangzhou Wuyang, which was famous in the Lingnan region; in November 2011, it acquired 60% of Xiamen Yinlu Food Group, which had the largest market share in protein drinks and eight-treasure porridge; in December of the same year, it spent $1.7 billion to acquire 60% of Hsu Fu Chi; after failing to acquire Shenzhen Jingtian Baishuishan, Nestlé quickly took a 70% stake in Yunnan Dashan, one of China's top ten bottled water companies and the number one mineral water brand in Yunnan, in 2010. In addition to TotoLe, Nestlé acquired 60% of another chicken essence brand, Sichuan Haoji, in 2000. The latter had developed into China's second-largest chicken essence brand and was the leader in the southwest market. Among these acquired companies, none like TotoLe achieved the leading position in their field's market share; some even became non-performing assets for Nestlé. After the joint venture, many people said it was a 'husband-wife relationship,' like a marriage. Rong Yaozhong compared it to a 'mother-in-law and daughter-in-law relationship,' where the controlling shareholder is the mother-in-law and the minority shareholder is the daughter-in-law, and he summarized a 'way of getting along': first, acknowledge the two corporate cultures. Two interest groups with two different philosophies are difficult to combine. But in business, one must talk about interests. If the interests of the major shareholder are satisfied in the long term, the relationship can be stable. During the 30 years of China's reform and opening up, there have been tens of thousands of joint ventures and cooperative enterprises, but the average lifespan is only 2.6 years, and successful cooperation cases are rare. Nestlé and TotoLe have been in a joint venture for over 18 years, which is unique within Nestlé. Nestlé's joint venture allowed TotoLe to achieve a larger production scale. China's condiment market has been growing at a rate of over 20% annually, and TotoLe has maintained growth, currently holding over 50% market share in chicken essence. In Rong Yaozhong's view, the highest realm for an entrepreneur is to make the enterprise the best, like creating a work of art or a product. The product made is not for oneself to consume. Entrepreneurs must first correctly position their relationship with the enterprise: they are neither the parent of the enterprise nor its eternal possessor, nor can they consume or enjoy everything the enterprise produces. So first, make the enterprise the best, then consider how to ensure its long-term stability, inheritance, and contribution to society. Conclusion TotoLe has experienced the entire process of China's reform and opening up, gone through numerous difficulties, and has now matured. But survival of the fittest is the natural law of competition, and the chicken essence industry already has several well-known brands. In the current chicken essence market, four major brands—'TotoLe,' 'Knorr,' 'Maggi,' and 'Haoji'—belonging to Nestlé and Unilever groups, account for 90% of national production. Among them, 'TotoLe' has a 45% share and dominates the East China, Central China, North China, Northeast, and Northwest markets. The southwest market is dominated by 'Haoji,' TotoLe's brother brand, while South China is the base for Unilever's 'Knorr' brand. To remain invincible in fierce market competition, an enterprise must always be in a state of growth and development. TotoLe's founder did not get bogged down in equity disputes but made decisions based on whether the enterprise could develop, which is an important reason it has come this far and become an industry leader. Moreover, by turning its corporate standards into industry standards and then promoting them to become national mandatory standards, TotoLe has significantly raised the standard awareness, technological innovation awareness, and safety and quality awareness of China's composite condiment enterprises, to some extent prompting some major brands to reach advanced levels in enterprise scale, management, and environmental control comparable to international peers. At the same time, it has formed a clear distinction in technology and quality from the other two major chicken essence production regions (Europe, America, and Japan), achieving high-level, high-quality standard competition with foreign counterparts. TotoLe should be a benchmark case of giving back to society after becoming strong and large, and its development trajectory and the lessons learned are worth our reference and reflection. -END-