Master Kong's Family Affairs｜New Distribution

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Introduction: On the evening of December 20, Master Kong Holdings announced that from January 1, 2019, Master Kong founder Wei Ying-chou would resign as executive director and chairman; taking over as chairman of Master Kong Holdings would be Wei Ying-chou's eldest son, Wei Hong-ming.

What Wei Ying-chou achieved at 24, Wei Hong-ming waited 40 years for.

On January 1, 2019, Wei Hong-ming, eldest son of Wei Ying-chou, officially became chairman of Master Kong Holdings, and his third son, Wei Hong-cheng, was appointed executive director. Thus, the 40-year-old Wei Hong-ming took over Master Kong from his father. He could finally introduce himself: "Hello, I am the head of Master Kong."

Wei Ying-chou, who had been paving the way for his sons for decades, finally saw this day come.

It had been 40 years since Wei Ying-chou took over the "Dingxin" oil mill from his father, Wei De-he.

40 years, from 1978 to 2018, the Chinese market underwent earth-shaking changes.

The Old Story of the Four Brothers

The Wei family started with a small oil mill called "Dingxin," managed by Wei De-he. In 1958, "Dingxin" began producing castor oil, palm oil, coconut oil, and other oil products, later renamed "Ting Hsin."

That year, Momofuku Ando's Nissin instant noodles had just been launched. According to the 2010 book "The Wei Family Behind Master Kong," such coincidences in years ending with "8" entered the Wei family's fate more than once.

Wei De-he had four sons, from eldest to youngest: Wei Ying-chou, Wei Ying-chiao, Wei Ying-chong, and Wei Ying-hsing. Wei De-he named each of the four brothers with a character of six strokes.

Brief family tree of the Wei family's three generations.

The eldest, Wei Ying-chou, had a strong style and was responsible for final decisions, being the "soul figure" both in the company and at home.

The second, Wei Ying-chiao, was skilled in marketing and cost control, responsible for maintaining shareholder relations, and sometimes acted as the "external spokesperson."

The third, Wei Ying-chong, excelled in financial management and liked to think about "soft topics" such as corporate culture and social responsibility. In 2001, Wei Ying-chong became chairman of Wei Chuan Foods.

The fourth, Wei Ying-hsing, was sociable and nicknamed "Peacock." Wei Ying-hsing served as chairman of Ting Hsin International Group, chairman of Tingqiao Holdings (Dicos fast food, Master Kong's Private Beef Noodles), and chairman of China FamilyMart convenience stores.

The four Wei brothers, from left to right: Wei Ying-chou, Wei Ying-chiao, Wei Ying-chong, Wei Ying-hsing.

In 1978, Wei De-he passed away. Wei Ying-chou led his brothers to take over the oil mill. The four brothers always "divided the business but not the family," pooling profits and sharing them equally at home.

In 1988, another year ending with "8," the State Council promulgated the "Provisions on Encouraging Investment by Taiwanese Compatriots," encouraging Taiwanese investors to invest in various provinces, autonomous regions, municipalities, and special economic zones on the mainland. The Wei family was tempted.

Wei Ying-hsing, then 28, carried the family's heavy trust and shareholder funds to the mainland to find suitable investment projects. But whether producing barrel cooking oil or egg rolls, due to insufficient understanding of mainland economic policies, the products lacked cost and price advantages, and Wei Ying-hsing's invested funds were almost all lost.

Fortunately, heaven never seals off all exits.

Once, while on a business trip, Wei Ying-hsing felt a bit hungry and boiled a pack of noodles on the train. The aroma immediately attracted the attention of fellow passengers, who asked where they could buy it. This inspired the Wei brothers, and they decided to produce instant noodles to be eaten on trains.

What should the noodles be called? The Wei brothers hoped to bring everyone healthy, professional products, so they named the noodles "Master Kong" (Kangshifu), and even had a cartoon image created and printed on the packaging to make it feel friendly.

It is said that Master Kong was also the first instant noodle brand to add a fork in the bowl.

The Wei brothers spent a year researching taste, brand, and price. Wei Ying-chou alone tasted over a thousand bowls of instant noodles in a year. The brothers found that among instant noodle products priced at a few mao and tens of yuan, there was a large gap in the mid-range, so they decided to price their product at 1.98 yuan.

A bowl of instant noodles under two yuan, though not as much as those costing tens of yuan, was far tastier than the few-mao ones, with obvious cost-performance advantages. The Wei brothers scraped together the initial production costs and started work.

Early Master Kong braised beef noodles.

With the product, promotion was essential.

In the early 1990s, the main channel for consumers to quickly recognize brands was TV advertising. The Wei family knew this well and spared no expense to increase publicity. In 1992 alone, Master Kong's annual brand advertising expenditure exceeded 10 million yuan.

TV ads indeed worked. Before long, distributors flocked in. But at this time, due to large early investments, the four brothers' funds were insufficient.

What to do? The Wei family came up with a solution: subsidize the lower with the upper. That is, they bought equipment on credit in Taiwan and asked distributors to pay cash for goods.

In 1992, Tianjin Tingyi Group was established, and Master Kong officially entered the instant noodle business.

As market demand surged, from August 1992, in less than a year, Tianjin Tingyi quickly replicated production lines, and by the second year, 11 production lines were running at full capacity.

1992 was the spring of the mainland. Trendsetters flourished, "jumping into the sea" of business. However, unlike those private owners who relied only on courage, after the production lines were on track, Wei Ying-chou hired PricewaterhouseCoopers for family financial management. This move required not only vision but also ambition.

From 1994, Tingyi expanded boldly, establishing companies in Guangzhou, Hangzhou, Chongqing, Shenyang, and Wuhan. In addition, non-core areas such as real estate, property, and machinery were also developed. Soon, Master Kong established three business groups: instant noodles, beverages, and pastries.

At that time in China, not everyone had eaten Master Kong, but almost everyone had smelled that "visible flavor." That flavor, along the green trains, flowed to localities and towns.

Master Kong's sales network quickly expanded to third- and fourth-tier regions. It is said that in just two weeks, Master Kong could complete nationwide distribution of new products from big cities to mom-and-pop stores in townships.

In 1996, Tingyi (Cayman Islands) Holding Corp. was listed on the Hong Kong Stock Exchange. The same year, Master Kong acquired Dicos, entering the Western fast-food industry. Since then, consumer leading companies represented by Master Kong entered a "golden decade"—with revenue, profits, and market value continuously rising.

In 1997, Tianjin Dinghao Oils Company, a joint venture between Master Kong and Taiwan's Namchow Group, officially started production; in 1998, Shanghai Hymall was established, and Master Kong officially entered the warehouse retail business.

The good news was not over.

In 2009, a confident Master Kong acquired 19.55% of Taipei 101 for NT$3.735 billion, becoming the largest single shareholder. At this point, the Wei family took control of Taiwan's most iconic building, the significance of which was self-evident.

In 2011, Master Kong's market value exceeded 140 billion, with an increase of over 20 times, and it was included in the Hang Seng Index constituents, becoming one of the most growth-oriented Hong Kong stocks.

This was undoubtedly Master Kong's "highlight moment."

"Continuous Fight Against Uni-President"

The "Kang-Tong" (Master Kong vs. Uni-President) rivalry has a long history. Behind their face-to-face competition in supermarkets and small shops lies a tangled past.

The feud between Master Kong and Uni-President can be traced back to Wei Chuan.

In 1953, Huang Lie-huo founded Hetai Chemical, and the next year, Hetai Chemical was renamed "Wei Chuan Foods." In 1961, Wei Chuan became the first listed food company in Taiwan.

In 1967, Kao Ching-yuen founded Uni-President Enterprise, and the saying "South Uni-President, North Wei Chuan" gradually became popular. Later, Uni-President introduced "7-11" to Hong Kong, Taiwan, and mainland China, and Wei Chuan, which failed to grasp the trend, lost out.

In 1998, another year ending with "8," Ting Hsin obtained a majority of board seats at Wei Chuan. Unexpectedly, that year the Asian financial crisis hit, and by the end of the year, the stock market suffered heavy losses. Ting Hsin faced a shortage of funds and wanted to borrow money from "compatriot" Kao Ching-yuen.

But what Kao Ching-yuen had his eye on was control of Master Kong.

Kao Ching-yuen was known as Taiwan's "Konosuke Matsushita." As early as 1992, due to insufficient market research, Uni-President's "Taiwan flavor" Uni-President Shrimp Noodles suffered a crushing defeat against Master Kong's braised beef noodles. When a competitor comes to you for help, you naturally want more.

This was unbearable for the Wei brothers, and the two families have been at odds ever since.

The Kang-Tong rivalry.

What followed was a childish PK between Kang and Tong.

You launch "Uni 100," I'll launch "Noodle Master 120"; you come with "Good Chewy," I'll come with "Fuman Duo"... Over 20 years, the two companies had many "famous scenes."

In 2008, Uni-President's Laotan Sauerkraut Beef Noodles hit the market. Wei Ying-chou declared: "I would rather sacrifice gross profit and continue to fight Uni-President," and countered with "buy noodles, get sausage." Kao Ching-yuen also responded, heavily investing in advertising, leading to Wang Han's famous line: "Some imitate my face, some imitate my noodles."

Later, in the sauerkraut noodle market, Kang and Tong split it "fifty-fifty." To quote Taiwanese media, Kang and Tong have been entangled for decades without a clear winner.

In 2011, the growth rate of China's migrant worker population began to decline. As "train food," both Kang and Tong would face new challenges. At this juncture, Wang Xing's Meituan had just turned one. The Wei family also faced a turning point in their fate.

Slowing Growth

Classic braised beef noodles.

In 2013, the growth rate of China's migrant worker population slowed to 1.7%, and the same year, instant noodle sales fell by 1.3%. In the following two years, the number of migrant workers stagnated, and instant noodle sales further declined.

In 2014, under pressure from Taiwan's Ministry of Finance, the Wei family handed over control of Taipei 101, and Ting Hsin began to divest its Taiwan assets.

In 2016, the China Standard EMU, independently designed and developed by China with full intellectual property rights, met at a speed of 420 km/h on the Zhengzhou-Xuzhou High-Speed Railway in Minquan County, Shangqiu, Henan Province, setting a new world record for EMU meeting speed.

The same year, Master Kong's total revenue fell from 67.202 billion yuan in 2013 to 55.579 billion yuan, a decline of 20%, and net profit excluding non-recurring items also declined repeatedly.

In September, Master Kong Holdings was removed from the Hang Seng Index constituents.

Everything changed so quickly.

On one hand, old rival Uni-President kept launching new products; on the other, train speed increased, food delivery rose, and the new generation's demand for trendy products exploded. Facing Bilibili's limited-edition Japanese ramen, celebrity food from variety shows, and Douyin grassroots idols' marketing... the empire built over decades seemed to be dissolving in an instant.

Financial writer Wu Xiaobo believes that the rise of the middle class and the awakening of public health awareness have made people increasingly focus on concepts like additives, GMOs, and all-natural. Correspondingly, heavily processed, additive-laden, or fried foods represented by instant noodles have begun to be forgotten by consumers. This trend is irreversible and directly leads to a dramatic change in the landscape of the entire FMCG market.

On January 1, 2017, Master Kong announced the formal dissolution of Taiwan Master Kong. In August, Uni-President Group announced it would "gradually exit the instant noodle market," but would not leave the "noodle" market and would reposition itself.

On June 22, 2018, Meituan Dianping officially submitted its IPO application to the Hong Kong Stock Exchange. On September 20, Meituan Dianping listed on the Hong Kong Stock Exchange.

This time, this year ending with "8" seemed not to belong to Master Kong.

Times have changed.

"Internet" is followed by "+", but will adding an extra sauce packet to instant noodles help?

National Entrepreneur

Over the decades, the scenes the Wei family experienced were far grander than those of Master Kong's consumers.

In 1986, 82-year-old Deng Xiaoping inspected Tianjin and wrote: "The development zone has great prospects." In 1988, the State Council promulgated the "Provisions on Encouraging Investment by Taiwanese Compatriots," and Wei Ying-hsing, as the family's "vanguard," showed goodwill to the mainland.

Then, in 1992, Deng Xiaoping delivered his Southern Tour speeches, and the 14th CPC National Congress established the direction of a socialist market economy. The same year, Master Kong instant noodles were officially launched.

In the following 20 years, Master Kong's fate was linked to grand scenes like "nation" and "ethnicity." Behind a bowl of instant noodles was the transformation of China's economic trends.

In 1998, at the beginning of the massive migration of hundreds of millions of rural laborers to cities, instant noodles, being portable and cheap, immediately became popular.

But as China joined the WTO and national income rose, Taiwanese businesses on the mainland successively raised the banner of "national enterprises," and Master Kong also sought closer ties with the mainland.

In 2012, the CPC News Network republished an article from "Chinese Children" titled "Wei Ying-chou: The Chinese Soul of Master Kong."

"Chinese Children" was founded in 1988, the same year Wei Ying-hsing went north. This magazine is supervised by the Central Committee of the Communist Youth League and sponsored by the All-China Youth Federation, with the title inscribed by Deng Xiaoping himself, aiming to introduce outstanding Chinese sons and daughters. Being featured in this publication also indicated the Wei family's awareness to some extent.

In recent years, Master Kong has frequently participated in activities on the mainland. Public welfare and charity go without saying. Wei Ying-chou repeatedly sent close associates to appear, expressing dependence on and confidence in the "nation."

In 2015, Wei Chun-hsien, nearly 60, succeeded Wei Ying-chou as CEO of Master Kong Holdings.

Wei Chun-hsien.

Wei Chun-hsien was deeply trusted by Wei Ying-chou. He had served as global vice president of Procter & Gamble and general manager of Greater China, the highest position ever held by a Chinese person in that company, and was hailed as the "godfather of marketing in Taiwan's consumer goods industry."

At the start of his tenure, Wei Chun-hsien closely followed the supply-side reform trend, interpreting the policy of "adjusting structure, stabilizing growth, and promoting development": "For Chinese enterprises to strengthen weak links, they need to strengthen R&D, brand, and systems engineering. Master Kong will not give up the foundation of success achieved through economies of scale, but on the other hand, we must embrace the once-in-a-lifetime opportunity of the rise of the middle class, actively strengthen weak links, complete transformation and upgrading, and meet, lead, and even create the consumption needs of the future middle class."

Wei Chun-hsien stated more than once in public: "Rural revitalization is the trend we prioritize. We must do a good job in the supply chain, ensure low-cost delivery, and win the vast rural market."

In June 2018, Master Kong was selected for Xinhua News Agency's National Brand Project. Wei Chun-hsien said Master Kong would expand more international cooperation through the Belt and Road Initiative.

The Wei Boys

Wei Ying-chou has three sons: Hong-ming, Hong-fan, and Hong-cheng. Hong-ming and Hong-cheng work in the company, while the second son, Hong-fan, chose to start his own business.

Born in 1980, Wei Hong-fan holds a master's degree in mechanical engineering from Imperial College London and once worked in Foxconn's mobile phone department responsible for component R&D. In 2012, Wei Hong-fan founded INHON Group, producing the brand bicycle "GUSTO," which broke NT$100 million in revenue that year, holding over 50% market share in Taiwan's carbon fiber bicycle market. In 2013, Wei Hong-fan created the mobile phone brand "INHON," which he personally designed, emphasizing "Taiwan craftsmanship."

Wei Hong-fan.

At the new product launch, Wei Ying-chou gladly supported his son, praising his adventurous spirit and deep grasp of his "brand differentiation" essence, and revealed that he had invested NT$1 billion to help.

But the big boss Wei was not partial. He had already told his sons: "Dad's will is written. How much I give to the second son for his business is all recorded. Parents must be fair!"

At the end of December the same year, Wei Ying-chou split Master Kong "in two," dividing the original three business units of "noodles, pastries, and water" into the "Master Kong Business Group" (including instant noodles and convenience foods) and the "Master Kong Beverage Group" (allied with PepsiCo China). The CEOs of the two business units were Wei Chun-hsien and Zhu Huaxu, respectively. The former was a "old minister" trusted by Wei Ying-chou, and the latter had served as president of Pepsi Beverages China.

Wei Hong-ming, as the eldest son, naturally had to "inherit the business," and the third brother, Wei Hong-cheng, decided to help his brother.

In 2006, Wei Hong-ming joined Master Kong Holdings as a project manager in the president's office. He had served as a director of Wei Chuan Foods and a director of Japan's Calbee Foods Co., Ltd.

Wei Hong-ming.

According to public information, Wei Hong-ming was born in 1978, holds a degree in mathematics from King's College London, a master's degree in mathematics from Brunel University, and a master's degree in management science from Stanford University.

Wei Ying-chou once said that although Wei Hong-ming is quiet, he is willing to learn and quick to react, and he never complains when given difficult problems.

Unlike his brother, Wei Hong-cheng, born in 1982, has a lively personality. He holds a master's degree in international relations from Waseda University and has worked at Blackstone Group's New York office and PepsiCo headquarters.

Wei Hong-cheng.

Public information shows that Wei Hong-cheng joined Ting Hsin Group in 2007 and has served as a director of Master Kong Beverage Holdings Co., Ltd. since February 2015.

As the "second generation" men successively began "grassroots training," the "rule" that Wei women do not participate in management is also changing.

Wei Ying-chiao's third daughter, Wei Pei-yi, born in 1981, once worked at FamilyMart headquarters. This "young lady" who does not envy power or wealth married a "civilian" colleague four years her senior, Hong Chao-chien, who holds a master's degree in food nutrition. After marriage, Wei Pei-yi transferred to Ting Hsin Group's finance office as a staff member, while Hong Chao-chien resigned from FamilyMart.

Regarding the specific performance of the "Wei second generation," very little information is disclosed to the outside world, showing that before officially taking over, Wei Ying-chou protected his children well.

Family and Enterprise

We can still see some clues from Master Kong Holdings' public information.

Browsing the list of Master Kong's senior management, besides Wei Hong-ming and Wei Hong-cheng, there are also Japanese friends like Junichiro Ida.

Earlier during the "anti-Ting Hsin" period, public opinion criticized this point—that Master Kong was actually a Japanese-funded enterprise.

In fact, capital does not necessarily have a nationality, and those you think are "compatriots" may not be on your side. The latter, for example, the one mentioned above; the former, for example, Junichiro Ida.

Who is Junichiro Ida?

He can be considered half a relative of Wei Hong-ming. Over the years, the Wei and Ida families have been closely related, "never abandoning each other."

Junichiro Ida is the son of Tsuyoshi Ida and currently serves as an executive director of Master Kong Holdings.

Tsuyoshi Ida was the president of Japan's Sanyo Foods Co., Ltd. When Wei Ying-chou faced financial difficulties due to the acquisition of Wei Chuan, he helped Master Kong resolve the crisis by purchasing equity. After the alliance, Tsuyoshi Ida appointed CFO Seiichi Ikeda and overseas business department head Ryo Yoshizawa as directors of Tingyi Group, and brought production line technology and detailed management methods to Tingyi.

Sanyo Foods' Pikachu bowl noodles.

Moreover, unlike Kao Ching-yuen at the time, Tsuyoshi Ida knew how to "let go." He taught the Wei family how to manage, helped them expand relationships, but never attempted to annex Master Kong, giving the Wei family ample room to operate.

This Zen-like attitude may have been absorbed by Junichiro Ida, who loves tea ceremony.

In 2002, Seiichi Ikeda passed away, and Junichiro Ida took over. The same year, Ting Hsin formed a strategic alliance with Japan's old trading house, Itochu Corporation. Itochu is a comprehensive trading company, selected by Fortune as one of the "Fortune Global 500," with strong strategic investment experience. In 2015, CITIC Limited introduced Japan's Itochu and Thailand's Charoen Pokphand Group as strategic investors.

Japan, known for its "craftsman spirit," has many family businesses in food retail, such as Sanyo Foods, Tsuki no Kagu, Suntory, and Aeon. Family businesses are common in Japan.

The concept of "family business" was first proposed by Harvard professor R.G. Donnely, emphasizing that family members' personal careers are influenced by company relationships, and company values and family values are integrated.

Taiwanese family businesses rose in the 1950s, similar to the course of mainland family businesses over the past 30 years. Research shows that family members holding more shares can overcome the agency problems arising from the separation of ownership and management in non-family businesses; family members' direct participation in company operations can better supervise professional managers; and longer family shareholding periods, viewing the family business as an industry to pass on to descendants, make family businesses value corporate reputation.

Since the professionalism, evaluation systems, and institutional guarantees of professional managers are not yet mature, for the Wei family, having Wei Hong-ming and his brother grow from the "grassroots" over more than a decade, gradually establishing the status of "new spiritual leaders," seems prudent at present.

But this "prudence" must face the reality at hand.

The Ambition of the Second Generation

From available information, after the "Wei second generation" took office, Master Kong became more "open."

If the early "alliances" were somewhat passive, the recent "strategic cooperation" in internationalization and digitalization seems to reveal the ambition of the Wei children to seize the initiative.

After the Wei brothers took office, they facilitated Master Kong's cooperation with international strategic partners such as Starbucks and Disney, and promoted the planning of the TMRS (Trade Marketing Research System) for the FMCG market. Cross-industry cooperation with fitness enthusiasts and China Aerospace also followed.

Master Kong's cooperation with Disney.

These moves seem to tell consumers that Master Kong is not just a choice when you are hungry, nostalgic, or short on money, but a current lifestyle, the fun of cutting-edge technology, and the sexy waist of Jung Da-yeon.

In 2016, Master Kong opened a flagship store on Tmall, founded by "instant noodle boy" Jack Ma. The same year, factories under Master Kong's strategic alliance with PepsiCo won 47 "China Beverage Industry Water-saving and Energy-saving Excellent Enterprise" awards. According to statistics, since September 2016, Master Kong's stock price has risen up to 184%; during the same period, the Hang Seng Index rose only 45% at most.

In October 2017, Master Kong joined Alibaba's Ling Shou Tong platform, using its channel and technology advantages to create a data-driven management system, aiming to further expand market share in offline retail small stores.

In the first half of 2018, Master Kong's instant noodle product revenue increased by 8.4% year-on-year, accounting for about 36% of total revenue; beverage product revenue increased by 9.19% year-on-year, accounting for about 62% of total revenue, and was rated "outperform" by CLSA.

However, with the diversification of consumption scenarios, Master Kong is facing consumption upgrades and rising labor and material costs. In traditional distribution, the model where brand owners fully control the channel will face severe challenges.

The Wei boys are no longer facing the old rivals of the last century. Watching the domestic "second-generation entrepreneurs" take over one after another, they have grown up in a more open environment, mostly influenced by world-class top universities. Some traditional enterprises are also trying more flexible management methods.

Wei Ying-chou once said he would hand over the chairman position at 65 and truly retire.

He kept his word and did his best to "help mount the horse and see him off."

In 2018, a year ending with "8." On the evening of December 20, Master Kong Holdings announced that Wei Ying-chou would resign as executive director and chairman. From January 1, 2019, Wei Hong-ming would take over as chairman and also serve as a committee member.

How will the second generation of "Ting Hsin" "Ting Yi" (benefit) further?

New Distribution will hold the 2019 (5th) FMCG + Internet Conference during the Chengdu Spring Sugar and Wine Fair from March 16 to 18. This conference will focus on the topic of "Breaking the Game" , with in-depth discussions with many brand owners, supply chain service providers, distributors, and retailers.

Compared to previous conferences, this summit will be fully upgraded. In addition to the original topics of channel innovation, city distribution logistics, and distributor transformation , new parallel forums such as new marketing cases, IP + FMCG empowerment, community group buying, and innovative retail have been added. Through three days of ten high-density, high-quality expert sharing sessions, we believe every brand owner and distributor can learn the latest business models, expert opinions, and practical methods, finding new tools and methods to break the game in 2019 and return to the track of rapid growth.

Conference Time: March 16-18, 2019 Conference Venue: Longfeng Hall, Chengdu Longemont Hotel

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