Recently, anxious comments about Wahaha's 7% sales decline have been everywhere on major forums, WeChat, and Weibo.
It seems as if Wahaha is on the verge of bankruptcy overnight, and Zong Qinghou is almost walking on the cliff of losing his reputation. Is it really that serious?
Without mentioning anything else, just the aspects mentioned below show that Wahaha is far more adept than you think! Don't believe it?
Read on before you speak!
80 billion, 80 billion—have you ever achieved that? In the sluggish macroeconomic environment of 2014, Wahaha's sales only dipped 7%, which is nothing for a giant enterprise approaching 80 billion in scale. Moreover, the rare public admission of internal issues by the old man Zong is a way to pressure the entire team and also to motivate himself for transformation. From this perspective, I still see a bright future for Wahaha. There is no need to doubt whether Wahaha's business model has problems; achieving 80 billion is the best proof. As the old saying goes, if you want to know the mountain path, ask those who have traveled it. Without the experience of growing from zero to 80 billion, do not easily dismiss Zong Qinghou and Wahaha's path to success.
1. Does Wahaha not understand fan marketing? Some experts, scholars, and enterprises criticize Wahaha for not understanding consumer needs and not playing fan marketing, claiming it is out of touch with the times. This is pure fallacy! What are fans? Fans are what we used to call loyal customers, or members. Don't confuse the issue just because a new term has been coined. If we talk about fans, Wahaha has at least 500 million fans in China, supporting 80 billion in consumption. If any website's fan count exceeded 2 million, they would be overjoyed and valued at a sky-high price. So, for Wahaha, if not using trendy vocabulary means being backward, that's a bit far-fetched. I once emphasized in a Tsinghua University executive class that I am not against internet thinking; I am against internet thinking that doesn't make money. In fact, if we study carefully, we find that all so-called internet companies make money from traditional enterprises—Alibaba does, JD.com does, and Baidu does too. On one hand, they preach that traditional enterprises are backward, and on the other, they make money from them. This is the real "internet thinking trap." Some might say fans are about stickiness, and Wahaha doesn't focus on stickiness. But ask yourself: if you could get every Chinese person to drink one bottle of your beverage, would you be happy or not? Conversely, look at Wahaha's sales increasing year by year to 80 billion—does that show stickiness with consumers or not? So, don't easily say Wahaha doesn't understand consumer needs! Maybe it's you who doesn't understand!
2. Does Wahaha not know how to create big single products? A widely criticized point is that Wahaha doesn't understand big single products. This is also a big mistake! Wahaha was built on "big single products"! One after another, big single products have made Wahaha what it is today! From the children's nutrition liquid at the start, to AD calcium milk, to purified water, and now to Nutri-Express with sales exceeding 10 billion—which of these is not a big single product? Wahaha has long mastered this game! I remember when Nutri-Express was first launched, it didn't sell well. An ordinary company or expert would say, "Is there a strategy problem?" But Zong Qinghou was unmoved and doubled the advertising budget, and it sold like hotcakes! At that time, a batch of distributors who didn't see the potential of Nutri-Express missed a huge opportunity to make money. So, Wahaha is already adept at handling big single products. In fact, it is a model for all FMCG companies in China to learn from, because you are far behind the era when Wahaha started playing with big single products over 20 years ago! What is a big single product? Big creativity, big demand, big scale, mass appeal—it's a product that looks ordinary but sells extraordinarily well. Is Nutri-Express extraordinary? Is children's nutrition liquid extraordinary? Neither is extraordinary, but consumers universally need them.
3. Is Wahaha's channel theory outdated? Wahaha's achievement of 80 billion in sales owes much to its joint distribution system channel model, which almost perfected the FMCG channel model. Its three-pronged approach of inventory pressure, advance payments, and advertising blitz may seem ordinary, but it's like a thousand-pound force hitting the Chinese market, stirring up waves and generating 80 billion in sales. Great form has no shape, great sound is silent. These plain techniques are played to perfection by Wahaha, while less capable companies are forced to ponder marketing tactics that spend little but achieve little. What Wahaha needs now is not to abandon the channel model that has proven successful, but to upgrade it, re-energize the distributor channels, make the channels "active" again, and develop a "Joint Distribution System 3.0." Restore the capabilities of distributors that have been neglected, support their success, and reposition them. This way, the "static joint distribution system" can be upgraded to a "dynamic joint distribution system," and Wahaha's growth could double, making it entirely possible to exceed 150 billion. Remember, history does not develop in cliffs; it is always continuous, from quantitative to qualitative change. Wahaha's channel model is still the most advanced in China and even the world. It's just that the knife has dulled with use and needs re-sharpening. When you're walking on the street in summer and thirsty, you can't go online to get a bottle. The corner store is still your most convenient choice, especially since a bottle of drink costs less than 5 yuan. So, traditional channels remain the mainstream for FMCG, accounting for 90% of total retail sales. So, why do you say Wahaha's channel model is outdated?
4. Has Wahaha really lost money on diversification? Wahaha tried baijiu (liquor) and was criticized as unsuccessful. Is the reason that it didn't achieve another 80 billion? If you knew how Wahaha's liquor was absorbed by the market, you might reconsider. Did you know? Wahaha distributes one case of baijiu to each distributor at factory price for their business banquets. Do you know how much sales that amounts to? Also, Wahaha's children's clothing and shopping malls may not look very successful, but they were never positioned as core strategies by Zong Qinghou; they were just trial balloons! With Wahaha's corporate influence, the cost advantages in these two industries are beyond your imagination. Doing business in China is not just about sales; it also involves strategic considerations like costs and land! Everyone sees the 80 billion in sales but ignores the land assets of Wahaha's factories and branches across China. Together, these assets amount to an astronomical figure. I think "not short of money" is the fundamental reason Wahaha hasn't gone public. If you consider Zong Qinghou's diversification from a capital operation perspective, you might find new insights and not judge the success or failure of Wahaha's diversification with conventional thinking.
5. Does Wahaha really not understand internet thinking? What is internet thinking? In three words: "zero distance"! I tell you, Zong Qinghou has been using "internet thinking" to run his business for over 20 years. Do you believe me? Are you suspecting that I, Guo Chenglin, am talking nonsense? The essence of internet thinking is "zero distance"—zero distance between the enterprise and consumers. To avoid confusion, let's replace "internet thinking" with "zero-distance thinking," which is more appropriate and easier to understand the points I'm about to make. Since the beginning of his entrepreneurship, Zong Qinghou has had a habit: spending up to 200 days a year on the front lines of the market, directly feeling the pulse of the market, and understanding daily changes in consumer demand. In those days, there was no email. Zong used a van as his office and fax machines to issue market policies nationwide, achieving "instant" response speed. This is true "zero distance"! It is this "zero-distance thinking" and "zero-distance management style" that allowed him to do without vice presidents, needing only about 20 secretaries! So, is Zong Qinghou using "internet thinking" or not? Is there any difference from Lei Jun of Xiaomi, who spends time on forums every day? The only difference is the tools of the times, but the essence hasn't changed! So, never say again that Wahaha and Zong Qinghou don't understand internet thinking! Saying that is childish!
6. Does Wahaha really not understand product innovation? Wahaha has a strategy that Zong Qinghou euphemistically calls "strike after the enemy," which means it rarely initiates product innovation first, but more often imitates competing brands. If you think Wahaha is good at copying and therefore not innovative, I think you are too arbitrary, even nitpicking. Do you know? Microsoft's products were taken from others, Pepsi's products were taken, many IBM products were taken, and Apple's iPhone is the epitome of taking. There is no original creation in the world; only discovery and refinement. True innovation belongs to the scientific community, and it's about discovering what already exists in nature. According to global statistics on innovative products, the failure rate of innovative products is 85%! If you asked Wahaha to innovate every day, the company would have disappeared long ago! In business, there is no issue of face, only success or failure. Nongfu Spring is good at innovation, but it always serves as a sample test for Wahaha. Wahaha doesn't want the honor of innovation; it just wants to harvest market results. I think its distributor partners are happy with that! Wahaha understands product innovation very well, especially how to maximize the harvest of market innovation results. Even if the result isn't its own creation, the risk is the lowest. According to rumors, one of Zong Qinghou's biggest regrets was missing the opportunity to follow up on herbal tea. Otherwise, today's herbal tea market wouldn't be left to JDB and Wanglaoji, who are busy with ridiculous lawsuits.
Hope China has more Wahahas I see many recent criticisms of Wahaha. Either they use new vocabulary and concepts that are actually old ideas Wahaha has practiced for over 20 years, or they misjudge Wahaha because they haven't analyzed the underlying reasons. If such views are widely accepted by the business community, it would be very dangerous, because erroneous criticism would make traditional Chinese enterprises in transition even more confused. If even Wahaha with 80 billion in sales is considered utterly wrong, how should small and medium enterprises with a few hundred million survive? The times are changing, and Wahaha is changing too. Large enterprises react faster than small ones, especially Wahaha, which grew on its own and has a keen market sensitivity. From Zong Qinghou's speeches, we can see that he mentioned paying attention to a small enterprise making special forces coconut juice. This shows how much Zong respects the market and his competitors. This attitude is worth learning for Chinese enterprises. I believe that even if Wahaha encounters setbacks in the future, its prospects remain bright, and China remains bright.
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