---
title: "Wahaha's Predicament: Revenue Down 30 Billion in Five Years, From Never Listing to No Chance If It Doesn't—What's Wrong with the Zong Family?"
description: "After a sharp revenue decline, time is running out for 73-year-old Zong Qinghou. Wahaha's revenue fell to 46.4 billion yuan in the latest private enterprise ranking, down from 78.3 billion five years ago, forcing the company to consider an IPO and explore new channels like micro-commerce and Pinduoduo."
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published: "2018-09-27"
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# Wahaha's Predicament: Revenue Down 30 Billion in Five Years, From Never Listing to No Chance If It Doesn't—What's Wrong with the Zong Family?

> After a sharp revenue decline, time is running out for 73-year-old Zong Qinghou. Wahaha's revenue fell to 46.4 billion yuan in the latest private enterprise ranking, down from 78.3 billion five years ago, forcing the company to consider an IPO and explore new channels like micro-commerce and Pinduoduo.

Click to read the original article for details.
This article is authorized for reprint from Finance World Weekly (ID: cjtxzk); author: Niu Geng, editor: Liang Ye.
**After a sharp revenue decline, time is running out for 73-year-old Zong Qinghou.**
On August 29, the All-China Federation of Industry and Commerce released the latest list of the top 500 private enterprises. Wahaha's revenue dropped to only 46.4 billion yuan, falling from 101st to 141st place. In the previous four years, Wahaha's revenues were 78.3 billion, 72.8 billion, 49.5 billion, and 52.9 billion yuan respectively. Wahaha is getting further and further away from its goal of "100 billion yuan in revenue."
Zong Qinghou was also forced to soften his stance, hedging on "never listing." According to Southern Weekly, Wahaha has cleared out employee shareholdings, and "if it doesn't list now, there will be no chance." This decision is believed to have come from the lobbying of his daughter, Zong Fuli.
With the impact of e-commerce, Wahaha's sales channels have begun to age. Its strategy of following and copying, dubbed the "Tencent of the beverage industry," has also brought bitter fruit in the era of diversified products. In desperation, Wahaha developed an eye-care drink called "Tianyan Jingjing," sold through micro-commerce, but it quickly led to distributor rights protection protests. In September this year, Wahaha launched the beverage "Youyoujun" on Pinduoduo, hoping for a new battlefield.
Is this still the Zong Qinghou who angrily confronted Jack Ma? When he grows old, who can take over the Wahaha empire?
**Condescending to Micro-commerce, Joining Hands with Pinduoduo**
In April this year, 73-year-old Zong Qinghou appeared twice to endorse a beverage. The peculiarity of this drink was that it was sold through micro-commerce.
As is well known, Wahaha's sales network covers the whole country. Duan Yongping once said that in a small county in Xinjiang, there is no Coca-Cola, but there is Zong Qinghou's Future Cola. But Zong Qinghou actually wanted to blaze a new trail and do micro-commerce?
This drink is called "Tianyan Jingjing," a fermented milk drink that focuses on "relieving visual fatigue." Wahaha is responsible for production, while Zhejiang Zhongnan Holding Group is the exclusive distributor. It also did not invest in any advertising, but aired the animated series "Tianyan Legend" on CCTV, produced by Zhongnan Cartoon. A distributor told Finance World Weekly that his nephew often watched it.
Zong Qinghou explained the logic: Wahaha started with children's nutritional liquid to solve children's eating problems. Later, it made fruit milk and found the beverage market bigger. Now that people's incomes have increased and they care about eyesight, Wahaha made an eye-care beverage.
Regarding social retail, Wu Jianrong, chairman of Zhongnan Group, and Shen Jian, general manager of Wahaha Group's sales company, said a string of theories such as "internet fan economy," "social fission," and "agent plus endorsement." Zong Qinghou's long-time secretary, Luo Jianxing, said that Wahaha's "united sales system" that made it successful is not conducive to new product promotion and modern terminal network expansion, nor is it conducive to launching old products.
It seems that all parties have high expectations for social retail. But as the product was promoted, it evolved into large-scale rights protection protests by distributors.
It turned out that Zhongnan Tianyan's social retail plan was not mature. According to Beijing Business Today, Zhongnan Tianyan divided distributors into different levels: for a box of 24 bottles, to become a regional agent, one must purchase 1,200 boxes; city agent, 60 boxes; maker, 10 boxes. Depending on the level, the price per box also rose from 155 yuan to 198 yuan. The lowest level member only needs to spend 238 yuan to buy one box.
But some distributors bought the goods and found they couldn't sell them at all. "The promotion is really not in place!" Xiaoshu, who runs a restaurant in Guangzhou, told Finance World Weekly. He bought 50 boxes at 155 yuan each, which is 7,750 yuan. But now no one buys them, and he can't even resell them at 50 yuan each. "I can only drink them myself; I'm afraid of the taste now."
Unlike traditional beverages, social retail beverages have "no way to return." "I can't contact my upline at all; he disappeared after selling, and blocked me," another distributor told him. Now the packaging has changed, and the box has changed from 24 bottles to 10 bottles, so the ones he bought before are indeed hard to handle.
According to Beijing Business Today, Zhongnan Tianyan quickly abandoned the "city agent-regional agent" system and switched to a "VIP member-partner-maker center" model. The packaging was redesigned, and the price became 66 yuan per pack of 10 bottles. This means the price per bottle dropped from 9.9 yuan to 6.6 yuan, triggering rights protection protests from the earliest distributors.
A distributor told Finance World Weekly that there are no detailed rules yet, and they will be announced when formulated. But he confirmed that Tianyan Jingjing currently has no restrictions on sales area or price, "as long as you stock up, you can sell it however you want." This clearly violates Zhongnan Tianyan's earliest regional agency model and also fundamentally conflicts with Wahaha's "united sales system."
According to the QR code he sent, Tianyan Jingjing can be purchased on a micro-commerce platform called "Haha for Mall." Currently, a pack of 10 bottles is 79 yuan. "After you buy, share it with 5 people; after they register, you become a VIP member, and the purchase price is only 63 yuan. The more people you bring, the cheaper it is."
According to Finance World Weekly's inquiry, the operating company of this micro-commerce platform is Suzhou Yunling Zhihe Biotechnology Co., Ltd., with a registered capital of 10 million yuan, and the legal representative is Liu Xiaomei. In business registration information, "Yunling Zhihe" has no relationship with Wahaha, and it seems to be just a micro-commerce company. According to the screenshots he sent, the micro-commerce had only over 3,000 members the day before, but when Finance World Weekly registered the next day, it was already 88,920. Half an hour later, the member recommended by Finance World Weekly was already 91,547.
Ironically, when Finance World Weekly opened the platform the next day, it found that it had been banned for "suspected illegal distribution."
Currently, there is no authoritative sales data for Tianyan Jingjing. But negative comments about rights protection are endless. In September this year, when launching the new lactic acid bacteria children's drink "Youyoujun," Wahaha chose a more conservative channel: first launch on Pinduoduo.
On Pinduoduo, the group-buy price for Youyoujun is 54 yuan per 40 bottles, and the single purchase price is 60 yuan. The seller is "Wahaha Official Flagship Store." The store has already sold 447,434 items, involving 40 categories, including Wahaha's signature AD calcium milk, Nutri-Express, eight-treasure porridge, as well as niche products like Cat Love coffee milk, Ru Wawa, and Aron fruit tea.
After joining hands with Pinduoduo, Wahaha also tried to make up for its R&D shortcomings. According to public reports, the development of Youyoujun was based on Pinduoduo's big data analysis and then determined by consumer demand. Currently, it has only one flavor, but whether the subsequent mango, durian, or passion fruit flavors will be launched will also depend on big data analysis. In addition, Youyoujun also launched a co-branded version of Pinduoduo × Wahaha.
**Wahaha's Glory Is No More**
Doing micro-commerce is surprising because Zong Qinghou once despised e-commerce the most.
Zong Qinghou directly confronted Jack Ma. In December 2016, at the recording site of CCTV's "Dialogue" program, Jack Ma had just said: "The five future opportunities are new retail, new technology, new finance, new manufacturing, and new resources," when Zong Qinghou suddenly attacked: "Except for new technology, the rest is nonsense. (Jack Ma) is not the real economy at all; what does he make?"
Even when leaders supported "e-commerce is the real economy," Zong Qinghou still did not let go. According to Tencent's Deep Net report, Zong Qinghou once asked employees in confusion: Why is it that with the same goods, e-commerce has better service, delivers to the door, and is cheaper? His conclusion was: e-commerce evades taxes, cuts corners, and disrupts the pricing system of the real economy.
Zong Qinghou's statement has a background. Wahaha's rise came from its unique "united sales system" model: the system divides distributors into multiple levels: headquarters-distributor-second-tier distributor-terminal. Each distributor exclusively occupies an area, is not allowed to cross-sell, and must follow Wahaha's pricing system. Therefore, even in the capillaries of the national network, Wahaha maintains control over distributors.
In addition, the reason it is called the united sales system is that it actually unites "production" and "sales." When distributors take goods, they must first pay a deposit to Wahaha. After selling, they get back the deposit and rebate, and the deposit also earns interest. Therefore, Wahaha maintains distributor loyalty and can quickly return funds.
In the era of underdeveloped logistics and information, the united sales system was very effective. But when e-commerce appeared, once a product was listed on an e-commerce platform, the whole country could buy it with efficient logistics, and the only truly necessary link was the terminal that contacts consumers. In the united sales system era, Wahaha conquered the world with one hit product, but in the e-commerce era, winning requires many products. At this time, the lengthy chain of the united sales system became a drag: slow distribution, slow withdrawal, and even slower feedback. When the beverage industry entered the era of "rapid iteration," Wahaha was still moving slowly in units of "years."
Wahaha's poor R&D directly caused brand aging. It is called the "Tencent of the beverage industry," and an industry insider said: "From Wahaha fruit milk, to purified water, to eight-treasure porridge, to Future Cola, to fruit juice drinks, to tea drinks, to vitamin drink Activate, to Nutri-Express, to Qili and Zinc Shuangwaiwai, all have adopted a follow-the-leader strategy."
Wahaha has not thought about diversification. In 2010, Wahaha cooperated with Royal FrieslandCampina to launch Edison milk powder, but its market share was less than 1%. In 2013, Wahaha entered the liquor industry and launched Lingjiang Guojiu, but it disappeared within half a year. In 2016, Zong Qinghou's daughter, Zong Fuli, launched the customized fruit and vegetable juice brand KellyOne. As a result, Zong Qinghou poured cold water on it: "This can't be big; the shelf life is very short. I don't really know what she's doing."
Wahaha's problem is that it is difficult to break through categories. Therefore, returning to the "nutritional liquid" category from thirty years ago shows Zong Qinghou's desperation. Recently, Zong Qinghou's insistence on "not listing" has also shown signs of loosening. But can listing save this old company?
**Listing Becomes a Lifeline**
In fact, listing has become a very realistic choice for Wahaha. In March 2018, multiple media outlets reported that Wahaha began to clear out employee shares at 2.6 yuan per share. "Wahaha's performance is getting worse and worse; if it delays further, it won't be able to list even if it wants to," said an insider at Wahaha.
Wahaha's employee shareholding began in 1999. Some employees have said that after working at Wahaha for one year, they are eligible for share allocation, with 1 yuan per share and dividends reaching 0.8 to 0.9 yuan per share. Zong Qinghou said that only when employees hold shares can they become masters of the enterprise and have enthusiasm and responsibility. He also said that Wahaha has at least 15,000 shareholders.
But according to domestic regulations, a company planning to list should not have more than 200 shareholders. According to reports, employee shares have now been fully cleared, removing the obstacle to Wahaha's listing.
Zong Qinghou's change of heart is likely influenced by his daughter Zong Fuli. Zhu Danpeng, a Chinese food industry analyst, once told Finance World Weekly, "Wahaha's successor will definitely be Zong Fuli. Her thinking is different from Zong Qinghou's, and her acceptance of new things is also different. Listing is a sharp weapon for Wahaha; the company needs capital support."
In his early years, Zong Qinghou was the biggest opponent of listing. In 1996, Wahaha formed a joint venture with French Danone, which evolved into a protracted legal battle. At that time, Danone first gained control of the joint venture and also wanted to obtain the brand usage rights, which was finally stopped by the authorities. But since then, Zong Qinghou has been extremely cautious about introducing investment.
Whether Zong Fuli is capable of taking over is also a concern.
Wahaha has a strong "family culture": even if performance is poor, employee salaries still rise, because Zong Qinghou thinks "it's management's fault." When old subordinates from other places are transferred back to headquarters, special advisory positions are created, but Zong Fuli bluntly said: it's better to let them take a sum of money and retire. Some employees told China Entrepreneur that Zong Fuli is hard to get along with, and she said "I am strict with myself."
Zong Fuli also does not respect the resources that made Wahaha successful. When dealing with import and export affairs officials, her blunt tone made them uncomfortable. Wahaha's backbone reminded her to be tolerant and tactful. But Zong Fuli thinks she is "outspoken": she said, I am indeed doing the work of a manager, but my true identity is the young boss.
Currently, Wahaha is far from independent of Zong Qinghou. "Employees wait for Zong Qinghou's instructions every day; if they don't get them for a day, they ask, 'What should I do today?'" Zong Fuli once said. In 2011, Zong Qinghou and Zong Fuli jointly attended a CCTV Finance program. The host asked Zong Fuli: What does Wahaha minus Zong Qinghou equal? "Equals zero," Zong Fuli said without hesitation.
Zong Qinghou, now 73, has planned to leave Wahaha. But Zong Fuli is far from mature. In 2017, her push for Wahaha to acquire "China Candy" failed, and it was considered that the market maker took advantage of her psychology of "wanting to prove she is independent." Earlier, she even said the bold words of "moving Wahaha out": Li Ka-shing can move out, why can't I?
In the eyes of the outside world, she has only learned the surface of Western governance and capital operations, and lacks sensitivity to the special domestic environment. Although Zong Qinghou has expressed optimism several times, whether she can smoothly take over and save Wahaha's declining sales still needs time to test.
**On October 23-24, during the Autumn Sugar and Wine Fair, the "2018 FMCG City Distribution Logistics Conference" hosted by New Distribution will be held.** At that time, we will invite industry bigwigs, FMCG warehousing and distribution experts, and distributors who have transformed into unified warehouse and distribution platforms to discuss and answer questions about the future development trends of FMCG city distribution logistics and practical cases of distributor transformation to unified warehouse and distribution, hoping to bring you different inspiration and thinking!
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