Understanding Zong Qinghou means understanding the Chinese market.

In 1987, Wahaha started from scratch with 3 people and a loan of 140,000 yuan. Today, it has over 80 production bases and 180 subsidiaries across 29 provinces in China, employing 30,000 staff with total assets of nearly 40 billion yuan. For 29 years, countless competitors have been helpless against Wahaha.

"Actually, many times I figured things out on my own. The methods I devised and things I did later found theoretical support," Zong admits that business requires a certain talent, but he emphasizes that he is also a person of integrity and looks honest and trustworthy. "If you're not trustworthy, it's hard to grow your business."

As the industry knows, since Wahaha's founding, Zong has been hands-on, even signing off on trivial expenses like buying a broom. Over time, the outside world has both admired and questioned this distinctive "Zong-style" management. Zong insists that if processes are too detailed, internal strife becomes severe, and Wahaha's extremely flat management represents efficiency.

However, in the past two years, Wahaha has established operations centers, management centers, R&D centers, and living service centers. Among them, the operations center acts like a deputy general manager, managing several departments. "We are gradually cultivating managers, because Chinese enterprises will eventually be managed by professional managers, but this group's business acumen, management skills, and professionalism still need further development," Zong says. The environment is no longer the same as when entrepreneurial founders started from scratch.

Cultivating Successors

In many people's eyes, Zong Qinghou is a management master with strong Chinese local characteristics. His management methods differ from what is taught in MBA textbooks. For a long period, Zong meticulously reviewed and signed off on everything, and the company did not have many vice presidents. Facts have proven that he represents efficiency. Today, Wahaha operates healthily and efficiently, achieving impressive results across nine product categories.

"Wahaha is truly astonishing. It's a company that has reached over 70 billion in scale, and besides Zong Qinghou, it's hard to think of other leaders. Moreover, over such a long period, management has been extremely flat, with various 'departments' all reporting directly to him. Even earlier, all regions and even over 70 production bases reported directly to him," comments Qin Shuo, a business civilization research scholar and founder of Qin Shuo Moments. "If this isn't unique, I can't think of anyone else who could achieve such a management state."

Zong Qinghou explains that when he first started the school-run enterprise, the higher-ups assigned him a deputy factory director, but he firmly refused, saying, "If you send a deputy factory director, let him be the factory director, and I'll quit." In Zong's view, overly detailed processes lead to infighting, making it hard for the enterprise to succeed. "Later, we set up many departments, and these department heads are equivalent to vice presidents in other companies. But they are at a lower level; they can discuss company matters, but they must obey. Otherwise, endless discussions without decisions will definitely cause problems."

Qin Shuo believes that generally, "Zong-style management" is inconceivable, but at least so far, it has worked well. This may depend on several factors: first, Zong Qinghou himself is an all-round talent with extraordinary energy; second, the nine product categories are all food and beverages, which share similarities in production processes and sales promotion; third, it's a relatively conventional traditional industry, unlike electronics which require high innovation, so an experienced entrepreneur can manage it well.

However, Zong Qinghou has also realized the importance of cultivating managers and successors. In the past two years, Wahaha has established four major centers, with the operations center gradually cultivating successors. "Market competition is now more intense, unlike the era of shortage economy when entrepreneurial founders could start from scratch without much capital," Zong believes. In the future, enterprises will indeed need professional managers, but this group in China still needs cultivation.

Additionally, Zong Qinghou is considering the succession issue. The second generation of private entrepreneurs may not all take over the family business, as most are returnees from abroad with different ideas and perspectives from the older generation. "After studying abroad, their ideas and culture are different, so they may not be immediately competent upon returning."

Zong adds that there is no need to worry too much. Enterprises themselves are subject to survival of the fittest; some fail, some rise, and society is always evolving.

Labor Costs and Innovation Value

Speaking with a strong Zhejiang accent, former richest man Zong Qinghou is very knowledgeable about food and beverages. After all, the Wahaha he built has consistently held the top position in the domestic beverage industry. "Whether an enterprise does well depends on the operators, but it requires the efforts of all employees to succeed," Zong says. Over the years, he has frequently raised wages and helped employees with housing and children's education. "Only by addressing their concerns can employees work with peace of mind."

Previously, when the Zhejiang Provincial Economic and Information Commission visited Wahaha for a survey, Zong said that even if the company experienced negative growth this year, he would continue to raise wages. "If we don't increase employee income, how can domestic demand be stimulated? If the state doesn't take measures, shouldn't enterprises take the initiative rather than just thinking about increasing product added value?" Zong believes that labor costs should rise. When labor costs increase, enterprises must innovate, increase product added value, and upgrade products. "If you only raise employee income without upgrading products, you will definitely lose money, and if you lose money, you can't continue."

Next, Wahaha will focus on health beverages and health foods. "Because as people's incomes rise, they also hope for health and longevity," Zong explains. The company has established a bioengineering research institute in the past two years, researching bioengineering and strains. At the same time, Wahaha is also researching traditional Chinese medicine food therapy, hoping to address modern lifestyle diseases and develop from a health perspective.

In the past two years, Wahaha has encouraged innovation from all employees. Zong is still not entirely satisfied with some of the company's equipment. He says, "After all, Wahaha has 30,000 employees, of whom 9,000 have bachelor's degrees or above. That's a lot of talent. How to leverage their enthusiasm and mobilize their initiative? I believe things will get better and better."

Until now, the capital market has always felt that Wahaha's absence is a great regret. Zong, however, disagrees. He says, "If it's for developing the main business, we probably won't go for an IPO. Honestly, I'm not short of money now, and I haven't borrowed a cent from banks."

But if Wahaha develops other industries, it might go public. "Because to achieve rapid development, you need capital. After listing, you must be responsible to shareholders and create benefits for them," Zong says.

(This project is supported by China Business Network, Fudan Management Award Foundation, and Fudan University's Oriental Management Research Institute; the main interviewers are Qin Shuo, founder of the China Business Civilization Research Center and independent financial observer, and Professor Su Yong, dean of Fudan University's Oriental Management Research Institute; the program will air on CBN on Saturday, February 27, at 19:50.)

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