Exclusive interview with Zong Qinghou. As a representative of the first generation of private enterprises, Wahaha has created many miracles—founded in 1987, its output value exceeded 100 million yuan in 1990, surpassed 10 billion yuan in 2003, and reached 78.28 billion yuan in revenue in 2013. Although performance declined over the following four years, it began to grow against the trend in 2018. Speaking about Wahaha's future, Zong Qinghou said in an interview with The Beijing News: "I have always had confidence in Wahaha's future, but at the same time, I have a sense of crisis. Wahaha needs a second startup. Only through continuous innovation can a company achieve sustained and healthy development." In 1987, female employees were loading goods at the Shangcheng District School-run Enterprise Distribution Department (the predecessor of Wahaha) in Hangzhou. Photo provided by the interviewed company. Wahaha needs a second startup The Beijing News: How do you view Wahaha's development over the years? Zong Qinghou: Wahaha has been established for 32 years. I believe there are several lessons from these 32 years of development: First, adhere to the main business and develop steadily with small steps and fast pace. Because we have neither loans nor debt, we avoided a capital chain rupture when downward pressure on the economy increased. Second, persist in continuous innovation in products, management, and marketing channels, which has won us development. Third, rely on employees and let them share the fruits of the company's development. A company cannot develop solely on the founder or chairman alone; it requires the joint efforts of all employees. Fourth, fulfill social responsibilities, as social benefits can also translate into economic benefits. Wahaha's 32 years of development have been relatively stable, but it has also experienced many ups and downs, especially vicious competition. Starting in 2015, Wahaha suffered from online rumors that drinking Nutri-Express and Wow-Wow would cause leukemia and rickets. These rumors caused heavy losses for Wahaha, and it is now slowly recovering. Through this incident, we also realized that adhering to brand development is correct, and we must ensure product quality. At the same time, I hope that enterprises can truly compete fairly. Unfair competition will harm the national economy, and I believe the government will rectify these issues in the future. The Beijing News: Wahaha is a memory for many born in the 1980s, but the public impression is still dominated by several old products. Is Wahaha lagging behind? Zong Qinghou: Young people's consumption concepts change rapidly now, and they don't care much about brands when choosing beverages. We are also promoting a shift in employees' thinking to adapt to industry changes, the new marketing environment, and changes in consumer demand. For example, in the past, consumers wanted sweeter drinks because people were undernourished at that time. Now consumers prefer healthier, lighter beverages, and we are adapting to these changes. Another example is that packaging design has become more important. Our packaging design is somewhat outdated, and the designers' thinking has become somewhat rigid. We require designers to change their mindset. The Beijing News: What is the most urgent change Wahaha needs to make now? Zong Qinghou: Management needs to change, products need to change, and marketing methods need to change. I think everything needs to change, and innovation is needed in all aspects for the company to develop healthily and sustainably. For example, in management, previously I made all decisions alone, holding positions such as Party Secretary, Chairman, and Director. Now Wahaha has implemented a post responsibility system with delegated authority, hoping to shift from rule by man to rule by system, so that every employee knows what they should and should not do. This way, the company can develop healthily and sustainably and become a century-old brand. In terms of products, I believe the big health industry has great prospects. Wahaha has established a Traditional Chinese Medicine Food Therapy Research Institute and a Bioengineering Research Institute. In terms of marketing channels, the physical marketing channels Wahaha created will always exist, but we are also adapting to market changes and exploring new marketing methods in social retail. I have always had confidence in Wahaha's future, but at the same time, I have a sense of crisis. Wahaha needs a second startup. Only through continuous innovation can the company achieve sustained and healthy development. For a country, lagging behind means being beaten; for a company, lagging behind means being forced to change by other companies. The Beijing News: Last year, Wahaha began to lay out industries in the technology sector. Is this the future direction of Wahaha's development? Zong Qinghou: There are rumors that Wahaha is going to make new energy vehicles. This news is not true; we have no such plans. Some actions are to solve Wahaha's own problems. Our equipment is imported from abroad. If we want to change the bottle shape, we have to buy molds from abroad, which are very expensive. So Wahaha set up two machinery factories to produce the molds, spare parts for imported equipment, and beverage machinery we need, and also developed robotic equipment. Later, some companies contacted us hoping to cooperate in producing polishing robots, with them providing technology and us providing funds. That's how Wahaha Intelligent Robot Company was established. In the future, Wahaha will continue to adhere to its main business, but high-tech industries are also an important direction for Wahaha's future development. For example, we do intend to develop in the direction of equipment manufacturing. We established the Electromechanical Institute, which now has over 100 master's and doctoral researchers developing products, but these businesses are still in preparation. How fast Wahaha can develop in the high-tech industry and when it can do well requires more effort, but I believe it will gradually develop. Early private enterprises introduced foreign capital to survive, unable to achieve equality with foreign capital The "Danone-Wahaha dispute" is an unavoidable node and one of the largest business wars experienced by Chinese private enterprises in the 40 years of reform and opening up. The Beijing News: The "Danone-Wahaha dispute" a decade ago was a landmark event for Chinese private enterprises introducing foreign capital. Looking back now, what are your views? Zong Qinghou: At that time, the background of the cooperation between Wahaha and Danone was, on the one hand, under the tide of opening up, the government called on enterprises to introduce foreign capital. On the other hand, at that time, Wahaha was the world's fifth-largest beverage company, but in the mainland market, it faced fierce competition with Robust. It needed to introduce foreign capital for expansion, as well as advanced management experience and production processes to run the company better. Thus, the joint venture between Wahaha and Danone came about. At the beginning of the cooperation, Danone agreed to several conditions we proposed: the Wahaha brand would remain unchanged after the joint venture; the management of the joint venture would be fully entrusted to Wahaha; no employees would be laid off before the joint venture; and the treatment of Wahaha's retired employees would remain unchanged. But later we found that many of my investment proposals were rejected or delayed. Danone also acquired companies that competed with Wahaha, such as Robust and Huiyuan, to limit Wahaha's development. Danone also wanted to acquire equity in Wahaha's non-joint-venture companies. Ultimately, after multiple lawsuits, Wahaha bought back Danone's 51% stake in the joint venture for 3 billion yuan, ensuring that the Wahaha brand was not lost. Looking back at this event now, one of my deep feelings is that in the early days of reform and opening up, most enterprises introduced foreign capital to survive, begging for cooperation, and could not achieve equality with foreign capital. But after decades of development, Chinese enterprises have grown stronger, and now they can achieve equality, mutual benefit, and complementary advantages when cooperating with foreign capital. Now China has become the world's second-largest economy and a manufacturing power, but our product advantages come from cheap labor, not core, advanced technology. Chinese enterprises still face suppression and unequal treatment in foreign competition. Therefore, China's economy and enterprises are now at the stage of "prying the door and crossing the threshold." We need to further accelerate economic development and overcome and make up for our shortcomings in high technology. Only by crossing this threshold and becoming truly strong can we achieve equal competition. The Beijing News: Some outside commentators say that the "Danone-Wahaha dispute" left a shadow on Wahaha, making it wary of introducing foreign capital or listing for financing. Zong Qinghou: That's not the case. The Chinese nation is inherently inclusive and is very polite and friendly to outsiders. During the cooperation with Danone, there was also a pleasant period. Although there were some conflicts later, we won the lawsuit in the end and did not ask Danone for any compensation for losses. We were relatively tolerant. Wahaha does not rule out future cooperation with foreign capital, but cooperation must be based on the premise of complementary advantages, balanced and mutually beneficial cooperation, and promoting the progress of the enterprise and the country. Private enterprises need not worry about succession; everything will work out naturally The Beijing News: As a member of the first generation of private entrepreneurs, how do you evaluate this group? Zong Qinghou: The first generation of private enterprises grew and developed under the encouragement of the Party's reform and opening-up policy. Without reform and opening up, the first generation of private entrepreneurs would not have had the opportunity to display their talents or become the first generation to develop and get rich. The original intention of the first generation of private entrepreneurs was to change their own lives, and their initial ideological level may not have been that high. But as enterprises gradually grew stronger, their ideological level also evolved. Back then, Comrade Deng Xiaoping proposed letting some people get rich first, with the rich helping the poor, to promote common prosperity. Now, some first-generation entrepreneurs are accumulating wealth for the country, solving employment problems, and driving some people to become prosperous. This approach is correct. Only by achieving common prosperity can the property of private entrepreneurs be more valuable and respected. For an entrepreneur, besides food, housing, and clothing, what else can they consume? At most, a bigger house and a better car. So, the wealth belonging to an entrepreneur may only be tens of millions; beyond that, wealth is just a number. Therefore, entrepreneurs should also help more people become prosperous to win respect. The Beijing News: Looking at the first generation of private enterprises now, many once-familiar brands and companies have disappeared. How can enterprises maintain long-term vitality? Zong Qinghou: The market itself is survival of the fittest. Enterprises without competitive advantages will continue to fall, and those with advantages will rise. Indeed, many enterprises founded in the early days of reform and opening up failed to adapt to market competition and progress, did not innovate continuously, and thus fell behind and collapsed. Including some current internet companies, if they don't focus on improving technology but rely on burning money for hype, they are doomed to collapse. Some companies that are developing well now, if they don't focus on improving technology and core competitiveness, I think they are also doomed to collapse. The Beijing News: Another common issue facing the first generation of private entrepreneurs is corporate succession. How do you view this issue? Zong Qinghou: Many private enterprises face this issue. I think Chinese private enterprises will eventually be like those in developed countries: if the second generation is willing to take over, they will manage the company; if not, professional managers will manage it. Whether children take over or not is not important because property is actually inherited by the children. Therefore, there is no need to worry about the issue of second-generation succession; everything will work out naturally. Humanity is constantly developing and progressing, and there will always be solutions. Professional managers managing enterprises will be a future trend, but at present, the professional manager class and system in China have not yet formed, and the supervision and assessment mechanism for professional managers' business level and professional ethics has not been established either. In the United States, if a professional manager mismanages a company to the point of bankruptcy, the manager's credit is damaged, making it difficult to find another job. In China, to establish a professional manager system, we also need to address the integrity issue of professional managers. Perhaps we need to establish a blacklist system—if a professional manager has dishonest behavior, they would be added to the blacklist. Through such constraints, we can improve the integrity level of professional managers. The Beijing News: In the longer term, what kind of enterprise do you hope Wahaha becomes? Zong Qinghou: My hope has always been for Wahaha to become a century-old brand, a household name trusted by the people. This year, Wahaha is 32 years old, still far from a century-old brand, with more than 60 years to go. For a person, thirty is the age of standing firm, but for a company, a company over 30 years old will have many problems, especially some big-company diseases. Now Wahaha is constantly overcoming these problems and solving these issues. Only when people have money to spend and dare to spend can China's economy take off again The Beijing News: Regarding China's economy, this year many people talk about its resilience and potential. In your view, how can this resilience and potential be stimulated? Zong Qinghou: China has 900 million laborers, of whom 200 million have received higher education. This is an advantage no other country can match. Therefore, with a large population and market, China still has a significant demographic dividend. The key to China's economic development now lies in stimulating domestic demand. I think the government should focus on solving the people's education, healthcare, and housing problems. Only then can domestic demand be better stimulated and China's economic potential be unleashed. First, can the healthcare and education industries return to a public welfare system? For minor illnesses, people can pay out of pocket to see a doctor, but for major illnesses, they may fall into poverty due to illness. For major illnesses, medical insurance can reimburse 60%, but you have to pay first and then get reimbursed, which also makes some people unable to afford medical treatment. I wonder if some expensive drugs can be developed and monopolized by the state. How to develop and monopolize? Many foreign patented drugs have passed their patent period, and many Indian manufacturers produce generics, so many drugs for major illnesses in India are very cheap. Can we organize experts to develop these drugs and then assign them to pharmaceutical companies for production? In this way, we can control and reduce drug prices, allowing most people to afford medical treatment and avoid falling into poverty due to illness. Second, solve the problem of expensive education. Now nine-year compulsory education is implemented, but many excellent public school teachers have flowed to private schools, which charge high fees. How can more people enjoy good educational resources? This problem also needs to be solved. Third, solve the housing problem. The current tax reduction policy for enterprises can enable them to increase employee wages and raise their income. But now young people take out loans to buy houses and have to repay them for a lifetime. Will they dare to consume? Now the middle class already has everything they should have, like houses and cars, and there is no more room to stimulate consumption. But we still have 1 billion low- and middle-income people whose consumption has not been stimulated. If their consumption is stimulated, it would be a huge deal. Therefore, I think the government should reduce investment in infrastructure and focus fiscal spending on people's livelihood. Some people ask, what about GDP? In fact, the decline in GDP growth is normal. The US GDP growth rate reaching 3% is already remarkable, and Europe's GDP growth of one to two percentage points is good. Our GDP growth rate remains at 6%, and the economy is growing steadily. Therefore, we need to let people have money to spend and dare to spend, and enable them to live and work in peace. Then consumption will be stimulated. Once consumption is stimulated, China's economy will take off again. The Beijing News: The housing problem has attracted particular attention. What are your suggestions? Zong Qinghou: First, solve the problem of fiscal revenue distribution between local and central governments. Local governments have less fiscal revenue and can only rely on the land finance model of selling land to maintain fiscal revenue. To solve the real estate problem, this issue probably needs to be changed quickly and cannot be delayed any longer. Second, focus on and solve the housing problem for those with rigid demand. On the one hand, for those with rigid demand, can banks lower loan interest rates or waive part of the interest? On the other hand, in the construction of low-rent housing, can some enterprises be allowed to use idle land to participate? The Beijing News: What is your prediction for China's economy in the future? Zong Qinghou: Chinese people are very smart and diligent. If we truly mobilize the enthusiasm of the people and stimulate domestic demand, I believe China still has a process of rapid development. Therefore, I am optimistic about the future of China's economy. Source: The Beijing News Tips will be paid 400-2000 yuan once adopted. 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