---
title: "Zong Qinghou's First Personal Account: The Real Story Behind Wahaha's \"Joint Distribution System\""
description: "Wahaha's joint distribution system has been widely praised by industry insiders and cited by Harvard Business School as a case of Chinese channel innovation. It is said to have played a key role in Zong Qinghou's victory over Danone. In his first official biography, Zong reveals the system's origins, the challenges faced during its implementation, and how he overcame opposition to enforce it."
author: "New Distribution"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2016-07-06"
language: "en"
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markdown: "https://xinjignxiao.com/en/articles/zong-qinghou-s-first-personal-account-the-real-story-behind-wahaha-s-joi-68ecb083.md"
original_source: "https://mp.weixin.qq.com/s/Sx5fk19abS6Hfz-8fk_RJg"
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---

# Zong Qinghou's First Personal Account: The Real Story Behind Wahaha's "Joint Distribution System"

> Wahaha's joint distribution system has been widely praised by industry insiders and cited by Harvard Business School as a case of Chinese channel innovation. It is said to have played a key role in Zong Qinghou's victory over Danone. In his first official biography, Zong reveals the system's origins, the challenges faced during its implementation, and how he overcame opposition to enforce it.

Wahaha's joint distribution system has been widely praised by industry insiders and cited by Harvard Business School as a case of Chinese channel innovation. It is said to have played a key role in Zong Qinghou's victory over France's Danone. Some experts and scholars even believe that the secret to Wahaha's sustained success lies in its joint distribution system, which is its core competitiveness. So, under what circumstances was the system born? What problems arose during its formulation? How did the iron-fisted Zong Qinghou overcome them and implement it fully? Recently, Zong Qinghou personally recounted these details in his first official biography, revealing many little-known entrepreneurial stories of Wahaha that are worth careful study for all FMCG professionals.

Let's go back to the end of 1993.

**As production scale expanded and growth accelerated, Wahaha urgently needed substantial funds to expand its territory.** But every time he looked at the financial accounts, Zong Qinghou had a headache: either distributors were delaying payments, or someone was defaulting. Chasing payments and collecting debts became the most troublesome issue.

**"Payment Before Delivery" Was a Must**

He recalled the early days of his entrepreneurship, when he had to travel to other places on New Year's Eve to collect debts, and all the humiliations he endured. He felt that he had to completely change this subservient, dependent situation. "With such good products, anyone who sells them will make money. If you make money but don't consider the company's development, I'd rather not have such distributors!"

When dealing with distributors, Wahaha had to be tough, otherwise they would be dragged down by distributors and a broken cash flow. Zong Qinghou told Ding Peiling, then general manager of the sales company, "We can't go on like this. We need to create something that ensures 'payment before delivery'." But even his sales company manager thought such a thing was inconceivable and unworkable, and voted against it.

Ding Peiling said, "If the money doesn't come back, you won't ship? If you don't ship, you lose the business, you lose the market, and the workers will just sit there waiting..."

Zong Qinghou ordered her, "We must do this. If we don't get payment before delivery, we will die. There will be problems at first, but if we persist, things will gradually improve."

"Anything I've decided on, no matter how many people oppose it, I will stick to it and hold firm. Because I have already seen the scenery ahead and understood the key to the future. This foresight is not accidental; it is based on countless meticulous observations, investigations, and reflections on the market," Zong Qinghou recalled with pride.

His principle: Know it by heart, and then miracles will illuminate the sky.

## **A New Profit Distribution Plan Sparks Strong Opposition**

In early 1994, at Wahaha's national distributor conference, amid the smoky haze filling the meeting room, **Zong Qinghou proposed a channel reform profit distribution plan to the distributors:**

Under Wahaha's new channel rules, special first-tier distributors had to pay in advance as a "deposit," on which Wahaha would pay interest. During operations, distributors had to settle payments before monthly purchases, and only then would Wahaha ship goods. After sales, Wahaha would return the deposit and give distributors rebates.

At the end of each year, first-tier distributors had to deposit about 10% of their annual sales amount as a deposit into Wahaha's account in one lump sum. Wahaha would pay interest higher than or equal to bank deposit rates. The specific calculation was annual task amount divided by 10, then multiplied by 1.17. If a distributor's annual sales task was 100 million yuan, the deposit would be 11.7 million yuan.

Wahaha established a strict price difference system. Distributors corresponding to provincial branches were uniformly divided into first-level wholesale, second-level wholesale, and third-level wholesale. Each level had to strictly adhere to corresponding sales prices to ensure "everyone makes money."

Sales areas were strictly "territorial," and selling Wahaha products outside the designated area was strictly prohibited. Violators faced severe penalties such as cancellation of distribution rights and confiscation of deposits. All distributors were bound by sales targets, and those who failed to meet them were dynamically eliminated.

On October 8, 1995, at Wahaha Group's eighth anniversary celebration and first staff sports meeting, Zong Qinghou participated in a tug-of-war competition.

**Three Reasons Why Distributors Had to Accept the Joint Distribution System**

Zong Qinghou explained that in this system, Wahaha's first-tier wholesalers played the role of "logistics providers," responsible for warehousing, capital, and supplying to terminals, while also managing second-tier wholesalers in each region. He assured them that Wahaha would develop only one first-tier wholesaler per region. Wahaha's sales teams stationed in various regions would also help distributors manage shelf stocking, shelf arrangement, and advertising promotions, and would supervise against "channel crossing." If needed, Wahaha personnel could even handle all marketing work except capital, warehousing, and transportation.

Zong Qinghou believed distributors would like this plan because Wahaha was a large company with strong brand influence and advertising momentum; it had a wide range of products, offering comprehensive business space and lower operating costs; and the assistance of dispatched personnel would allow distributors to focus on market sales without worrying about discounted sales policies or the impact of "channel crossing."

However, upon hearing his "distribution plan," all the smoking distributors were stunned. They first widened their eyes, speechless, and the meeting room fell silent as a pool of stagnant water. Then they suddenly erupted, shouting and protesting, displaying every imaginable posture and state.

They felt the plan was unfair, like putting a yoke around their necks, leaving them at his mercy.

One person stood up and demanded loudly, "Why?"

Many followed, shouting, "Why?"

Zong Qinghou was never afraid of loud voices. When he merged with Hangzhou Canned Food Factory, he had already seen what "loud voices" meant. Loud voices are not a sign of confidence but proof of cowardice.

**"For three reasons. First, Wahaha's children's oral liquid and fruit milk sell well, so everyone can make money. Second, the deposit earns interest, which is better than depositing in a bank. Third, for a long-term business, credit is essential. We are all in the same boat. We can't just look after ourselves and ignore the company. Both sides must show sincerity in cooperation."**

Before announcing the plan, Zong Qinghou had consulted many people and held multiple internal discussions, but faced open opposition. They worried that distributors would be outraged or even rebel, that Wahaha's channels and sales would suffer, performance would plummet, competitors would seize the opportunity, and they would eventually be forced to retreat.

Many salespeople came to him complaining, "Boss Zong, this won't work! It's definitely not going to work!" Many middle-level cadres also directly expressed opposition. One person said firmly, "I strongly oppose this plan. If the payment doesn't come back, you won't ship? If you don't ship, you lose the market, and your workers will sit idle. In the end, you'll have to beg them: 'Please, you must help me continue!'"

Zong Qinghou's stubbornness flared up: "We must do this! If we do, we might struggle for a few months; if we don't, we're doomed! Our scale is growing, and we can't leave so much capital in the channel. If we delay, we'll be dragged down sooner or later. The industry's practices will change eventually; they must change. If they don't change, we'll force them to. If we don't change now, we won't be able to later, and we might not even have the chance. We'll collapse."

When he consulted distributors, he also faced widespread opposition. They said, "Boss Zong, this won't work! Nobody does it this way! If you do this, we won't sell your products. It's the end of the year, and we're about to have the ordering meeting. I might as well sell someone else's products."

Zong Qinghou said, "Even if you don't sell my products, I'll still do this! I have no choice. Don't rush; let me explain the reasoning."

He told them that the deposit would earn interest, so they wouldn't lose out. "You transfer the money, and for your daily capital needs, you can get a bank loan. If the bank charges you 1% interest, I'll give you 1.5% or 2% on your deposit. So you still make money, right?"

But the distributors didn't care about that; they wouldn't listen to reason.

**"Making Money Is the Absolute Principle!"**

Zong Qinghou had no choice but to say, "You have to let me continue production. On the surface, your money comes to me first, so I don't have to worry about you not paying me later; the risk shifts to you. But in reality, I use that money to improve production and do market promotions, making the products sell well. Then you can make more money, right? If I don't do this, I'll die sooner or later, and you'll have no money to make."

Zong Qinghou explained the logic clearly, but none of them were willing to comply. He couldn't care less about their support or opposition; he was determined to implement this model.

He firmly believed that Wahaha must not be dragged down by distributors. Attracting distributors mainly depended on two things: making money and having products that sell well. As long as Wahaha made good products and promoted them well, distributors would eventually accept this model. Wahaha handled production, distributors handled sales; both aimed to make money, and making money was the absolute principle. When there's money to be made, anything can be discussed; when there's no money, no one will listen to reason.

---

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