---
title: "Zong Qinghou's Strategic Shift"
description: "In 2016, the clash between the real and virtual economies peaked, with Zong Qinghou, the founder of Wahaha, publicly criticizing Jack Ma's 'Five New' concept. However, by 2017, the two had reconciled, and Wahaha began cooperating with Alibaba. This article explores the challenges Wahaha faced, Zong's transformation, and the role of his daughter, Zong Fuli, in driving change."
author: "华商韬略"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2019-06-29"
language: "en"
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---

# Zong Qinghou's Strategic Shift

> In 2016, the clash between the real and virtual economies peaked, with Zong Qinghou, the founder of Wahaha, publicly criticizing Jack Ma's 'Five New' concept. However, by 2017, the two had reconciled, and Wahaha began cooperating with Alibaba. This article explores the challenges Wahaha faced, Zong's transformation, and the role of his daughter, Zong Fuli, in driving change.

Click to read the original article for details.
"What is Wahaha minus Zong Qinghou?"
In 2016, the collision between the real economy and the virtual economy reached its peak.
Zong Qinghou, seen by the public as a representative of the real economy, bluntly stated that except for new technology, Jack Ma's "Five New" (new retail, new manufacturing, new finance, new technology, and new energy) were all nonsense.
Subsequently, Ma's apparent retort at the Zhejiang Entrepreneurs Conference—"It's not technology that eliminates you, but backward thinking, unwillingness to learn, and self-righteousness"—stirred up a huge controversy.
The two were once thought to have a grudge against each other.
However, in September 2017, Wahaha partnered with Alibaba to jointly launch a shared service credit booth. Zong also responded that he had no conflict with Ma, and their cooperation was complementary.
Behind this shift from collision to reconciliation lies Wahaha's midlife crisis and the trials, struggles, and transformation of Zong Qinghou, the "cloth-shoe billionaire."
"Wahaha is my entire life, all my dreams, and the meaning, value, label, and symbol of everything. It is proof that I existed in this world."
Without Wahaha, Zong Qinghou might have been just an ordinary person struggling with poverty and unfulfilled ambitions. For this reason, his inspirational story of building the Wahaha empire from scratch is even more legendary and moving.
In 1978, at the age of 33, Zong returned to Hangzhou with the wave of educated youth returning to the cities, taking over his retired mother's position at the Workers' and Peasants' School-run Carton Factory. Over the next decade, he moved between several school-run enterprises, carrying factory products onto one green train after another, almost measuring the entire Chinese market on foot.
This habit of going deep into the market frontline accompanied him throughout his life.
At the beginning of reform and opening up, the development of the commodity economy impacted people's imagination at an unprecedented speed, but Zong's efforts did not bring much improvement to his life. A family of six still squeezed into a dozen square meters, living in relative poverty. Cui Jian's songs "Not That I Don't Understand" and "I Have Nothing" expressed the aspirations and frustrations of their generation.
In 1987, at the age of 42, Zong decided to start his own business. He borrowed 140,000 yuan and, together with two teachers, contracted the loss-making Hangzhou Shangcheng District School-run Enterprise Sales Department.
By this time, Zong had long passed the optimal age for entrepreneurship. Friends around him advised him not to act impulsively, but he was resolute: **"Can you understand the feelings of a 42-year-old facing his last opportunity in life?"**
Zong desperately seized this lifeline. Every day, wearing a straw hat and pedaling a flatbed cart, he went through the streets hawking popsicles and stationery, undeterred by wind and rain. Entrepreneurship was not easy; he even quarreled fiercely with a neighboring brother unit over the "flint" used for lighting coal stoves...
Gradually, Zong realized that merely acting as a distributor was not a way out.
During deliveries, he noticed that many children had poor appetites and malnutrition, and he saw an opportunity. In 1988, with the help of Zhu Shoumin, a nutrition professor at Zhejiang Medical University, the first nutritional liquid designed specifically for children was launched. Zong publicly solicited brand names in newspapers. At that time, the children's song "Wahaha" was popular across the country. Among the letters, someone suggested "Wahaha." Zong made the final decision. Wahaha has since become a childhood imprint for the post-80s and post-90s generations.
When the new product was first launched, Zong had only 100,000 yuan in hand, but the local TV station in Hangzhou quoted 210,000 yuan for advertising. Zong did not hesitate and insisted on going ahead. The classic slogan "Drink Wahaha, eat with a good appetite" quickly spread to countless households.
After the advertisement aired, Wahaha sold 150,000 bottles in the first month. Within a few months, Wahaha's sales reached 4.88 million yuan. Through the strategy of advertising bombardment—recruiting local distributors—and comprehensive distribution, Wahaha created countless sales miracles.
Subsequently, he acquired the state-owned old factory Hangzhou Canned Food Factory, causing a nationwide sensation with "small fish eating big fish," and propelled Wahaha's rapid expansion and growth. By 1995, Wahaha's annual output value exceeded 1 billion yuan, with total profits and taxes reaching 180 million yuan. By the end of 2002, Wahaha had established 30 production bases in 22 provinces and cities outside Zhejiang, producing 3.23 million tons of beverages annually, accounting for 16% of the national beverage output.
Thanks to his market acumen cultivated through years of market visits, Zong's product lines always hit the right notes of the times.
By 2013, Wahaha set a revenue record of 78.3 billion yuan, and Zong topped the Forbes China Rich List three times.
**During nearly 30 years, Zong was both chairman and general manager, without a secretary or deputy general manager, single-handedly controlling Wahaha's destiny, serving as its sole brain and absolute authority.**
A media outlet once asked Zong's daughter, Zong Fuli, "What is Wahaha minus Zong Qinghou?"
Zong Fuli answered without hesitation: "Zero."
After 2014, the prosperity of China's FMCG industry weakened. As a veteran FMCG leader, Wahaha also fell into struggle.
The once-proven success formulas seemed to fail. This caught Zong off guard.
In 1993, Wahaha's business rapidly expanded nationwide, with products in short supply, but at the year-end inventory, Zong was troubled by distributor arrears. To solve problems like bad debts and triangular debt, Zong proposed the joint sales system: binding distributors with interests, but requiring payment before delivery; at the end of each year, first-tier distributors had to pay 10% of the forecasted sales for the next year as a deposit.
The joint sales system was met with strong opposition from distributors and even sales staff. Many felt their interests were harmed and went to Zong's office crying and making a scene, but the decisive Zong still implemented the policy.
**The joint sales system laid the foundation for Wahaha's massive marketing network.** Zong signed joint sales agreements with nearly 8,000 distributors, quickly forming a "rural surrounding the city" marketing pattern. Wahaha's new products could be distributed from small towns in the northeast to small fishing villages in Hainan within a week.
As a marketing-driven enterprise, the joint sales system contributed to Wahaha's years of brilliance and was even selected by Harvard Business School as a case study of channel innovation in China.
With the powerful marketing network, Zong developed a follow-up strategy. Once a successful beverage appeared on the market, Wahaha would replicate a similar product at low cost, then leverage the strong marketing network to quickly distribute the new product nationwide.
The success of Future Cola is a classic case of the follow-up strategy.
In the late 1970s, Coca-Cola and Pepsi entered the Chinese market with great momentum, quickly occupying half of the beverage market. But Zong noticed that after more than 20 years in China, Coca-Cola and Pepsi had relatively low coverage in rural markets.
Zong saw the opportunity and decided to compete with the "king of beverages."
In 1998, Wahaha launched Future Cola, officially challenging the "two colas." Leveraging price advantages and Wahaha's massive marketing network, it quickly penetrated the rural market, positioning itself as "Chinese people's own cola." The nationalistic appeal of Future Cola was well received by the market.
By 2002, Wahaha's "Future Series" carbonated beverage production and sales reached 620,000 tons, accounting for about 12% of the national carbonated beverage market, once approaching Pepsi's sales in China.
"The past cannot be changed; the future is yet to come."
Past successes are hard to replicate, and the surge of the internet and virtual economy dealt a heavy blow to Wahaha.
In the internet age, modern channels such as international hypermarkets, chain convenience stores, community stores, and e-commerce are gradually replacing traditional channels, and Wahaha's joint sales system gradually lost its soul.
In the past, Zong, who had measured the market step by step for decades, was the person who best understood channels. The new e-commerce practices ran counter to his experience and philosophy, making him naturally distrustful and even resistant to e-commerce.
He criticized e-commerce for "buying for one yuan and selling at a loss of 8 jiao," opposing e-commerce price wars that disrupted the real economy.
But the wheels of the times rolled on, and collapse and disillusionment were inevitable. Around 2016, retail giants like Walmart, RT-Mart, and Carrefour faced a cold winter. Offline channels changed overnight.
How could channels used for decades be so fragile? Zong seemed to struggle, and in his struggle, he continuously revised his judgments, and his attitude towards the internet quietly changed.
Zong, who joked that he didn't know how to shop online and didn't use WeChat, still believed that the real economy would survive long-term, and consumers still needed to experience real life rather than being immersed in the virtual world. However, when mentioning e-commerce again, he began to soften: **"We do not resist e-commerce, nor do we embrace it."**
Wahaha's lifeline, the "joint sales system," also began to embrace "social retail" and experiment with a "joint venture system." Zong said: "While the big environment is undergoing changes, Wahaha will also keep up with the pace and innovate in its models."
However, it is undeniable that severe path dependence has become a stumbling block for Wahaha.
The follow-up strategy that once created countless sales miracles is no longer as effective. Wahaha continues to launch new products quickly. From dairy drinks, bottled water, carbonated beverages to tea drinks, juice drinks, and canned food, its product categories exceed 150, but since Nutrition Express, there have been few long-term flagship products.
Meanwhile, the domestic beverage industry has gradually matured, with the top five beverage companies, including Wahaha, Master Kong, and Uni-President, occupying about 60% of the national market share, and the industry pattern is relatively stable.
The era when Wahaha could take whatever it wanted is long gone.
How to climb to 100 billion? With bottlenecks in the main business, Zong decided to launch a new diversification strategy and set a goal: "Create another Wahaha." Over the years, Wahaha tried dazzling diversification, making children's clothing, milk powder, shopping malls, baijiu... but all ended up anticlimactic.
**Diversification not only failed to create another Wahaha but also dragged down the main business.** After 2015, Wahaha's sales declined at a rate of 20% per year. In 2017, Wahaha's revenue was only 46.4 billion yuan, a decrease of over 30 billion yuan compared to 2013, moving further away from Zong's 100 billion goal.
Regarding the decline in performance, Zong admitted that Wahaha, at its 30th year, suffered from serious "big company disease," and its innovation capability had regressed in recent years. "Now, we old-timers don't even know how to do advertising."
But Zong was not ready to continue aging; he wanted to be reborn like an eagle.
In the eyes of the outside world, Zong has always been a tough "dictator."
Wahaha has not had a deputy general manager for years, with all decisions made by Zong alone. In the early years, there were rumors that even buying a broom required Zong's signature. Later, he gradually delegated authority, raising the approval limit from 50 yuan to 2,000 yuan. The authenticity of the rumors is unverifiable, but it is a fact that every Wahaha product, from taste and packaging to every advertisement, must be personally reviewed by Zong. He even knows exactly how many ridges are on the cap of Wahaha mineral water.
Under his control, for over 30 years, Wahaha has insisted on not being in debt, issuing no bonds, and having no bank loans, relying entirely on internal funds for endogenous growth.
In 1996, with the good intention of "exchanging market for technology," Zong strategically introduced the world beverage giant Danone. Wahaha held 49% of the shares, while Danone and Hong Kong's Peregrine jointly held 51%. After the Asian financial crisis, Peregrine sold its shares to Danone, giving Danone a 51% controlling stake.
However, Danone's acquisition of Wahaha's competitor Robust and other moves made Zong smell danger.
To prevent problems, Zong and the Chinese management decided to establish a batch of companies without joint ventures with Danone, held by employees. In 2006, when Danone's newly appointed chairman of the joint venture, Fan Yimou, discovered this, he believed these non-joint venture companies had taken away market share and profits that should belong to the joint venture, and demanded to acquire 51% of the non-joint venture companies for 4 billion yuan.
To avoid repeating the fate of Robust, Zong rejected Danone's acquisition request, and the Danone-Wahaha dispute broke out.
This tug-of-war, involving 29 lawsuits, made Zong see Danone's true colors: "Danone's acquisition of Wahaha and other major Chinese enterprises is not to grow these businesses but for capital operations—acquiring Chinese companies' equity at low prices and then selling or listing them internationally to extract huge funds and profits." "What would happen to Wahaha's 20,000 employees then? What would happen to the Wahaha brand?"
Perhaps the prolonged "Danone-Wahaha War" deeply hurt Zong, leading to a strong aversion to capital.
For years, many people advised him to go public, citing various benefits, but he turned a deaf ear, insisting **"Wahaha is not short of money; we will never go public."**
**However, even such a business tough guy has a soft side—his daughter, Zong Fuli.**
Like father, like daughter. Those familiar with Zong Fuli know that she always presents a "iron lady" demeanor internally. Even Zong himself said, "She is tougher than me."
And she has not let her father down.
In 2004, Zong Fuli returned to China and began participating in Wahaha's internal affairs. She did not directly enter the decision-making layer as the "heiress" but started from grassroots production management, gradually building her own business empire.
With 10 million US dollars in startup funds from her father, Zong Fuli boldly integrated resources for Hongsheng Beverage Group, which was originally responsible for Wahaha's beverage OEM processing, and actively expanded the market.
Over more than a decade, she mastered every aspect of beverage production, from professional bottle and cap making, food and beverage equipment manufacturing, to beverage printing and packaging, and flavor and fragrance processing, expanding subordinate enterprises to 16 production bases and 36 branch companies nationwide.
"My strength should be opening factories," she once joked. "I can open five factories in a year."
Public data shows that from 2009 to 2012, the annual revenue growth rate of Hongsheng Group, led by Zong Fuli, exceeded 30%. By 2012, Hongsheng Group's annual revenue exceeded 8 billion yuan. Today, Hongsheng Group's revenue exceeds 10 billion yuan, contributing about one-third of the entire Wahaha Group's sales.
Zong Fuli has been striving to prove herself. "My ten years of accumulation at Hongsheng were carved out by my own fists and feet, from negotiating with the government for land, to procuring all production lines, to installation and commissioning, and to producing all products—I did it all myself. My father didn't help me much."
Zong Fuli has been more eager for independence than her peers since childhood. At 16, she proactively asked to study in the United States, hoping to see the outside world. **"I wanted to study abroad, and when I made that decision, I accepted all its consequences. This experience taught me a lot, including independence and knowing what I want, which has been very helpful to me."**
In Wahaha, her father's old subordinates habitually call her "Princess" in private. But she doesn't want to be a princess forever hidden under her father's halo. She prefers to be called "Kelly," her English name during her eight years of study in the US.
Her overseas study experience gave Zong Fuli a Westernized logic of conduct—directness, efficiency, and self.
Her thinking and action principles differ greatly from her father's, and her management style is also completely different. "When the post-80s daughter stands beside the post-40s father, breakfast itself is a Sino-Western difference: the father eats big pancakes and fried dough sticks, while the daughter eats bread and milk," as described by China Entrepreneur magazine.
In Zong Fuli's view, this is an inevitable result of the times. "In the early days of reform and opening up, with wisdom, courage, boldness, and intuition, one could break through alone," Zong Fuli said. She herself pays more attention to rules, processes, and teamwork. "A team needs all kinds of people, each taking on a part of the role, discussing together, unifying thoughts, and avoiding risks."
In the love-hate relationship between "big pancakes and fried dough sticks" and "bread and milk," both Zong and Wahaha are quietly changing.
Only this "Devil Wears Prada" can control her stubborn father.
The father-daughter partnership has thus become an opportunity for Wahaha's transformation!
In 2018, Zong actively promoted changes at Wahaha: re-entering the health products industry, cooperating with Pinduoduo, and experimenting with social retail...
But Zong also said, "We are cautious and must fully consider not dragging down the main business." He doesn't want to repeat the mistakes of past diversification.
Well-known media person Chi Yuzhou, in Zong's biography "The Principle of Universal Gravitation," called Zong a "moderate hawk." In this era of rapidly changing consumption and channels, **he is indeed attempting to carry out a moderate transformation within Wahaha.**
Under the influence of his daughter, Zong began to try to change his long-held methodologies, delegating authority in management, and experimenting with the internet and e-commerce in channels.
In the past, Zong managed the company with meticulous attention to every detail. Chi Yuzhou once jokingly referred to Zong's management style as "the emperor reviewing memorials."
However, in a recent interview with China Entrepreneur magazine, Zong's attitude had clearly changed. "They all say I am dictatorial. In the past, I indeed managed too meticulously, causing employees to rely on me. Now I am gradually changing my management style and undergoing process reform. In recent years, Wahaha has also been cultivating middle management."
According to Zong Fuli, within the Wahaha Group, she and her father have a rough division of labor: **she is responsible for production management, while Zong is responsible for marketing.** At the same time, Zong Fuli is also making active attempts in Wahaha's youthfulness, internationalization, and capitalization.
Zong Fuli's attitude towards the internet and capital is subtly influencing Zong.
As a "digital native," Zong Fuli has a natural affinity for the internet. Under her influence, Wahaha began to embrace the internet.
A notable change is that Wahaha's "Tianyan Jingjing" fermented milk launched in 2018 did not choose traditional offline channels but relied on IP for social retail—that is, WeChat business. Since 2018, Wahaha has actively sought cooperation with e-commerce platforms like Pinduoduo and Alibaba.
Zong Fuli's attempt to acquire Hong Kong-listed company China Candy can be seen as her first contact with the capital market. Although the result was somewhat unexpected, it did not affect her interest and expectations for the capital market.
**In Zong Fuli's view, Wahaha going public is a normal move.** "In the future, only by combining with the capital market can we go further; this is something every company must do."
At the end of 2018, Zong Fuli became the head of Wahaha's Brand Public Department, moving from behind the scenes to the forefront. From AD calcium milk-flavored mooncakes, colorful Nutrition Express, to cross-border makeup palettes... Wahaha has seen many surprising changes.
Even Zong's attitude that "Wahaha will never go public" has shifted.
In November 2017, at Wahaha's 30th anniversary celebration, he changed his previous stance of "never going public" and publicly stated, "Going public can accelerate enterprise development, and we will consider it at an appropriate time."
However, one thing Zong has never changed is his hardworking and simple entrepreneurial spirit and his adherence to the cultural foundation of industry.
To this day, Wahaha's headquarters still stands at No. 160 Qingtai Road, not far from the old Hangzhou railway station. It is still the original six-story building, as low-key and simple as its owner. If not on business trips, Zong works here every day from 7 a.m. to 11 p.m., seven days a week, without fail.
**In 31 years of entrepreneurship, Zong has insisted on working more than 16 hours a day.** In a year, he spends over 200 days on the front line, either at new project production bases or in sales markets.
Zong's bookshelves are densely packed with various maps, from different countries to provinces, municipalities, and autonomous regions, to highways and urban-rural road networks, usually marked with notes. He prides himself on possibly being the person who has drunk the most beverages in the world; wherever he goes, he tastes local drinks, and his office and warehouse are filled with empty beverage bottles.
In 2003, during the SARS outbreak, most companies were on holiday. Zong went alone from Hong Kong to Yunnan, inspecting markets in Kunming, Dali, and other places. After the inspection, he made a bold decision: while others were contracting, Wahaha should take the initiative to attack, push products to the terminals, and seize the market first.
Facts have proven that Zong's decisions after field research always bring miraculous results. Even after becoming the richest man, he remains the most meticulous market researcher.
A plain jacket and a pair of black cloth shoes are still his standard attire, staying true to his "cloth-shoe billionaire" image. At Wahaha, his frugality is well-known; it is said he spends no more than 50,000 yuan a year.
**Being complacent is quite dangerous for a company, but a company's soul and cultural foundation are equally important.** In the delicate balance between change and constancy, Wahaha seems to have found the key to welcoming its second spring.
In 2018, Wahaha's revenue was 46.89 billion yuan, the first time performance recovered growth since 2014.
"The golden morning sun flowed in through the window, ordinary, as before. The white poplars in front of the building have indeed thickened a bit, but they look ordinary, as before. It is winter, and the leaves have fallen; but I believe they are curled up in the soil, dreaming of spring."
Source: Huashang Taolue (ID: hstl8888)


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