No matter who is at the helm, Wahaha's troubles will not go away

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2024-07-21 15:04Posted on the official account of Beijing Tiger Sniff APP

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On July 18, Zong Fuli, the daughter of Zong Qinghou, resigned as vice chairman and general manager of Wahaha, which attracted attention.

02 Zong Zehou spoke in the circle of friends, pointing out his dissatisfaction with Zong Fuli's style of doing things and business strategy, hinting that there are contradictions with old employees and state-owned assets.

03Wahaha performed strongly in the sinking market, but its market share in the milk beverage and instant porridge market declined, facing intensified market competition and changes in consumer preferences.

04Zong Fuli is committed to promoting Wahaha's youthfulness, internationalization and product diversification, but has not succeeded in breaking the limitations of Wahaha's traditional business.

05No matter who is at the helm of Wahaha, they need to face the common problems of the beverage industry, how to stay ahead of the market with fierce competition and a steadily stable growth rate.

The above content is generated by Tencent's hybrid model and is for reference only

Produced by | Tiger Sniff Commercial Consumer Group

Author | Chen Yaoge

Edit | Miao Zhengqing

Header | The official website of Hangzhou Wahaha Group Co., Ltd

No matter how the drama between Zong Fuli and Wahaha ends, Wahaha's problems will not go away.

On July 18, an internal letter from Zong Fuli, the daughter of Zong Qinghou, resigned as vice chairman and general manager of Wahaha, which quickly attracted great attention. Subsequently, Zong Qinghou's brother Zong Zehou's circle of friends spoke out, in which he directly pointed out his dissatisfaction with Zong Fuli's style of doing things and business strategies, and hinted that there were contradictions between Zong Fuli and old employees and state-owned assets.

On July 19, Tiger Sniff contacted the Finance Bureau of Shangcheng District, Hangzhou, as well as several offices and distributors of Wahaha. The Finance Bureau of Shangcheng District of Hangzhou responded: "We are still in the process of further verification and understanding of this matter, and I am not very clear about other circumstances." Wahaha's Hainan office responded that "it has not received relevant notices"; Wahaha's distributors in Kunming and Shenyang said they had not received the relevant notices and that the supply of products was normal.

Wahaha's biography of Zong Qinghou "Zong Qinghou: The Principle of Gravity" wrote: "From beginning to end, Zong Qinghou has two modes of choosing a successor: one is the succession of the management team, and Zong Fuli only appears as a major shareholder and investor; Another model is that Zong Fuli is not only the representative of the major shareholder, but also the leader of the management team, and she is the real 'successor'. ”

But both modes are difficult to land. According to Tianyancha, the largest shareholder of Hangzhou Wahaha Group is Hangzhou Shangcheng District Cultural and Commercial Tourism Investment Holding Group Co., Ltd., holding 46% of the shares. Zong Qinghou and Wahaha Group Co., Ltd.'s grassroots trade union joint committee (employee stock ownership association) held 29.4% and 24.6% of the shares respectively. The date of the last record change of senior management of Hangzhou Wahaha Group was in 2019, and before and after the change, the ratio of non-Wahaha members to Wahaha members among shareholders was 2:6.

It is worth noting that in July this year, the main personnel and business scope of Hongsheng Beverage Group Co., Ltd. have changed. Zong Fuli was changed from chairman to executive director, and Shi Lijuan and Shi Youzhen withdrew from the board of directors. Shi Youzhen is Zong Qinghou's wife and Zong Fuli's mother. In addition, the Group's business scope has been added to the category of "leisure and sightseeing activities". The KELLYONE brand founded by Zong Fuli also belongs to Hongsheng Beverage Group.

Ren Yunzhi, vice president of Instant Win, told Tiger Sniff: "In this era, the possibility of making evergreen products is getting lower and lower, because consumers are facing more and more choices, and bottled beverages are not "fashionable products" in this era, and there are more novel and rich ready-made and brewed products are also competing for consumers. So in terms of the general trend, we would think that the bottled beverage market may gradually lose consumers, rather than flow into consumers from other products. ”

Whoever is at the helm of Wahaha, this is the problem they will face.

Change is not the first priority

For Wahaha, "change" is not the first priority.

Zong Zehou's speech in the circle of friends also proves this: "Successor Wahaha should not think about how to do large-scale, how to make money, and how to drastically change the status quo. “

There is a saying in the beverage industry that "a business that is not innovative is a good business". Wahaha does have a very large share in the milk beverage and instant porridge market, and this share is difficult for others to snatch. According to the data of Wahaha's offline retail monitoring network, among the sales of Wahaha from March 2023 to March 2024, milk drinks, instant porridge, packaged water, lactic acid bacteria drinks and others accounted for 63.1%, 15.7%, 5.3%, 4.5% and 11.4% respectively. In the first half of 2024, Wahaha milk drinks and instant porridge have been ranked first and second in terms of market share.

Despite the intensification of market competition and changes in consumer preferences, Wahaha still performs well in the sinking market. Wahaha has been deeply involved in China's third- and fourth-tier cities and rural markets for many years, and has accumulated a huge consumer base with products that are affordable and tasteful to the public. According to Nielsen data, grocery stores are the main sales channel for packaged beverages in 2021, 2022 and 2023, accounting for 68.6%, 66.6% and 66.6% of all channels, respectively. These scattered grocery stores are mainly concentrated in lower-tier cities, which is Wahaha's most solid market.

Wahaha's dealer channels in these markets are also difficult to shake. The beverage industry has the characteristics of high consumption frequency, scattered channels and low customer unit price, so in order to make a national brand, manufacturers need to have strong control over the distribution network, so as to ensure the scale and stability of sales. Once the sales network is formed, there are strong industry barriers, and it is difficult for other brands to have the opportunity to enter.

However, despite Wahaha's strong performance in the sinking market, its market share of milk drinks and instant porridge is declining. At the same time, the overall growth rate of China's packaged beverage industry has also stabilized. In the context of the slowdown in the growth of the packaged beverage market, diet sparkling water and sugar-free tea have successively brought new variables to the market, but it has become increasingly difficult to create a national beverage like "AD calcium milk".

Diversification attempts are hardly successful

When Zong Qinghou was in office, he did not make any attempts to change.

As early as 2010, Zong Qinghou publicly stated that he wanted to "create another Wahaha", and set the revenue target for 2014 at 100 billion yuan. Wahaha under Zong Qinghou has tried children's clothing, dairy, wine, commercial real estate, and even once wanted to invest in iron ore in Australia. Again, these attempts have had little success.

Judging from her public speeches, Zong Fuli is committed to promoting Wahaha's youthfulness, internationalization and product diversification. She actively created IP, opened pop-up stores, promoted makeup co-branding, updated spokespersons, and launched a brand named after her English name, KELLYONE. KELLYONE has successively launched high-end customized fruit and vegetable juices, high-end pure tea products "Yicha", angry sparkling drinks, CHACHA juice fruity teas and "three and a half" sparkling wine series. However, none of these innovative attempts were ultimately accepted by the market. According to the official website of Hongsheng Group, there are only three products left under the KELLYONE brand: "Angry Bobo", "KELLYONE CHACHA", and "Yicha".

Ren Yunzhi told Tiger Sniff that after the second generation of domestic succession, the first areas to start are generally internationalization and branding, and these two pieces are generally unlikely to have much impact on the core business of the enterprise. After entering Wahaha, although Zong Fuli made a lot of efforts in brand image and product innovation, she failed to break the limitations of Wahaha's traditional business.

In 2013, Wahaha's annual revenue reached 78.279 billion yuan, the highest level in history. In 2014, the revenue was 72.043 billion yuan, far from reaching the target of 100 billion yuan. Since 2015, Wahaha's annual revenue has plummeted, and since then it has remained at about 50 billion, and the goal of 100 billion yuan has never been achieved.

After Master Kong's iced tea, pulse, oriental leaves, and raw coconut latte exploded, Wahaha also launched iced tea, activation, sugar-free pure tea series and coffee bits. But at present, Wahaha's idea of launching new products is more like launching new drinks according to the needs of distributors and the market, rather than rebuilding a new product line. There is still room for improvement in the penetration rate of sugar-free tea and coffee launched by Wahaha in first- and second-tier cities in convenience stores, large supermarkets and other channels.

Regardless of who is at the helm and what style it adopts, Wahaha faces a common problem in the beverage industry, that is, how to stay ahead in a market with fierce competition and a steady growth rate.

It's just that for Wahaha, it's not yet time to have to change.

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