1. Being the agent and processing for others to complete the initial primitive accumulation.
In April 1987, Mr. Zong Qinghou contracted with the school run business in Shangcheng district, and started from scratch by selling soda, ice cream, stationery and paper to earn penny by penny. In July of the same year, Mr. Zong Qinghou established Hangzhou Baoling Children Nutrition Food Factory based on the capital earned from the sales revenue of pollen and 50,000 yuan of bank loans, through processing pollen for Hangzhou Baoling Co., Ltd., began Wahaha’s business venture.
2. Starting from scratch
Rely on the successful development of children's nutrient oral tonic, to achieve "from scratch" to complete the initial primitive accumulation.
In order to get rid of the problem, which is processing products subject to others would not survive long-term development, we were keen to capture the huge business opportunities in child nutrition market to develop our first own product- Wahaha children’s tonic in 1988 under the guidance of Professor Zhu Shoumin in the Department of Nutrition in Zhejiang Medical University, to solve the problem for those children who are in malnutrition or unbalanced diet or do not have good appetite.
Wahaha children’s tonic which filled the gaps in the domestic market of children's nutrition and health care products, adopted the natural raw materials, scientific formula and reasonable proportion, and won the support from the children’s nutrition expert, the chairman of Chinese Children's Nutrition Association, Ms. YU Ruo Mu who is Mr. Chen Yun’s wife, and many other domestic Nutrition experts who gave the multi-participatory argument. The product won the second prize of National Spark Technology in 1992.
As a result of outstanding efforts to solve the problems of children who were in malnutrition or did not have good appetite, Wahaha children’s tonic quickly won favorable market response from the consumers. The resounding slogan drink Wahaha to have good appetite became popular throughout the country and Wahaha children’s tonic became the company’s top product. In 1989, Hangzhou Baoling Children Nutrition Food Factory changed its name to Hangzhou Wahaha Nutrition Food Factory.
After Wahaha children’s tonic was launched in the market, it constantly refreshed new record in the sales revenue. In 1990, Wahaha’s sales revenue exceeded 100 million yuan, and the profit exceeded 20 million yuan. The corporate output, sales revenue, profits before taxes, net profits and other economic indicators were all in linear growth. The breakthrough quickly completed the primitive accumulation.
1. Acquisition in one hundred days
The acquisition called small fish eats big one miracle laid the foundation for development
In 1991, in order to expand the production scale to meet the market demand, Hangzhou Wahaha Nutrition Food Factory, with only 100 employees, acquired the state owned factory- Hangzhou Canned Food Factory with a plant area of 60,000 square meters and 2,000 workers at the price of 80 million yuan under the support of Hangzhou municipal government, which created a "small fish eats big one" miracle.
Wahaha acquired Hangzhou Canned Food Factory at the beginning of the reform and opening up policy. There was no any precedent for a school-run enterprise acquiring a state-owned enterprise at that time; therefore, there were certain risks arising from policy and public opinions. However, the government leaders from Zhejiang Province and Hangzhou municipal government strongly admitted and supported Wahaha’s acquisition, including Mr. Li Zemin, the then Secretary of Zhejiang Provincial Party Committee, Mr. Lu Wen Ge, the then Mayor of Hangzhou, Mr. Shen Zheshou, the then Secretary-General of Hangzhou Municipal Party Committee, who gave guidance, confidence and encouragement to Mr. Zong Qinghou and Wahaha people.
After the acquisition, Wahaha quickly revitalized the stock assets of Hangzhou Canned Food Factory due to its advantages in product, capital and market. Only three months later, the former Hangzhou Canned Food Factory with more than 40 million yuan in deficit turned into profitable. The sales revenue, profits and taxes doubled at the same year. At the second year, the sales revenue reached 400 million yuan, and the profit reached more than 70 million yuan, which helped in the historic breakthrough from small to big. The One Hundred Days acquisition laid the foundation for enterprise development.
2. Go southwest
Relying on Go Southwest strategy, Wahaha not only supported the western region, but also promoted our own development which helped us to be the industry leader.
At the end of 1994, Wahaha responded positively to the nation’s call to support the resettlement of the Three Gorges reservoir area and joined the western development. We creatively adopted the reform strategy that took over the whole package of immigrant tasks and immigration funds, acquired 3 bankrupting enterprises in Fuling district and established Wahaha Fuling Co., Ltd.
Wahaha Fuling Co., Ltd. won a quick success due to Wahaha’s mature products, mature technology, mature market, strong financial strength and brand advantages. The total output and profits before taxes gained rapid progress. Until 2016, Wahaha Fuling Co., Ltd. accumulatively reached the sales revenue of more than 9 billion yuan, and the profits before taxes more than 1.7 billion yuan.
Wahaha positively answered the nation’s call to support the western development and support the resettlement in the Fuling reservoir area, which led to the widespread attention in the community and were highly admitted by the central government, provincial government and municipal leaders, experts, and scholars.
The success of Fuling provided valuable experience during the process of development and growth for Wahaha to spread to the whole nation. Since then, Wahaha expanded its investment in establishing subsidiaries in the southwest regions, the regions that are close to the consumer market, old revolutionary base areas, ethnic minority areas, and poverty-stricken areas. Up to now, Wahaha has established more than 180 subsidiaries in 29 provinces, municipalities and autonomous regions. These subsidiaries were proven to be successful in every single case, driving the local economic development, directly solving the employment of more than 13,000 people, and indirectly solving the difficulties in farmers' agricultural products sales, which contributed to the agricultural industry structural adjustment and the construction of new style socialist countryside. All these marked that Wahaha of Hangzhou has become Wahaha of China, which laid the foundation for us to be the industry’s leading position.
1. Joint venture
Through the introduction of capital and technology, we developed our own brand, and accelerated the expansion.
In 1996, in order to achieve the "second pioneering" strategic goal of superior quality products, large scale production, and high level management, Wahaha and French Danone Group cooperated in joint venture, introducing foreign capital of 43 million US dollars and jointly setting up five joint ventures.
Wahaha was quite clear on the purpose of introducing foreign investment: introducing the foreign technology and capital to explore the domestic market on the basis of complementary advantages and common development. Meanwhile, both parties agreed on four prerequisites: 1. the trademark of "Wahaha" should be in continuous use, 2. the management rights belonged to the Chinese party, 3. all the original employees should remain in employment, 4. the responsibility of the wages paid to retired workers should be shared.
After the joint venture, Wahaha’s development ran into the fast lane. Danone totally invested 1.4 billion yuan in ten years, and Wahaha also invested roughly the same amount correspondingly, which together resulted in 39 joint ventures. Wahaha then carried out large-scale equipment updates and technology reform. The first-class equipment and advanced technology significantly improved the product quality, production scale, management level and enterprise efficiency, and effectively promoted the development of our own brand. Danone also obtained huge interests from the cooperation with Wahaha. Due to the excellent business operation from the Chinese party, the annual investment return rate of each joint venture project was about 40%, that is, Danone’s investment could be fully recovered in 2-3 years. Until 2007, Danone’s accumulated profits reached 3.554 billion yuan, therefore, Danone’s joint venture case with Wahaha became the most successful case of Danone Group in the world.
2. The dispute between Danone and Wahaha
After solving the dispute between Danone and Wahaha, our group learned lessons and experience in many aspects, based on which we marched towards a new beginning.
Although Wahaha’s joint venture business was proven to be successful, Danone was reluctant to see Wahaha’s continuous growth and expansion because the management rights have always been in the hands of the Chinese Party. On one hand, Danone repeatedly rejected Wahaha’s proposed new establishment of joint venture companies to make up for the shortage in production capacity. On the other hand, Danone invested in Robust on large amount to hold the control, and also invested in other Wahaha's main rivals. Wahaha had no other choice but to invest in a number of non-joint venture companies by ourselves to processing for the JVs to make up for the JV’s shortage in production capacity.
In 2006, Danone’s holding Robust, was in consecutive losses year after year, while Wahaha’s non-JVs had grown steadily. Danone then suggested acquiring Wahaha’s non-JVs at low-cost of net assets. Wahaha flatly rejected the unreasonable request. In order to force Wahaha to do so, Danone adopted all sorts of means to threaten and induce Mr. Zong Qinghou and Wahaha, fabricated stories to slander, defame and attack Mr. Zong personally, even complained to all levels of government leaders in China, and persuaded the French government and the president to put pressure on Wahaha. After all kinds of coercion failed, Danone filed a series of litigation and arbitration against Wahaha and its related parties in Sweden, the United States, the British Virgin Islands (BVI), China and other places, accusing Wahaha of breaching the contract and fraud. When Mr. Emmanuel Faber was the president of Danone’s Asia-Pacific region, he made the public allegation that he could even make Mr. Zong Qinghou to "spend the rest of his life in litigation."
In face of Danone’s global offensive, Wahaha hired the top domestic and international litigation team that focused on the two core issues of "who abused the Wahaha trademark" and "who violated the non-competition clause" for comprehensive, rigorous and meticulous litigation preparation. Based on truth and law, Wahaha ultimately won the litigation in Chinese and foreign courts and arbitration institutions. Facing repeated defeats, Danone was forced to propose reconciliation requirements. In the end, the two parties signed a package of settlement agreements in Beijing on September 30, 2009. Danone withdrew from Wahaha joint ventures at the cost of its original investment of RMB 1.4 billion. Wahaha won the battle of "self-defense and fight back" for national dignity and interests. After the legal disputes, Wahaha further enlarged its vision, enhanced its awareness of protecting the national brands, and improved its confidence in participating in international competition. Wahaha once again marched towards a new starting point for rapid development.
1. Innovation leads the development
Innovation-driven development to ensure the leading position
Wahaha has been insisting on continuous innovation for three decades, from follow-up innovation and introduced innovation to independent innovation and comprehensive innovation, which helped to gain leading advantages and initiative position. Wahaha set up an integrated enterprise research institute with the function of technology R&D and product innovation. At present, the Institute has a state-level enterprise technology center, post-doctoral research station, laboratories accredited by the National Laboratory Accreditation Board (CNAS) and other R&D testing institutions with more than 300 R & D personnel to form a research team led by people of doctorate or master degree, or senior engineers. Over the years, the Institute has obtained more than 80 national, provincial and municipal scientific and technological innovation awards and more than 40 scientific research projects at all levels, applied for more than 200 kinds of patents, and participated in drafting more than 70 national and industry standards.
Under the guidance of innovation strategy, Wahaha vigorously carried out product innovation activities, and launched a series of new products featured by Nutrition Express. These products won favorable market response because of high technological content, nutrient-rich, and excellent taste, and thus generated rich economic benefits. Since its initial introduction into market in 2005, Nutri-Express has reached a production amount of nearly 50 billion bottles and the production value of more than 120 billion yuan. By means of independent products innovation, Wahaha realized its transformation from Large to Great. Today, Wahaha is well on its way to cultivate health-based product innovation, and fulfill customers’ new needs by jointly adopting food therapy in traditional Chinese medical and modern biology engineering technology.
Promote the transformation and upgrade of beverage industry, and build a new engine for enterprise development
In recent years, the combination of intelligent technology and conventional industry has become a trend. In the beverage industry, Wahaha has taken the lead in the practice of "Made in China 2025", having accomplished the establishment of precision machinery plants, mechatronics research academe and other scientific research institutes. All such affiliates are dedicated to the study on intelligent beverage production line and intelligent equipment industrialization. We possess a professional team with capacity of technical and scientific research, and have undertaken Major Sci-Tech Projects of the Ministry of Industry, projects of National 863 plan and many other national, provincial and municipal research projects. In 2015, our project titled "Intelligent Plant for Food and Beverage Process Manufacturing" was selected by the National Ministry of Industry as one of the first batch pilot demonstration projects on intelligence manufacturing. We continuously carry out practical exploration on establishing intelligent food and beverage factories with full digital control, which fills the blank in the country.
At present, Wahaha has carried out a number of equipment development including industrial robot, high-end direct drive motor and other core automation components, and has successfully developed serial robots, parallel robots, high-speed packing machine, automatic logistics sorting system and other intelligent equipment. Hence, Wahaha has become an enterprise in the food and beverage industry with capability of developing, designing, installing and testing equipment by itself.