I. Basic Information
Established in 1987, started with only 3 employees and a loan of 140000 yuan, Wahaha has grown into China’s largest beverage corporation and a leading beverage company in the world, in terms of total output and profit. We have established 80 production bases and more than 180 subsidiaries in 29 provinces and municipalities so far, with an aggregate of 30000 employees. Our product lines include protein drinks, bottled water, carbonated drinks, bottled tea, juices, coffee drinks, plant drinks, special purpose drinks, canned food, dairy drinks, medicine & health care products, which are classified in ten categories and more than 190 types in total. The sales revenue of bottled water, dairy drinks, and canned food listed among the top positions in the nation.
For 30 years, Wahaha has sustained steady and rapid development. The company’s scale and profitability have ranked first in China's beverage industry for 19 consecutive years. Wahaha is also listed among China's top 500 enterprises, and China's top 500 private enterprises. To date, Wahaha has accumulated abundant capital with no outstanding loans. "Wahaha" is a well-known trademark in China, and it is China’s famous brand.
In addition to the R&D and manufacturing of food and beverage, Wahaha has Precision Machinery Manufacturing Company and Electrical and Mechanical Research Institute which design, development, and manufacture molds and beverage production equipment. In recent years, Wahaha has begun to develop into the areas of bacteria, enzymes, electrical and mechanical and other high-tech industries. Up to now, we have formed our own strains of bacteria and successfully developed string and parallel robots, automatic logistics sorting system and other intelligent equipment. All the above mentioned enables us to become the only company in the food and beverage industry to integrate capacities of the R&D, the design and manufacturing of molds, beverage production equipment and industrial robots.
II. The Development History of Wahaha
During the 30 years of development, Wahaha has walked through the following stages:
1. Drink Wahaha to have good appetite, this advertisement signals the complete of the initial primitive accumulation.
Wahaha started from scratch by selling soda, ice cream, stationery and paper to earn penny by penny. In 1987, Wahaha processed for others on oral liquid. In 1988, we were keen to capture that the children nutrition market had huge business opportunities, based on which we developed Wahaha children’s tonic to solve the problem for those children who do not have good appetite. The product quickly became popular throughout the country. In 1990 it reached an annual sales income of 100 million RMB, with the profits of more than 20 million RMB, which completed Wahaha’s initial primitive accumulation.
2. A small fish eats a big one miracle laid the foundation of Wahaha’s development.
In 1991, in order to solve the problem of the shortage of products as soon as possible, Wahaha, with only more than 140 employees and hundreds of square meters of production site merged Hangzhou Canned Food Factory at the price of 80 million RMB, which was supported by Hangzhou municipal government. The state-owned insolvent old Factory had 2,200 workers and more than 60,000 square meters of plant and the backlog of products amounted to 60 million RMB. The small fish eats a big one reform initiatives caused a wide response nationwide. Our solid work quickly revitalized Hangzhou canned food factory and its stock of assets. After only three months, Hangzhou Canned Food Factory turned into profit. The next year, Wahaha doubled its sales revenue, profits and taxes. The merge in 1991 laid the foundation of Wahaha’s development.
3. Go to the South and West to support the poverty-stricken areas, which helps Wahaha become the nation’s largest beverage company.
Since 1994, Wahaha established its first subsidiary outside Zhejiang Province in Fulin at the three gorges area. After that, Wahaha responded to the nation’s call to set up factories in the central and western regions, poverty-stricken areas and all parts of China, which promoted the local economic development and the mutual development of us. Currently, Wahaha production bases have blossomed everywhere in the country. The output value, profits and taxes from the subsidiaries outside Zhejiang province accounted for more than half of the entire group. This action not only supported the economic development of the old revolutionary base areas, poverty-stricken areas, and ethnic minority areas but also made Wahaha of Hangzhou become the Wahaha of China, achieving economic benefits from social effects.
4. Independent R&D to provide the momentum of business development.
Since Wahaha’s launch of Future Cola in 1998, we have accelerated the process of independent research and development, and have developed and launched a series of products such as G-vital, Nutrition Express, Milk Baby, and Shuangwai Wai, which combines technological content, good taste, consumer’s favor and healthy element. They formed a series of product clusters, carried the banner of national brands, consolidated the visibility and reputation, and maintained the competitive advantages. Wahaha established a national enterprise technology center, a post-doctoral research station, a laboratory accredited by the National Laboratory Accreditation Board (CNAS), key laboratories of food biotechnology accredited by Zhejiang Province, and other research and development institutions, which helped Wahaha to be strong in the scientific level.
5. Continue to expand the scale to solid the leading position in China's beverage industry
Wahaha first topped the list of China's beverage industry in 1998, since then, we continued to expand the market and production scale, with constant investment and innovation in new products. Currently, Wahaha accounted for nearly 40% of China’s Top 20 beverage enterprises in total in terms of profit, profit before tax, and other economic indicators. In the Chinese market, we kept pace with the world's leading companies, which helped the brand Wahaha to enjoy high reputation both in China and in the world.
6. Explore diversification to seek greater development.
After Wahaha obtained a solid position in the main industry, Wahaha also appropriately diversified business exploration in the recent years, utilizing the advantages in capital, brand and other aspects, to explore the upstream and downstream industries and high-tech industry development. The first area is the field of bio-engineering which leads the beverage industry from solving the problem of thirst to solving the problem of health. The second area is the field of high-tech industries, such as the development of energy-saving motors and industrial robots, easing energy shortage, labor and employment issues.
III． Wahaha Development Experience
For the recent 30 years, especially in the past 10 years, the Chinese beverage industry has faced fierce competition, while Wahaha has maintained a healthy and rapid development of an annual 30 billion bottles of various types of drinks sold throughout China. There are various reasons for Wahaha’s healthy development in 30 years. After all, it is to improve the core competitiveness of our enterprise mainly in the following aspects of the experience:
1. Adhere to the main business, gain progress in small steps.
During the past 30 years, Wahaha has continued to focus on its major business to develop mainly in the food industry, cultivating large market with small products, and adhering to the careful development of small steps, resolutely not doing things uncertain or beyond our power. However, once we manage to seize the opportunity, we would take immediate action. That’s what we called the strategy of gaining progress in small steps. Meanwhile, we do not engage in operating in loans. Up to now, we have no bank loans but billions of deposit. Furthermore, we do not mess with investment due to abundant capital. That’s why we could maintain a steady development momentum in more than 20 years.
2. Persist in innovation to ensure that the leading position.
Food industry is a traditional industry; therefore most products are in the low-end of the value chain. Low-cost competitive edge is facing a great challenge. Wahaha has always insisted on the business philosophy of manufacturing "the products with real value". We insist on independent innovation, insist on always being ahead of others half a step. Through constant innovation, we launch new products every year, and obtain new growth point every year, overcoming the problem that the life cycle of products is decisive of the life cycle of a company. Through product innovation, we could implement the differentiation strategy, avoiding the vicious price competition with others. Meanwhile, these products are high-value added with high technological content. Its sales and benefits lay good foundation for the sustainable development of the enterprise.
3. First-class technology and first-class equipment form the competitive edge.
Wahaha adheres to the main business of food and beverage industry and insist to make it bigger and stronger, and to make the small products into the large market. We have invested more than 20 billion RMB to introduce the world-class automated production lines, realizing the whole process of automation from raw materials to products packaging. Meanwhile, we continue to introduce and develop new technologies, so to keep the leading position of our equipment technology. Thanks to our scaled production, we can guarantee product quality, enhance production efficiency, and cut the cost. As a result, the quality and price of our products have gained absolute advantages compared to those from other large enterprises domestically and internationally.
4. A reasonable share of the profit between the manufacturers and the distributors to establish our own marketing network.
Wahaha attaches great importance to the construction of sales network, and establishes the joint sales system and advance payment deposit system to implement "a reasonable distribution of the profits between the manufacturers and distributors", so that every part of the sales process is earning profit, which act as the fundamental policy. We have woven the marketing network which is composed of 7,000 distributors all over the country, and a larger number of wholesalers and retailers. By allying with distributors, we have unified with thousands of enterprises to compete together in the market, so that the company's newly launched products can be put on the shelves in millions of retail terminals within one week across the nation, which greatly improves our competitiveness.
5. Adhere to the management strategy of highly centralization and authorization in different levels, promoting the efficient and flexible operation of enterprise.
Drinks are fast moving consumer goods, and fast change is the biggest feature of this industry. "Rapid response, efficient implementation" is of particular importance for the beverage business. Based on this, Wahaha has adopted the management strategy of highly centralization and authorization in different levels: the departments of HR, finance, material, production, supply and sales in each subsidiary are all controlled and scheduled by the headquarter. The benefits for centralized management mode are quite obvious in some aspects. The unified management of the national market could largely reduce the disorder of products sales, and enhance the control of the product sales price system. It also significantly reduces the cost of purchasing; unity effect is realized, though our overall strength may still lag behind international giant companies, yet we usually perform much better than their subsidiaries. Meanwhile, we devolve the authority in an orderly manner in the company. Every employee’s power and responsibility are regulated in our qualification system. The capital safety and quality of our products and equipment are guaranteed through a combination of timely review, evaluation and audit. Based on the afore-mentioned standard managements, Wahaha can realize healthy development.
6. People oriented: building an excellent team of employees
Wahaha upholds “family” culture. Namely, we pay great attention to all of our employees, regarding them as family member, thus they will strive to contribute to the company like what they will do for their real families. On the basis of caring employees and developing the company, concerted effort will be made to fulfill our social responsibility. Under such company culture, each employee is treated like a family member and receives ample consideration about his life and work. Personnel allocation within the company relies mainly on the stimulus and competition mechanism. “Contribution determines income, competition determines post” is a precise description of these two mechanisms. We insist on putting people at the first place and have built an outstanding and professional employee team through sharing the fruit of development. Our employees are diligent, highly loyal to the company, and extremely dedicated to work, which lay a solid foundation in terms of personnel for the development of the company.
7. Insist on brand management, promoting sustainable and healthy
Brand is an important intangible asset of modern company. The basis of brand is both quality and integrity. Since our founding, we have always put quality at the top place. We have introduced many top testing equipments, cultivated a group of high quality testing personnel, and carried out strict quality control with the involvement of all employees and procedures. Meanwhile, we are honest to consumers, suppliers,distributors and employees, winning the recognition of the society and the support of our employees.