'Princess of Wahaha' looks to revive a fortune down $18 billion
Wahaha is facing growing competition in the beverage market
For about two decades, Kelly Zong Fuli operated in the shadows of her father, beverage tycoon Zong Qinghou — once China's richest man. His death last month is now thrusting the woman known as the "Princess of Wahaha" into the spotlight.
It won't be easy for the 42-year-old heiress, who's poised to take over an empire fighting for relevance. Sales at the family's Hangzhou Wahaha Group Co. have fallen in an increasingly competitive market, and another beverage tycoon has become China's wealthiest person: Nongfu Spring Co.'s Zhong Shanshan.
"She is facing different difficulties ahead," said Suheng Wu, business analyst at Daxue Consulting in Shanghai. "Consumer demand is changing, and the market competition is intensifying with new domestic and international brands emerging."
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Privately held Wahaha — which means "laughing child" in Chinese — has been slow to adapt to consumers' changing tastes and habits, losing business to online shopping. While other brands have innovated and gained a following, Wahaha's novelties have failed to get much clout.
The company's sales dropped 35% from a high in 2013 to 51.2 billion yuan ($7.1 billion) in 2022, the last year for which the data are available, according to the All-China Federation of Industry and Commerce. Revenue at rival Nongfu, which went public in Hong Kong with much fanfare in 2020, climbed 62% in the five years through 2022 and another 28% in 2023 to 42.7 billion yuan.
At stake is a family fortune worth at least $2.2 billion, a fraction of the $20 billion it was in 2012, according to the Bloomberg Billionaires Index. That's based on Qinghou's 29.4% stake in Wahaha — official records haven't been updated since his death — and Kelly's 100% ownership in Hongsheng Group, a beverage and packaging-service business she has helmed since 2007 and has used to launch her own brand of tea drinks, KellyOne.
The Zongs might be worth more as their wealth estimate doesn't include personal investments, properties or cash dividends collected over the years, for which the information isn't clear.
Wahaha didn't reply to requests for comment for this story.
Kelly Zong, a graduate of international business from Pepperdine University in the US, started at Wahaha with a stint at one of the empire's factories to learn how to manage production. She quickly rose through the ranks, eventually becoming vice chair and general manager in December 2021. Recently, she has been helping the company develop marketing strategies to tap young consumers: She picked a new brand ambassador, has placed products on TV shows and hired influencers to live stream Wahaha's products.
The only child is now expected to take over the chair title that her father still held at the time of his death.
The Zong family is part of a succession wave that's been taking place as China's first generation of private entrepreneurs moves on. Some tycoons are preparing their children to run their companies at an earlier age, with many millennial and Gen-Z heirs taking board seats at some of the country's largest firms.
Zong Qinghou founded Wahaha's predecessor in 1987 with a $22,000 family loan and turned it into a multibillion-dollar business in the boom years that propelled China's middle class. Its milk drinks became particularly popular in the 1990s as parents with increasing spending power sought to provide better nutrition for their single child. By 1996, the elder Zong had formed several joint ventures with French dairy giant Danone.
But the two parties soon fell out, triggering years of discord and a flurry of lawsuits that eventually required the governments' intervention. When Danone capitulated in late 2009, the elder Zong bought its stake, turning him into China's richest person with a fortune estimated at more than $20 billion.
Wahaha, which also makes bottled water, has since developed carbonated beverages and canned congee products, but those haven't managed to replicate the earlier successes. While other drink makers seized onto the bubble-tea and coffee craze that's taken over the region — there are at least six bubble-tea companies waiting to go public in Hong Kong — Wahaha has remained largely on the sidelines.
Less than two weeks after her father's passing, Kelly made her first public appearance at the annual gala of the China Beverage Industry Association. She called herself both a sector veteran and a "new general" to corporate operations, mentioning that the company is pivoting to focus more on low-sugar, healthier drinks that consumers are now seeking, the local press reported.
While Wahaha might face challenges — its existing distribution network is skewed toward lower-tier cities where consumers have yet to jump on the health trend — it's pushing to reach new consumers and build trust, according to Harry Han, a research analyst at Euromonitor International.
"This is a strategic and yet bold move to refresh the brand image," Han said. "Stable expansion and evolution of offline shelf space, together with aligned new products and marketing strategies, is expected to help Wahaha to stand firmer in the future."
