文 | Russell Flannery
It was the 80s of the 20th century: the Cold War was coming to an end, and China's economic reforms were gaining momentum, bringing more income to Chinese consumers to enjoy their lives. It was also around that time that Tsai Yanming, the new head of Taiwan's family-owned I Lan Foods, discovered a product with great potential: rice crackers — biscuits made from stalk rice.
Recently, Want Want China's executive director Cai Shaozhong was interviewed by Forbes in Taipei. "We are a long-term player in the Chinese market and have invested in production facilities all over China," he said in the interview. We need to leverage more than just our brand. "IMAGE SOURCE: WANT WANT CHINA
Cai Yanming was a blockbuster. Yilan Food's successor, Want Want China, has been successful in the field of snacks and beverages, and Cai Yanming has become a billionaire as a result. Today, Want Want China has more than 80 factories and more than 41,000 employees in Chinese mainland, and the current chairman and CEO of Want Want China, Cai Yanming, is now valued at $5.8 billion on the Forbes Real-Time Rich List.
However, Want Want's sales and share price have been flat since then. In the 12 months to March 2023, Want Want's revenue fell 4.4% to 22.9 billion yuan ($3.2 billion) from 23.9 billion yuan in the same period last year. On Friday, the company's shares closed at HK$4.42 per share on the Hong Kong Stock Exchange, up from a 2024 low of HK$4.17 per share in March this year, but still down 16% from the same period last year. It is reported that the company's share price has created a recent peak of more than HK$8 per share in 2022, and also exceeded HK$14 per share in 2014, making Tsai Yanming the richest man in Taiwan in 2014 with a fortune of US$9.4 billion.
As the source of 90% of the Group's business, the slowdown in the Chinese mainland economy was the main reason for the decline. Last year, China's GDP gradually recovered from the pandemic, growing by 5%. However, weakness in consumer confidence remains. One of Want Want's rivals, Master Kong, which is led by the Wei family of Taiwanese billionaires, fell even more sharply on the Hong Kong Stock Exchange last year. Shares of another Taiwanese rival, Uni-President China Holdings Ltd., whose main shareholder is billionaire Ko Hsiu-ling, fell 26% year-on-year on the Hong Kong Stock Exchange. In terms of the overall environment, Hong Kong's Hang Seng Index has fallen by more than 20% in the past 12 months.
Recently, Want Want China's executive director Cai Shaozhong was interviewed by Forbes in Taipei. In the interview, he said: "Compared with past growth trends, we have not met the desired growth target in the Chinese market. Cai Shaozhong, 43, is the eldest son of Cai Yanming (67).
This perception is pushing this long-established Greater China company to take a new approach. "What I want to share with you is that our mindset has changed over the past few years. We initially strived to become the most well-known and influential snack and beverage brand within the Chinese community. ”
Through a series of initiatives in Chinese mainland and overseas markets, Want Want China has changed its development model. In Chinese mainland, Want Want has leveraged its manufacturing expertise to develop its private label snack business, continue to advance the low-alcohol beverage business launched last year, and launch a new product line aimed at female consumers.
Want Want China's range of low-alcohol beverages launched last year includes kumquat-flavored beverages. IMAGE SOURCE: WANT WANT CHINA
In addition to the Chinese mainland market, the large snack producer is also looking to increase its high-single-digit revenue share in other markets. To achieve this, Want Want China needed to expand its factory in Tien Giang province, Vietnam, which opened in 2022. The company calls the expansion of overseas markets "Want Want's first step towards the 'global dream'".
Cai Shaozhong explained: "We have an internal policy called 'China Dream and Global Dream'. The Chinese Dream refers to those products that we should make with the goal of becoming number one in the Chinese market. The global dream, on the other hand, refers to products that have a competitive advantage in the global market. When it comes to dairy, it may not be easy to achieve the global dream. But the rice cracker business has the potential to make the global dream come true, and this product line allows us to promote ourselves on a global scale. ”
The company's chairman, Cai Yanming, initially started his business with his father at I Lan Foods, and has been fighting alongside his family while pursuing his lofty ideals. In Taiwan, where Tsai works in Taiwan, in addition to food, the Tsai family owns finance, real estate and media businesses. The company's main office in Chinese mainland is located in Shanghai. Tsai's family members share his high expectations, with his second son, Tsai Wangjia (39), now the chief operating officer of Want Want Group, who has more than a million followers on Weibo, and Tsai's nephew, Zheng Wenxian (61), who is also a member of Want Want Group's board of directors.
The entry into the private label business marks a change in the concept of Want Want China. For years, a smiling cartoon boy in a vest has been the mascot for all Want Want China's products, but that's changing. Cai Shaozhong said: "This is a change in mentality. If our core competitiveness includes not only brand, but also production and manufacturing capabilities, then we are now able to produce products under our own brand. We are even willing to produce rice cake food for other businesses.
Want Want China's factory in Tien Giang province, Vietnam, was put into operation in 2022. IMAGE SOURCE: WANT WANT CHINA
He believes that no one is willing to invest in capital spending due to the slowing growth outlook, so now is the right time for the transition. In the crowded snack industry, he sees an asset-light model as it is easier for retailers already in the industry and for other potential players who are ready to enter the industry.
"We are a long-term player in the Chinese market and have invested in production facilities all over China. We need to leverage more than just our brand. ”
This does not mean that Want Want will no longer promote its traditional rice crackers, gummy bears and other snack drinks. "We will continue to grow organically through our own brands and products. But at the same time, we also want to try to work with retailers or other brand owners. Private label products will sit alongside Want Want China's own Wangzai signature snacks and beverages, including the "Baby-Mama-brand" for children and the "Prime of Love" brand for the elderly, which will compete with larger global brands such as PepsiCo and Coca-Cola.
Over the past few decades, the company continues to introduce new products, even though Want Want China has emerged as a big winner in the tough market battle for snacks and beverages. "We believe that even with today's scale, the company still faces a lot of risk and may not be able to maintain such fundamentals tomorrow," Cai said. So the chairman thinks that we need to launch more new products in markets that are large enough, and we need to really be grounded in those markets. ”
Twenty years ago, Want Want entered the coffee market with the "Bond Coffee" range of products and competed with competitors such as Nestlé and Starbucks. Although it has only achieved modest success so far, Want Want will continue to work hard in the field of coffee beverages. "This market is big enough, there are many players in it, and the competition is fierce, but if we can get into this market, it will become a new pillar of our food and beverage business," Cai said. To achieve even greater success, Want Want opened an independent retail store to sell coffee.
Last year, Want Want launched a series of new products, including low-alcohol beverages. The company experiments with blending spirits such as coconut groves, mojitos and Baileys with fruity flavours such as kumquat and green plum. "If we sell to retailers, these products will be in 'Tetra Pak' packaging, which is already one of the largest users in the world," Cai said. If we sell to corporate customers, we use larger capacity packaging, so that those customers can directly open the drink and pour it out, which is easier for them. We're going to find ways to invest in that.
Want Want is also promoting international business this year. The company evaluated potential overseas markets based on population size and spending power and was very satisfied with the results, especially those with a low base. "Indonesia is obviously a very large market, we are interested in the whole Southeast Asian region and see a lot of potential in the Western market as well. ”
Over the past year, Want Want has opened an office in Germany and allocated new internal resources to Africa and the Caribbean, the United States and Australia. This year, the company launched new products in the U.S., including "DeliGrains" brand roasted brown rice chips. Cai Shaozhong said: "We are trying to do everything. He pointed out that Want Want China has been transferring international export orders to factories in Vietnam to improve their utilization.
Want Want China sells "DeliGrains" brand roasted brown rice chips in the United States. IMAGE SOURCE: WANT WANT CHINA
The taste of snacks and beverages in the Vietnamese market is slightly different from that of the Chinese market, but the country (with a population of nearly 100 million) offers a large domestic market for Want Want China, as well as easy access to other markets in Southeast Asia.
Another advantage of Vietnam is the resource that has sustained the Tsai family's prosperity for decades: rice. Vietnam is one of the top five rice milled producers in the world, after China, India, Bangladesh and Indonesia.
Translated from https://www.forbes.com/sites/russellflannery/2024/04/20/billionaires-snack-flagship-changes-growth-recipe-as-china-pace-slows/?sh=6122e23b79e0