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The resignation storm of Zong Fuli, daughter of Wahaha founder Zong Qinghou, lasted only seven days before a dramatic "reversal" occurred.

On the evening of July 22, Wahaha issued a statement saying that in order to ensure the company's stable and healthy development, after friendly consultation among shareholders, Zong Fuli decided to continue to perform the relevant management responsibilities of Wahaha Group. Wahaha also expressed its gratitude for the recent attention from all walks of life and the media, and apologized for occupying media resources.

Image source: Wahaha Group

Judging from this statement, the previous resignation letter was indeed genuine, but the outcome of the matter was "reversed". The family of Wahaha's founder did not leave, and Zong Fuli stayed. However, the problems exposed by this incident in the inheritance of the founder's family and the corporate governance structure of Chinese local enterprises may be discussed for a longer time.

Wahaha has been a leader in China's beverage industry for many years. However, less than 150 days after the death of Chairman Zong Qinghou, the company's control rights have been caught in such a huge storm, which may also provide room for reference and thinking for many latecomers.

Some people believe that Zong Fuli's leadership style is too radical and innovative. While this strategy promotes the company's development, it may also cause some internal instability due to its collision with traditional concepts. Others emphasize that from the perspective of the company's nature, Wahaha is a state-owned enterprise dominated by a major state-owned shareholder, which means that the founder's family cannot do whatever they want with it as a family business.

So, can the "compromise" and consensus reached by all relevant parties now really enable Wahaha to achieve a smooth transition?

Stabilize the morale of the troops

When Zong Qinghou passed away, many people missed the old generation of local entrepreneurs. Many Hangzhou citizens and old Wahaha employees went to Wahaha headquarters to pay their respects. This kind of connection between corporate brand, corporate culture and ordinary consumers and grassroots employees sometimes seems loose, but it still has strong explosive power.

After Zong Fuli's resignation, although her own prestige and influence cannot be compared with her father's, many people still linked this incident to the direction of the national brand Wahaha. In the past few days when the incident continued to ferment, the anchors in Wahaha's live broadcast room were scolded and left the broadcast.

Image source: WeChat public account · 607 Moon

Netizens have said that if Wahaha is not named "Zong", it has lost its soul. Some netizens even joked that if "Waha" is gone, only "Haha" will be left. This shows the status of Zong Qinghou in the hearts of the people. Because the soul of the Wahaha brand is Zong Qinghou himself, even if Zong has passed away, Zong Fuli is the continuation of consumers' faith.

Many people said that the reason they supported Wahaha was not because Wahaha’s water tasted so good, but because Wahaha carried the memories of several generations and respect for an entrepreneur.

Obviously, this surge of public opinion has somewhat affected the direction of the incident. As the incident continued to ferment, Wahaha's sales performance began to decline. Wahaha's products began to become deserted on the shelves of shopping malls, and consumers' enthusiasm for purchasing was greatly reduced. They believed that capital was only pursuing commercial interests, while ignoring the feelings of the elders and the feelings of consumers.

Especially in the current stage of fierce market competition, whether the product brand has sufficient recognition and favorability still deeply affects consumers' choices. Consumers' trust in brands cannot be established overnight. It requires companies to work hard over the years, continue to innovate, and deeply understand and meet consumer needs. Its stability is directly related to the long-term development of the company.

In the history of China's commercial development, the so-called public opinion will also affect the final competition for the control of the company. A typical example is the "civil war" of Gome in the early years. Professional managers and capital hoped to get rid of the shadow of the major shareholder and become a listed company with a governance structure more in line with Western public companies. However, in the face of surging public opinion, although the professional managers won the vote at the special shareholders' meeting, they eventually died for personal reasons. Gome returned to the family of the major shareholder Huang Guangyu.

For Wahaha, if the trust of consumers completely collapsed just because of a resignation incident, it would undoubtedly be a huge loss for a long-term brand, and it would not be worth the loss. Therefore, the shareholders finally reached an agreement to let Zong Fuli return, more to stabilize the morale of the troops.

Successively took over many companies of his mother

At present, Zong Fuli's strategy of "retreating but not quitting" has temporarily eased the controversy in public opinion, and the "friendly negotiation" of shareholders is more like a delicate balance of power, which has temporarily calmed the storm. After all, the group does not hold a controlling stake in any Wahaha-related companies, and the market is still in Zong Fuli's hands.

According to Tianyancha, Wahaha Group currently has direct investments in a total of 15 companies, of which 3 have abnormal operating conditions and 12 have normal operating conditions, and the shareholding ratio of any of them does not exceed 50%.

On the other hand, Zong Fuli personally holds at least 51% of the shares in 5 companies, including Hangzhou Wahaha Food Co., Ltd. In a sense, the main connection point of Wahaha companies is Zong Fuli, not Wahaha Group.

In the Wahaha Group system, the Zong family has established a huge industrial group, including Hongsheng Beverage Group and Hongzhen Investment. Tianyancha shows that there are as many as 179 companies associated with Zong Fuli. Zong Fuli has invested in 27 subsidiaries through Hongzhen Investment. Zong Fuli's personal company involves many fields, including but not limited to beverages, packaging, e-commerce, marketing, advertising and investment. The close connection between her personal company and the Wahaha Group enables her to have an important voice in the group's decision-making and operations, and her influence and control should not be underestimated.

But the subtle thing is that not long ago, Zong Fuli's mother Shi Youzhen resigned as a director of Hongsheng Beverage Group Co., Ltd., and Zong Fuli's position was changed from chairman to executive director. During the period when the resignation storm was brewing, Zong Fuli took over several companies of her mother Shi Youzhen, which also showed the strong backing behind her. Her mother Shi Youzhen resigned as the chairman of Suqian Hengfeng Food Co., Ltd., which was jointly held by Hengfeng Trading and Hongsheng Beverage Group, and Zong Fuli took over as executive director. At the same time, she also resigned as the chairman and director of Shaoguan Hengfeng Beverage Co., Ltd. and Guangzhou Hengfeng Beverage Co., Ltd., and Zong Fuli took over as executive director of these companies.

Today, Zong Fuli seems to be reproducing the actions of her father in the Dawa dispute many years ago. If the joint venture company was hollowed out, the internal structure of the Wahaha Group now seems to reveal a sense of "empty appearance", and the real core strength and production capacity advantages have not yet been fully released. Just like her father, Zong Fuli controls more production capacity in Wahaha companies and can use the Wahaha trademark. Perhaps this is also an important reason for her temporary "reversal" of the situation today.

The succession challenge is far from over

But you have to know that the ownership of the "Wahaha" trademark is still in the hands of the Wahaha Group, which is full of uncertainties. When Zong Qinghou used state-owned assets to drive Danone away, he had already lost the opportunity to truly control Wahaha. In addition, when Zong Qinghou was alive, whether Zong Fuli was capable of taking over the Wahaha Group was also a matter of great controversy within the team. Now it will be even more difficult for Zong Fuli to turn the situation around on her own.

The difficulty of power transfer and the intensification of internal conflicts are all problems that family businesses cannot avoid. A set of statistics from McKinsey once explained the inheritance risks of family businesses: the average lifespan of family businesses around the world is only 24 years, less than 30% of family businesses can be passed on to the second generation, and less than 13% can be passed on to the third generation. After three generations, only 5% of family businesses can continue to create value for shareholders.

Zhao Hejuan, founder of Titanium Media Group, believes that Zong Fuli's return to work may temporarily calm the storm, but it does not mean that even if she takes over, the future will still be full of variables. Because whether she takes over or not ultimately depends on two points: "One is whether she has equity control, and the other is whether she has actual control."

For Zong Fuli personally, the pursuit of actual control over the group cannot be achieved simply by relying on the concentration of equity. Even her father Zong Qinghou did not easily achieve this during his lifetime. Therefore, she needs to explore a more complex and strategic path. On this road, winning the trust and support of shareholders and building a deep trust relationship with employees will be two indispensable cornerstones. At the same time, whether she can lead Wahaha out of the long-term weak operating challenges and let performance speak for itself is also crucial. You know, achieving actual control over the group is not something that can be achieved overnight, but a long and challenging journey, which may have just begun now.(This article was first published on Titanium Media APP, author: Zhao Chenhan, editor: Fang Yu)