Zong Qinghou

Water tycoon still keen to expand, despite setbacks

PUBLISHED : Monday, 05 March, 2012, 12:00am
UPDATED : Monday, 05 March, 2012, 12:00am


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Zong Qinghou, one of the richest men in China, has suffered setbacks with his plan to turn his bottled-water business into a conglomerate spanning retailing, drinks, and children's clothing, but the billionaire said he would make breakthroughs in the retailing industry this year.

The chairman and general manager of Hangzhou Wahaha Group had originally planned to open retailing outlets on the mainland last year, but failed to find a proper location.

'It's more difficult than I expected. But I'm confident that we can make it this year,' said Zong (pictured), who was ranked the third richest man in China by Forbes last year with an estimated wealth of US$5.9 billion.

Zong said the company would run shopping malls, supermarkets, luxury-brand discount stores and convenience stores across the country, and the first outlets would be located in Zhejiang and Hunan provinces. He said he hoped to list the retailing arm in the future.

The move is part of Wahaha's efforts to expand into more profitable sectors as the bottled-water industry slows due to surging costs, particularly for sugar, oil and labour.

The largest soft-drink maker on the mainland in terms of sales posted revenue of 67.8 billion yuan (HK$83.4 billion) last year, up 23.65 per cent year-on-year, but profit rose only 6 per cent to 6.9 billion yuan.

Early last year, Zong expressed interest in investing in a rare-metal mine in Canada, but abandoned the plan, saying the price was too high. He did not specify the rare metal.

His plan to acquire a Japanese yogurt manufacturer also fell through.

'We are very careful. It's hard to get into a new industry if you screw it up at the beginning,' said Zong, who was in Beijing yesterday to attend the National People's Congress.

Despite the frustration over overseas expansion attempts, the entrepreneur said he had never backed off from plans to diversify his business.

He said the group was in talks with the South African government and businessmen about building drink-bottling plants and funding agricultural projects in the country.

His company had also talked to the American Dairy Science Association about increasing the import of milk powder from the United States. Wahaha tapped into the high-end baby formula market with the brand Edison in 2010, which generated about 1 billion yuan last year.

Zong expected Wahaha's sales revenue would increase 25 per cent to 85 billion yuan this year, but rising costs of raw material would remain a major concern.

'China's economy will slow down this and next year. But the consumer sector will be a sunrise industry in coming years and has strong growth potential, so we'll still focus on domestic demand in the foreseeable future,' he said.

Zong, 67, expressed no plans to retire.