Stories behind top Asian brands

How four generations left their mark in Li & Fung

Li & Fung’s story -- its establishment, growth, prosperity and future challenges -- is Hong Kong’s history writ small. Here’s how four generations of one of the city’s most storied families left their mark on Hong Kong.

PUBLISHED : Saturday, 01 April, 2017, 8:16am
UPDATED : Wednesday, 27 June, 2018, 8:24pm

Li & Fung was founded in 1906 in Guangzhou by entrepreneurs Li To-ming and Fung Pak-liu, the great-grandfather of the current chief executive Spencer Fung, as one of the first solely Chinese-funded companies to engage in direct exports from China.

From a startup focusing on exporting Chinese porcelain, silk, rattan ware, handicrafts and fireworks to the West, the company has morphed into a multinational with 22,000 employees in over 250 offices and distribution centres in more than 40 markets in the Americas, Europe, Africa and Asia.

Last year it sourced 65 per cent of its revenue from apparels and 35 per cent from hard goods such as furniture, toys and home ware.

The United States contributed 64 per cent of its turnover, compared to 17 per cent by Europe, 12 per cent by Asia and 7 per cent from the rest of the world.

In 1937, Fung sent his second son Fung Hon-chu, to set up an operation in Hong Kong to handle the shipping of its goods.

In the four decades since, Li & Fung prospered along with Hong Kong’s growth into a manufacturing and export hub while mainland China, ravaged by war and revolution, turned inwards. The company became one of the city’s largest exporters of garments, toys, electronics and plastic flowers.

Operations were modernised in the early 1970s when Fung Hon-chu’s sons Victor Fung Kwok-king - Spencer’s father - and William Fung Kwok-lun - joined the firm after returning from studies and careers in the United States.

It was listed on Hong Kong’s stock exchange for the first time in 1973, becoming the most sought-after initial public offering in 14 years, when its shares were overbought by 113 times.

After branching out into toys and convenience stores retailing in 1985, it was privatised by the Fung brothers in 1989 in one of the city’s first management buyouts.

Subsequent restructuring saw the firm’s sourcing and trading business re-listed in 1992.

In the subsequent decade, it bought out competing trading houses, including Inchcape Buying Services, and Swire Pacific’s Swire & Maclaine unit, and apparel trading firm Camberley.

In 2000, Li & Fung bought rival Colby Group for HK$2.2 billion, creating the world’s largest sourcing network for retailers.

Its buying spree continued for just over another decade, including US apparel brand Timberland, private label firm American Marketing Enterprises and leading US handbag importer Van Zeeland. It bought 19 companies in 2011 alone, bolstering its product design capability, customer network and product range.

It also entered into wholesale distribution in the US, as well as consumer and healthcare distribution in Asia, but the former had to be restructured subsequently to cut costs due to disappointing performance, while the latter was sold to allow the firm to refocus on its sourcing and trading business.

Li & Fung said in mid-2015 it would form its first mainland China venture with two Chinese department store operators to develop own-brand products, part of its strategy to tap into growing consumer demand in Asia.

It aimed to create one to three private labels and up to six licensed brands over three years and may open up to 300 stores or store-in-stores to realise up to 1 billion yuan in sales.

The first few of these store-in-stores will be launched within a few months selling ladies fashion, children’s clothing and homeware, chairman William Fung said on Wednesday.

Victor Fung, a Harvard finance professor before returning to Hong Kong in 1976, led the firm’s development of the supply chain infrastructure for decades.

Since handing over the chairman’s seat to his younger brother William in 2012, Fung had been spending more time as the elder statesman of Hong Kong business, serving on the city government’s Economic Development Commission and as a delegate to the Chinese People’s Political Consultative Conference (CPPCC).

Li & Fung’s stock performance hadn’t been kind to investors, tumbling almost 84 per cent to HK$3.37 on Friday, from its peak of HK$20.7 in January 2011.

The stock was dropped from the city’s Hang Seng Index on March 6 during the benchmark’s quarterly review, and replaced with Chinese carmaker Geely Automobile Holdings.