Chapter 32 2. Wahaha's "Four Basic Principles"

Throughout the 1990s, Chinese enterprises have been in an embarrassing situation of "love-hate" for foreign capital. The world economy is entering the era of globalization, and the wave and temptation of capital flow integration are irresistible.Over the past 20 years of reform and opening up, the inflow of foreign capital into China has reached 400 billion U.S. dollars, ranking among the top among developing countries.Without the powerful "engine" of foreign capital, China's double-digit annual economic growth rate at the end of the last century would have been impossible to achieve.

But this was accompanied by the exclamation of "wolf is coming", and the dilemma of a large number of enterprises "waiting for death without joint venture, seeking death for joint venture".As a result, the impassioned generosity of simple and xenophobic narrow nationalism has emerged one after another in the past ten years. When we go to one extreme, it is often the beginning of falling to the other extreme. The voice of "enterprises are economic animals whose sole goal is to pursue profits, and nationality is a burden that enterprises cannot bear" has also become louder and more popular in the media everywhere.

You may wish to transcribe a paragraph as follows: Do you want "flags" or "benefits"?Do you want "stomach" or "face"?When people worry about the survival of Chinese enterprises, they often point the problem to the policy environment or the legal environment first, but at the same time they ignore another environment, which is the social and psychological environment.It is composed of a series of value judgments such as national sentiment and traditional morality. It is this environment that virtually makes enterprises bear the "cross" that should not be carried, carrying too many values ​​​​and moral criticisms that should not be carried... When , can our enterprise pursue "profits under the sun" openly and without worries?

Indeed, we have to stand at the crossroads where "it's hard to have both."What's more, with the rapid development of the international economy and the turbulent situation, what is a national enterprise and what is a national brand still needs a new interpretation. In the hustle and bustle, we are often confused and at a loss for what to do.However, Wahaha insisted on going its own way, and Zong Qinghou had his own "joint venture concept".He believes that in today's world of great integration of the international economy, especially for an enterprise in a developing country, giving up foreign capital is tantamount to giving up development opportunities.However, marriage with foreign capital requires not only courage, but also an open mind and superb operating skills.

In the joint venture agreement between Wahaha and Danone Group, four items have become the focus of great attention.These are the "four basic principles" that Zong Qinghou insisted on negotiating: first, the "Wahaha" brand will still be used after the joint venture; thirdly, middle-aged and elderly employees over 45 years old are not allowed to dismiss; fourthly, the benefits of "Wahaha"'s original retired employees remain unchanged, and the income of existing employees can only increase incrementally, not decrease. The core of the "Four Basic Principles" is obviously to uphold the "Wahaha" brand.

On June 22 of the same year when the joint venture with Danone Group started, Zong Qinghou and Zhejiang Nice Group Chairman Zhuang Qichuan and other 14 domestic famous entrepreneurs jointly signed the "Declaration on Promoting Domestic Famous Brands" in Hangzhou. The "Declaration" solemnly declares that a brand is a symbol of corporate wealth, a symbol of a region's economic development, and a symbol of a country's economic strength.You must cherish domestic brands like you love your own eyes, and domestic brands will definitely have a valuable place in the Chinese market and the world market.

"Capital has no borders, products and technologies have no borders, but brands have borders." Zong Qinghou said, "Brands are the soul. Once the flag falls, people's hearts will disperse." In the blending and collision of Chinese and foreign capital for more than ten years, the brand competition is undoubtedly the most intense war without gunpowder. After a rough review, it is not difficult to find that free transfer and discounted shareholding are two common outlets for the original brands of Chinese companies during joint ventures Hupao (beer), which was not evaluated at the time of the joint venture;

Ballet (cosmetics), not evaluated at the time of the joint venture; Ariel (washing powder), free transfer; Peacock (television), with a discount of US$3.15 million; Jiehua (shampoo), with a discount of US$1.35 million; Jieyin (toothpaste), a discount of 10 million yuan; Golden Rooster (shoe polish), with a discount of 10 million yuan; Taihu water (beer), with a discount of 25 million yuan. We might as well understand these two ways out as "actively disarming". Today, most of these once-famous brands are "smelling and dying". The third way out is cautious lend-lease, which is still costly.A typical representative is "Maganet" Wandering Notes. "MAXAMIN" is an old famous brand in Shanghai's daily chemical industry. Shanghai Jahwa and Shanghai Toothpaste Factory have the right to use the brand of "MAXAMIN" cosmetics and "MAXAMIN" toothpaste respectively.

In 1991, Shanghai Jahwa United Co., Ltd., the oldest cosmetics company in China, formed a joint venture with Johnson & Sons of the United States with 2/3 of its fixed assets, and transferred its own "Macan" trademark at an annual price of 12 million yuan. The fee is "leased" to the joint venture for a period of 30 years. In the 1980s, "MAXAC" cosmetics created many firsts in domestic cosmetics: the first mousse, the first two-in-one shampoo, the first hybrid perfume, etc. In 1990, the net sales of the United States and Canada reached 300 million yuan, accounting for one-tenth of the total sales of the national cosmetics market at that time.However, since then, "Meganet" has almost become a beauty in the cold palace. The joint venture company with 60% holdings of SC Johnson in the United States shelved it, and the advertising was pitifully small, and the brand influence and sales plummeted.In desperation, in November 1994, Ge Wenyao, who resigned from the position of the Chinese general manager of the joint venture company, returned to Shanghai Jahwa. After consultations with many parties, he "redeemed" the right to use the brand at an accumulative price of 405 million yuan. Maxam" took her back to her natal home.

Coincidentally, the fate of another stunning beauty "Megajing" toothpaste was exactly the same. In the same year when Shanghai Jahwa Maxam returned to her mother's home, Shanghai Toothpaste Factory and British Unilever started a joint venture "honeymoon".According to the agreement, Unilever, the controlling shareholder, also obtained the right to use the trademark "Meganet" toothpaste from Shanghai Toothpaste Factory by means of "lease", and paid an annual fee of 1.8% of sales. The first "lease" period ended at the end of 2000.Drawing lessons from the past, Shanghai Toothpaste Factory and Unilever agreed that the sales volume at the end of the brand lease period must be greater than the sales volume at the beginning of the period, otherwise the Chinese party has the right to take back the right to use the trademark.In addition, during the cooperation period, the joint venture company must each account for 50% of the brand maintenance and promotion expenses invested by both parties.

These hopeful insurance measures ultimately failed to save "Meganet".Statistics show that Unilever invests more than 70 million yuan in advertising fees for its "biological son" Jienuo every year, but Maxam was "refrigerated" in the media and disappeared for three consecutive years. From the beginning of the joint venture, the annual sales of 60 million Branches all the way down to 20 million. At the end of 2000, when the lease expired, Shanghai Toothpaste Factory categorically rejected Unilever's request to renew the contract for three years, and took back the right to operate the "MAXAM" brand. All of a sudden, foreign capital's promotion of "elimination joint ventures" and "conspiracy theories" of brand joint ventures appeared in the newspapers one after another. Zong Qinghou believes that although there is suspicion of pan-politicizing the operation of enterprises, the increasingly obvious trend of sole proprietorship of foreign capital in recent years seems to provide us with a reference for thinking. In the early days of reform and opening up, the state had strict control over the entry of foreign capital into the Chinese market. At the same time, this vast market was unfamiliar and mysterious to foreign capital, with immature laws and regulations and opaque government operations.Therefore, joint ventures and cooperation with Chinese companies are an inevitable choice.With the expansion of China's openness, the improvement of the market environment, and especially the arrival of joining the World Trade Organization, foreign capital has begun to continuously dilute the presence of the Chinese side through substantial capital increase and share expansion, or simply set up wholly-owned companies.Interest is the most reasonable explanation for all corporate behavior. When the brand of a Chinese company conflicts with the interests of foreign capital, the former can only be forced to give way. Zong Qinghou has always been very clear about how to make full use of the advantages of resource integration without losing the initiative of his own destiny. As one of the core decision-makers of Wahaha Company, Party Secretary Du Jianying recalled that what Lao Zong repeatedly emphasized to the decision-makers at that time was, "First of all, we must find out what problems the joint venture is to solve the company's problems and how much the company will pay to solve them. It is cost-effective to exchange for a joint venture, and this account must be settled clearly. We must never give up long-term benefits for a little immediate benefit." In 1995, before the joint venture with Danone Group, Wahaha’s total profit and tax amounted to 177 million yuan, ranking 19th in the ranking of the top 500 Chinese industrial enterprises in the comprehensive evaluation first launched by the state, and ranked first in Zhejiang Province.In the same year, according to the evaluation results released by Beijing Famous Brand Assets Appraisal Co., Ltd., the brand value of "Wahaha" was 2.179 billion yuan. Strength and the mentality held by it are the basis for equal dialogue on the negotiating table.During the joint venture negotiations with Danone and the previous Goldman Sachs and more than a dozen multinational groups, Zong Qinghou insisted on the "four basic principles" unwaveringly.In the end, Danone was chosen, and it was signed after the other party injected 45 million US dollars at a time. Regarding key brand issues, Wahaha and the joint venture have adopted a "paid use" method, and the right to dispose of the brand is still in the hands of Wahaha.Moreover, since the chairman and general manager of the joint venture company are held by Wahaha, Danone did not send anyone into the management, nor did it bring in a new brand. The "Wahaha" brand is actually exclusive in the joint venture company.In the past few years, the company has invested more than 1 billion yuan in advertising expenses, and the "Wahaha" brand is the only beneficiary. "The result of adhering to the 'four basic principles' is that we have grown a large tree of Chinese brands on the fertile soil of foreign capital." Zong Qinghou said.