Chapter 27 Nanyang Brothers

In April 1937, Song Ziwen was "invited" to serve as the chairman of Nanyang Brothers Tobacco Company, which was one of his masterpieces in taking over many well-known local enterprises.On this day, it has been 14 years since Jian Zhaonan (1870-1923), the founder of Nanyang, passed away suddenly. In the past 30 years, this largest national tobacco company in China has fought against British American Tobacco, the global tobacco king, and achieved great success. An eye-catching record, but in the end it is still inevitable that it will end in poverty. In 1881, American engineer James Bonsack invented the continuous production cigarette rolling machine, which directly gave birth to the prosperity of the modern tobacco industry.It is said that the first thing that an American entrepreneur named James Duke said after hearing the news was, "Bring me the map." When the map was unfolded, what he was looking at was not the map, It was the following description, and soon he found a legendary number, "Population: 340 million." Duke said, "That's where we're going to sell cigarettes." The "there" he was referring to was, of course, China .It is a habit of Western entrepreneurs to imagine the vastness of the Chinese market in terms of population.Duke founded British American Tobacco, which soon became the overlord of the global tobacco industry. (British American Tobacco is a consortium after the merger of American Tobacco Company and British Imperial Tobacco Company. It was founded in 1902 and headquartered in London, but has always been led by Americans.) In 1902, British American Tobacco set up a factory in Lujiazui, Shanghai, and started Du The long-awaited conquest of the Far East.It established large-scale tobacco factories in Shanghai and Hankou, and its employees reached 13,000 in 1915. It was the largest industrial enterprise established by the West in China. It planted tens of thousands of acres of American tobacco leaves in the North China Plain, with 300,000 households A total of about 2 million farmers are engaged in this industry.British American Tobacco has also established an astonishing, blood-vessel-like sales system. In 1907, a reporter saw during an interview in Kaifeng, Hebei, that "the whole city is covered with thousands of dazzling billboards." A reporter saw in Xi'an, "On the city gates, on the city walls, on every empty wall or signboard in the streets and alleys, on the brick bases of the pillars in front of the yamen, there are huge advertisements of British American Tobacco everywhere. painting."

The first local tobacco factory was Sanxing Tobacco Factory founded by Sheng Xuanhuai in 1903, which was soon annexed by British American Tobacco. In 1905, brothers Jian Zhaonan and Jian Yujie (1875-1957) founded Nanyang Brothers Tobacco in Hong Kong with a share capital of 100,000 yuan. Two knife sharpeners and four cigarette rolling machines.Born in Nanhai County, Guangdong Province, the Jian brothers came from a poor family. They went abroad to make a living since they were young. They once ran a porcelain shop and a shipping company in Japan.As soon as Nanyang Tobacco was founded, it was "dismissed" by British American Tobacco. It accused the Hong Kong court that Nanyang's "White Crane" brand cigarettes were similar to "Rose" brand cigarettes from packaging to trademark patterns. Nanyang lost the lawsuit and was forced to publicly burn all printed cigarettes. nice logo.The company announced its liquidation auction in 1908. After that, the Jane Brothers raised funds again to re-register and start construction.In the following years, Nanyang Tobacco has been sold in South Asian countries such as Singapore and Indonesia.Until 1915, Jian Zhaonan thought the time was ripe and began to expand the Guangzhou market, so a tit-for-tat business war started.

British American Tobacco employs some very vicious methods of competition.It secretly bought a large number of Nanyang cigarettes, stored them, waited until the cigarettes were moldy, and then sold them to consumers at a low price, which greatly damaged the reputation of Nanyang.It also wrote a newspaper, accusing Nanyang of relying on Japanese raw materials, machines and technicians, and being supported by dirty Japanese capital.In addition, it also accused Nanyang of counterfeiting the trademark of British American Tobacco in the Hong Kong court, and distributed leaflets threatening all distributors, warning them that if they sell Nanyang cigarettes, they will be "prosecuted by the authorities."

Jian Zhaonan's countermeasures are also quite tough. He has two ways to deal with British American Tobacco. One is a firm low-price strategy, and the other is to play the "patriotic" card fiercely. This is almost the common logic of Sino-foreign business wars for a century.The packaging and style of Nanyang Brothers are very similar to British American Tobacco, but the price is 30% lower.Jian Zhaonan proposed "Chinese people please smoke Chinese cigarettes", and he actively participated in charitable donation activities. There are floods in Guangdong every year. Jian Zhaonan organized 10 relief ships, which were filled with giant colorful flags of "Nanyang Brothers Tobacco Company Relief", which is very eye-catching Parked in front of a theater on Guangdong Haibin Avenue.He also published a large advertisement, proposing that "relief for refugees, orphans are anointed; it is all right to rescue the drowning; my fellow Cantonese, who does not recognize it; what is the reason, good cause and good result; repaying it with virtue, revitalizing the land It’s easy to use imported goods, but I don’t know where to die.” The last two sentences are almost like curses.In response to the rumor tactics of British American Tobacco, he also secretly paid people to distribute British American cigarettes for free at some funeral activities, and specially bought coffin bearers to carry cigarettes in their mouths to leave the funeral, so that people have the impression that buying British American cigarettes will bring "unlucky" impressions .After gaining a firm foothold in Guangdong, Jian Zhaonan quickly went north and invested 1 million yuan to set up a cigarette factory in Shanghai with more than 1,000 employees.Obviously, British American Tobacco has encountered a real opponent.Jian Zhaonan is not only good at marketing, but also very expert in factory management and technological innovation. Around 1915, the national industry was in a period of vigorous growth, and the boycott of foreign goods came one after another. King".

In this tobacco war, in addition to the dazzling marketing duel, there is another incident that is worth studying but neglected. Nanyang Brothers and British American Tobacco had two secret capital cooperation negotiations.In 1917, British American Tobacco felt that it was difficult to kill the Nanyang brothers in one fell swoop in the market, so it proposed a merger request.This caused a huge disturbance within Nanyang Brothers. Jian Zhaonan tried his best to resist in the market competition, but unexpectedly, he was also an active promoter of the merger.In his view, the Nanyang brothers are in troubled times, and it is difficult to survive with only their own business capital, so they must rely on something.At the beginning, he tried to cooperate with the Beiyang government to obtain government support through the "government-supervised and commercial-run" model.However, after several rounds of contact, he was disappointed, thinking that "officials do things in a ghostly manner... It is difficult to get along with officialdom and eat a load of amomum." Instead, he expressed his opinion on the merger plan proposed by British American Tobacco. Interested.The merger of Nanyang and Anglo-American has many commercial benefits. First, it can avoid the pressure of price wars and form market monopoly profits. Second, it can learn the most advanced manufacturing technology and benefit from the huge procurement and sales system of British American Tobacco. Third, Then you can enjoy various privileges of foreign companies. At that time, the tax payment pressure of the Nanyang Brothers was far greater than that of British American Tobacco. The former had to pay 3 to 10 yuan per box of cigarettes. The government has reached a "arrangement" policy, and each box only needs to be calculated at 2 yuan.Therefore, in Jian Zhaonan's view, merger should be the best policy. (The profit rate of British American Tobacco in the Chinese market is very high. According to Gao Jialong’s research, selling the same brand of cigarettes in China and the United States, although the price in the Chinese market is 40% lower than that in the United States, the profit is still higher than that in the United States. profit.)

However, the merger case aroused fierce resistance within the Nanyang Brothers, almost all of the Jian family opposed it, and their only reason was "violating the principle of patriotism".Jian Yujie, the younger brother who started the business with Jian Zhaonan, was the staunchest opponent, arguing that even though the deal was legal and profitable in the long run, it was immoral.One of their cousins ​​wrote in a letter, "Our industry is in its infancy, and there are very few successful ones. Our company's products are in competition with the outside world. In recent years, it has been booming. It is not only an honor for individuals, but also for the country. Light. If you follow it because of lures, you will be reviled by future generations in the future." Jian Zhaonan does not take these views seriously. He thinks that the so-called patriotism of the brothers in the clan is an expression of injured national self-esteem. If I am defeated, can the people of my country strive to make up for my loss?" He considers himself a Darwinist and a cosmopolitan, "What people can do to create happiness for the world society, fight for the rights of the country, and bring glory to the country is mostly money." , "People with money respect them, but people without money will be despised. The world is like this, so there is nothing to do." In order to continue the image of China Tobacco and its nationalist advertising strategy, Jian Zhaonan also reached a tacit agreement with British American Tobacco. The merger of the two companies will be carried out in secret. Nanyang will still be able to attack rivals in the newspapers, and the top executives of the two companies will avoid attending social events together.Jian Yujie and others scoffed at such a "tacit agreement". They held a family meeting and decided that if Jian Zhaonan insisted on going his own way, he would be expelled from the clan. This was the most severe and humiliating punishment at the time.

From March to November 1917, the merger deal finally aborted.During the "May 4th Movement" in 1919, British American Tobacco once again launched a public opinion attack on Nanyang Brothers. It found that as early as 1902, when Jian Zhaonan was running a shipping company in Japan, he became a Japanese citizen and changed his name to Matsumoto Terunan.This fact plunged Nanyang Brothers into a whirlwind of scandals. The Ministry of Agriculture and Commerce in Beijing announced that it would revoke Nanyang's license and declare it to be a Japanese company.Jian Zhaonan announced his renunciation of Japanese nationality and invited more than a dozen social groups from Guangdong to visit the factory, but it was still difficult to appease public doubts.Therefore, he made a risky decision, announcing the immediate issuance of shares worth 10 million yuan in the open market, at 20 yuan per share, only to Chinese people.Nanyang stocks were popular, Zhang Jian, Yu Qiaqing, Zhu Baosan and other well-known entrepreneurs invested in the shares one after another. The number of shareholders reached 15,500. The shares of the Jian family were diluted from 94% to 60.6%. Jian Zhaonan resolved the crisis in this way.In the following three years, Nanyang Brothers entered the peak period of growth, with an average annual profit of 4 million yuan.

Interestingly, in 1920, British American Tobacco proposed a merger again, and it proposed very favorable conditions. In the new merged company, the shareholding ratio of British American Tobacco and Nanyang Brothers was 75:25, and the annual profit of the former was 1500 at that time. 10,000 yuan, four times that of the latter.Although Jian Zhaonan was almost discredited not long ago, he still did not change his original intention. He even flew to the United States to negotiate face-to-face with James Duke. In February 1921, the merger contract between the two parties was ready, but at the last moment, Jian Yujie and other members of the Jian family refused to sign. In 1923, Jian Zhaonan died suddenly at the age of 53, and the matter of merger was never mentioned again.

After Jian Zhaonan's death, Nanyang Brothers' business gradually declined. In 1924, the profit dropped to 479,000 yuan, which was only 12% of that of the previous year. Mismanagement, market confusion, and clan corruption appeared within the company.Gao Jialong’s research shows, “Jian Yujie himself is not corrupt, but he connives at the illegal behavior of every department in the company.” In 1927, the Nanjing National Government was established and immediately announced a substantial increase in tobacco tax to 50%. More than half of them closed down, and British American Tobacco strongly rejected this tax policy.As the largest tobacco company in China, it is conceivable that the Nanyang Brothers have been hit. British American Tobacco took the opportunity to cut prices sharply to snatch the market.Ironically, the Nanyang Brothers were one of the earliest donors to the KMT regime, as early as 1911, the Jian brothers donated large amounts of cash to Sun Yat-sen, and in 1922, they donated 20,000 yuan in provisions to the KMT army in Guangdong After Chiang Kai-shek entered Shanghai, it donated another 500,000 yuan, but it became the first batch of policy victims. Scholar Zheng Youkui believes that "the main purpose of China's tariff policy is to increase fiscal revenue, while protecting domestic industries is still in the process." Secondly." In 1928 and 1929, Nanyang Brothers suffered a huge loss of 5.45 million yuan. Although they recovered in the next few years, their annual profit never exceeded 600,000 yuan, which was only a fraction of that of Jian Zhaonan's era.In the early 1930s, the Japanese army occupied the Northeast, and Japan Tobacco quickly covered the three northeastern provinces and the North China market, and Nanyang Tobacco was further squeezed.Under the dangerous pressure of survival, Jian Yujie had no choice but to ask the government for help, demanding to turn Nanyang into a "state-owned enterprise". In order to avoid official and unofficial blackmail, he also hired Du Yuesheng and Song Ziliang as directors of Nanyang.By 1937, Jian Yujie asked Song Ziwen to borrow money, and Song Ziwen took the opportunity to snatch 27% of the shares and become the chairman of the company.For the first time since its founding in 1905, the Jane family lost control of the company.

After the "July 7th Incident", Nanyang's factory in Shanghai was bombed by Japan, and the mainland market was almost completely lost.British American Tobacco did not withdraw from the Chinese market until the outbreak of the Pacific War in 1941. In 1945, after the end of World War II, British American Tobacco returned quickly, but Nanyang Tobacco, which was controlled by Song Ziwen, was no longer as brave as before, and its annual output was less than one-tenth of the former. Sherman Cochran, director of the History Department of Cornell University, has done the most research on the Nanyang Brothers. In his book "China's Big Enterprise: Sino-foreign Competition in the Tobacco Industry 1890-1930", he believes that Jian Zhaonan is rare and possesses Entrepreneurship of the "Schumpeterian entrepreneur."