A century-old wealthy family that rose from Shanghai

Mid-December, Hong Kong.

Global Group Building.

Chen Guangliang reviewed the data of Global Shipping and found that Global Shipping had a cash flow of up to 2.8 million US dollars at that time; moreover, it was continuing to grow at a rate of about 2 million US dollars per year, which can be described as a money-making machine.

In fact, the original plan was to pay off the debt by the end of this year, meaning the 2000 million-ton fleet would be debt-free. But now, not only are they debt-free, they also have $2.8 million in cash flow on their books.

What is going on here?
Simply put, in the past year, Global Shipping sold 200 million tons of second-hand vessels, mostly non-VCLL tankers. These vessels were sold at very good prices, given the favorable shipping market and inflation.

Secondly, after selling its Japanese securities assets, Worldwide Shipping earned a net profit of US$6000 million.

So now, not only is there no 'debt' (there is debt, but the repayment funds have been prepared), but there are also more than a billion Hong Kong dollars in the account (the exchange rate is about 1 US dollar to 5.6 Hong Kong dollars).

Of course, at this time, Worldwide Shipping only had a fleet of 1800 million tons, a reduction of 200 million tons; although the oil crisis hit and the tanker business suffered a great blow, Worldwide Shipping's VCLLs were mostly under long-term contracts, so they were not greatly affected.

On the other hand, when Middle Eastern oil production recovered in 1975, countries like Japan, in addition to developing nuclear power, focused more on importing oil for reserves.

Therefore, during the five years from 1975 to 1979, the global oil transportation capacity will increase significantly.

Understanding these situations is undoubtedly a great help in the shipping industry.

However, Chen Guangliang naturally did not intend to expand his fleet at this time. When his VLCC fleet (about 13 million tons) contracts expired in 1975, he planned to sign another three or four years of contracts until the end of the 1970s when he began to reduce his fleet again.

A short while later, Chen Guangcong, Chen Wenming, and Chen Wenbo walked in.

Today, the Global Group has four main business segments: shipping, container terminals, trading, and aviation.

However, the Global Group will next focus on real estate investments. Although the timing for acquiring Wharf Holdings is not yet right (Hongkong Land's stake is still relatively high), it does not preclude investing in international assets.

"Next year will be the year our Global Group enters the real estate industry, so we need to be prepared. We will use our cash flow to purchase a substantial amount of properties in Manhattan and Tokyo for long-term rental income."

Chen Wenming asked, “Father, although Hong Kong is small, this oil crisis will inevitably release a lot of assets. Although Cheung Kong is the family’s real estate flagship, it rarely buys small and medium-sized properties for rental. Can we invest in some non-core properties in Hong Kong?”

The father was careful not to 'monopolize' the business, but he felt that investing in some non-core properties would not have any impact.

Chan Kwong-leung said, “I have this in mind. When the time is right, we will own rental properties in Hong Kong, and they will be very lucrative. But next year, our global focus will be overseas.”

Global Group also owns properties in Hong Kong. This office building on Des Voeux Road occupies a large area of ​​20,000 square feet; it is expected to be redeveloped into a 30-plus-story office building. Global Trading also owns a 20-plus-story Grade A office building on Queen's Road Central, which is mainly occupied by Standard Chartered Bank, Guangdong Provincial Bank, and other banks.

Moreover, container terminals are considered to be properties.

Chen Wenming didn't press the matter further; he believed that if his father had it in the future, then it definitely would.

Of course, no one expected that Chen Guangliang was referring to the future of Wharf Holdings.

"Okay, we have already established a professional real estate investment department."

Chen Guangliang nodded and said, "If you invest in Japan next year, Cheung Kong will help you; if you invest in Manhattan, Amazon will help you."

This highlights the importance of family unity and strategic planning!
The Chen brothers, Wenjie and Wenkai, hosted Simon Donaldson, the president of the Canadian Imperial Bank, at the Shangri-La Hotel.

After the introductions, Chen Wenjie raised his glass and said to Simon Donaldson, "We have heard that the Canadian Imperial Bank of Commerce operates with prudence. This invitation to President Simon to visit Hong Kong is also to encourage your bank to expand in Hong Kong. Our Cheung Kong Group is willing to cooperate with your bank!"

Upon hearing this, Simon Donaldson exclaimed happily, "That's a great suggestion! In Hong Kong, Cheung Kong Holdings is a behemoth, and we would be very happy to cooperate with your company. But what exactly would the cooperation entail?"

He certainly knew that in Hong Kong, the Chan family was the 'real governor', wielding profound influence over Hong Kong's economy. And since Hong Kong had become a major global economic center, collaborating with the Chan family was an excellent suggestion.

But the other party must also want to gain something.

Chen Wenjie said, "We have two cooperation proposals: First, we are willing to cooperate with the Canadian Imperial Bank of Commerce to jointly establish a finance company. This finance company can invest in Hong Kong's real estate development projects and also participate in businesses such as housing loans, which is also a way for many foreign banks to enter Hong Kong."

Hong Kong is not yet an international financial city, and foreign banks face significant restrictions in their development there. For example, they are not allowed to open branches, even Citibank and JPMorgan Chase Bank are subject to these restrictions. Therefore, most foreign banks conduct their business through finance companies and representative offices.

Simon Donaldson immediately asked, "Just Hong Kong's economy?"

Isn't this an oil crisis?

Chen Wenjie said with a smile, "This time, the Hong Kong economy has plummeted, and the real estate and securities markets have crashed. This is not due to a political crisis, but rather the impact of the global economy. But as a banker, you should know that this is a good time to buy at low prices."

Simon Donaldson suddenly realized and said, "Okay, that's a very good suggestion. What's your second suggestion?"

Chen Wenjie said, "CK Asset Holdings hopes to raise some funds for development by establishing a secondary listing in Canada."

They have no shortage of funds; listing in Canada (which is essentially issuing new shares) is just a way for them to expand their international business.

“Okay, our Canadian Imperial Bank is willing to facilitate Cheung Kong Holdings’ listing in Canada. Moreover, as far as I know, there are many Chinese immigrants in Canada, and I believe they will be very interested in Cheung Kong Holdings’ shares.”

Thus, through Chen Wenkai's introduction, Cheung Kong Holdings began to associate with the Canadian Imperial Bank of Commerce, laying the foundation for its later foray into the Canadian business market.

By the end of the year, the Ping An Index had fallen to 560 points, a drop of more than 70% from its peak.

If anyone tries to buy at the bottom now, congratulations, you've bought halfway down the mountain, because the situation may be even worse in the coming year.

The impact of soaring oil prices has only just begun.

Prices in Hong Kong were also affected, rising across the board and making life increasingly difficult for residents. At this time...

CK Asset Holdings Limited.

Chen Wenjie is holding a high-level retail meeting at the Lane Crawford Group headquarters in the Lane Crawford Building.

This includes Richard, president of Lane Crawford Group; Bruce, president of Lane Crawford Department Stores; Li Pingshan, general manager of Wellcome Supermarkets; David, president of Lane Crawford Jewelry; Wang Qilin, president of 7-Eleven Convenience Stores, and other senior management personnel.

Chen Wenjie chaired the meeting in English: "Today's meeting is about the new landscape of the retail industry."

Upon hearing this, everyone was puzzled by the topic.

Hong Kong's retail industry today:

Supermarkets and department stores are developing in tandem, but supermarkets' market share is rising while department stores' market share is declining.

In the supermarket sector, Wellcome, a subsidiary of Lane Crawford Group, has the most stores and the largest market share, with 68 stores; followed by ParknShop, a subsidiary of Watsons, with 38 stores; and finally, Dairy Farm, a subsidiary of Hongkong Land Group, with only 30 stores.

In the department store sector, Japanese department stores grew increasingly powerful, but were quickly overtaken by Hong Kong supermarkets; therefore, Hong Kong's department store industry experienced a significant decline at this time. In the high-end department store market, Lane Crawford held a dominant position; in the mid-range market, Japanese-owned, Wing On, and Sincere were the three main forces, with Japanese-owned department stores excelling in product range, price competitiveness, and service advantages, thus Wing On and Sincere faced some pressure; low-end department stores, with their lower entry barriers, were quite numerous in Hong Kong.

At the same time, a new form of retail emerged in Hong Kong: the convenience store.

Lane Crawford's 7-Eleven convenience stores are practically a monopoly; however, the Fung family of Li & Fung Trading in Hong Kong has also introduced OK convenience stores, which have captured a portion of the market.

Now that the group's general manager, Chen Wenjie, is talking about a "new retail landscape" at this time, everyone knows that things are not simple.

As expected, Chen Wenjie continued, "Currently, the group has sufficient cash flow and can maintain good profitability; while our competitors in the retail industry, whether it is Hutchison Whampoa or Hongkong Land, are encountering problems to varying degrees. The more this is the case, the more we need to take the initiative to launch an offensive and further strengthen our dominance in the retail market."

Upon hearing this, the British executives' faces tightened. This was the destructive power of the second generation of the Chen family, and the main opponent was a British company.

Of course, they are senior executives at Lane Crawford, and the company provides them with generous salaries, so they naturally side with the company.

Now that CK Asset Holdings wants to become the leader in the retail industry and dominate Hong Kong, its other competitors are sworn enemies.

Lane Crawford Group President Richard immediately suggested: "Intense advertising and price reductions are the simplest and most effective business strategies. Price reductions at this time are most conducive to the loyalty of Hong Kong citizens to Wellcome and 7-Eleven convenience stores. After all, prices in Hong Kong are rising now, but we are going against the trend, which is undoubtedly a symbol of strength."

Wellcome Supermarket General Manager Li Pingshan immediately added, "That's right, President Richard makes a lot of sense. Moreover, to completely defeat the other two, we can wage a protracted war. The price reduction doesn't need to be too large, but as long as it lasts, it will be enough to wear down the other two competitors."

With everyone contributing their best ideas, a "promotional war" was undoubtedly ignited in Hong Kong.

Chen Wenjie finally made the decision: "Okay, then you should hurry up and try to officially start in early next year (1974) to give the people of Hong Kong a wonderful Lunar New Year."

"Yes, Mr. Chen."

Just after New Year's Day in 1974, before the festive atmosphere had fully set in on the streets of Hong Kong, a wave of "promotional frenzy" swept across television screens. Wellcome supermarkets and 7-Eleven convenience stores under the Lane Crawford Group, along with mid-to-low-end department stores such as Chung Hwa Department Store and Dah Sing Department Store, and even Lane Crawford Jewelry, launched a barrage of advertisements, all under the banner of "New Year Special Offers" and "Limited-Time Price Reductions".

Grains, oils, and daily necessities are reduced by 12%-15%, 7-Eleven breakfast sets are half price, jewelry offers "member-exclusive discounts," and Chung Hwa Department Store is even shouting the slogan "spend 100 and get 20 off."

The news sent Hong Kong citizens, already struggling under the weight of the stock market crash and oil crisis, into a frenzy. Clutching their crumpled wallets, they flocked to Lane Crawford's laid-back stores: at Wellcome supermarkets, housewives pushed shopping carts, snapping up rice and cooking oil; long queues formed outside 7-Elevens for breakfast; and the clothing section of Chung Hwa Department Store was packed with customers buying new clothes for their families. "Prices have been rising for over half a year, finally there's a place to save some money!" citizens exclaimed as they checked out. No one realized that behind this "people-friendly promotion" lay a brutal battle sweeping through Hong Kong's retail industry.

News of Lane Crawford's promotional blitz reached Hutchison Whampoa headquarters immediately. Looking at the promotional advertisements on his desk, Qi Dezun frowned deeply. At that time, he was already overwhelmed with problems—his stock market investments had suffered a major setback, his Indonesian operations were incurring heavy losses due to the turbulent situation, and Hutchison Whampoa's cash flow was stretched thin. Only Watson's ParknShop supermarkets could maintain stable profits, becoming the group's "lifeline."

"We must respond immediately!" The president of Watsons rushed into the office, his voice urgent. "Lane Crawford is clearly trying to steal our market share. If we don't lower our prices, ParknShop's customers will all go to Wellcome. Once we lose market share, it will be difficult to win it back!"

Qi Dezun remained silent. He was not unaware of the consequences, but if he followed suit with promotions, Watsons' already meager profits would be further squeezed, and it might even incur losses. And what Hutchison Whampoa needed most right now was money.

"If we don't follow, the market will disappear; if we do, our cash flow will dry up."

He muttered to himself, his fingers tapping unconsciously on the table. Finally, he steeled himself and said, "Follow suit! Tell ParknShop to also lower prices by 10% on grains, oils, and daily necessities, and double the advertising budget. We must retain the customer traffic in our existing stores!"

After the order was issued, ParknShop supermarkets urgently adjusted their price tags, and TV and newspaper advertisements went online overnight. However, compared to Lane Crawford's "deep pockets," ParknShop's promotions seemed less confident—the price reduction was 5% less than Wellcome's, and the advertising volume was only one-third of Wellcome's. Many customers, after shopping at ParknShop, would still turn around and go to Wellcome: "The same rice is two cents more expensive here than at Wellcome, why bother?"

Meanwhile, Henry Keswick, chairman of Hongkong Land Group, also received a report from his subordinates. More than a year ago, Hongkong Land acquired Dairy Farm Company through a share swap, which not only gave them access to prime land in Causeway Bay but also allowed them to take over Dairy Farm's Tai Lei Lin supermarket chain. For Henry, Tai Lei Lin was an "unexpected bonus" and a "stepping stone" for Hongkong Land to enter the retail industry. However, this "stepping stone" has now become a hot potato.

“Lane Crawford and ParknShop are both lowering prices. If Dali Lian doesn’t follow suit, the store will have to close down in less than three months.” The head of Landmark’s retail division said worriedly, “Now citizens only care about low prices. If we don’t make any moves, our customers will definitely be snatched up.”

Henry Keswick frowned, calculating in his mind. Hongkong Land had just completed the integration of the Dairy Farm Company, and most of its funds were invested in real estate development. Dairy Farm wasn't a core business of the group, so the resources it could allocate were limited. But he also knew that if Dairy Farm went bankrupt, it would be difficult for Hongkong Land to re-enter the retail industry.

“Lower the price!” he finally decided. “But we don’t need to compete head-on with Wellcome. We’ll select a few essential daily necessities and lower the price, such as eggs and toilet paper, by 2% more than Wellcome. Let’s stabilize our old customers first.”

As a result, Dali Lian also joined the promotional war, but it was a step behind Lane Crawford and ParknShop, and its price reduction strategy was more "conservative." The price war among the three giants was like a boulder thrown into a calm lake, quickly disrupting the landscape of Hong Kong's retail industry.

A strange scene unfolded on the streets of Hong Kong before the Lunar New Year: Wellcome, ParknShop, and Dairy Lane stores were packed with people, with long queues at the checkout counters; while across the street, small and medium-sized supermarkets and mom-and-pop shops were deserted, with shop assistants listlessly tidying up the shelves, looking at the bustling scene next door with worried expressions.

“I used to be able to sell 10,000 yuan a day, but now I can’t even sell 8000 yuan.” The owner of a small supermarket in Yau Ma Tei sighed, holding the account book he had just calculated. “Wellcome sells rice for 2.5 yuan a pound, and I have to pay 2.3 yuan to buy it. I can’t compete with them at all.”

This price war, initiated by industry giants, is a "catastrophic blow" to small and medium-sized retailers.

Wellcome, ParknShop, and Dali Lian are backed by three major conglomerates: Cheung Kong, Hutchison Whampoa, and Hongkong Land. Even if they suffer short-term losses, they can withstand it. However, most small and medium-sized businesses are "small-scale operations" and do not have strong financial support. They dare not lower prices and cannot retain customers.

In just one month, nearly a hundred small and medium-sized supermarkets and grocery stores in Hong Kong closed down, and the remaining ones could barely stay afloat. Reducing business hours, laying off staff and cutting salaries became the norm.

“They used to say, ‘When one chicken dies, another crows,’ but now there are more dead chickens than crowing ones!” A grocery store owner in Mong Kok, who had run the business for ten years, looked at the “Clearance Sale” notice posted on his door, his eyes reddening. He had done the math: his monthly revenue had plummeted by 30% compared to the same period last year, while his rent and inventory costs remained unchanged. He simply couldn't hold on any longer. (End of Chapter)