Rebirth in Hong Kong: From Dessert Shop to Industrial Empire

Chapter 148 Basic Operations (Seeking monthly votes, recommendations, and continued reading)

Chen Bingwen affirmed: "The balance of supply and demand has likely been completely tilted."

A surge in normal demand, coupled with a potential structural reduction in supply, and fueled by panic and speculative capital...

The momentum of this surge will be terrifying.

The 25% increase we're seeing may just be the beginning.

Based on this trend, it is not impossible for sugar prices to hit historical highs this year.

We are facing a long and arduous battle to reduce costs.

It's more like a survival competition for the industry.

Companies that cannot withstand cost pressures will be the first to be eliminated.

Fang Wenshan gasped after hearing this.

He initially thought it was just a normal cyclical rise, but he never expected that it was driven by such a complex and powerful global energy and geopolitical landscape.

If Chen Bingwen's prediction is correct, then Chen Ji's upcoming surge in production capacity will face an extremely harsh raw material environment.

"Mr. Chen, if that's the case, then we need to immediately buy sugar that can be used for a long time and store it!"

"Let's lock in as much low-priced sugar as possible before prices skyrocket!"

Fang Wenshan's first reaction was to stockpile goods, which is the most instinctive human reaction. When prices are expected to surge, people stockpile goods in advance to prepare for a shortage.

However, Chen Bingwen slowly shook his head, a complex expression on his face.

"Director Fang, stockpiling goods is the most direct reaction and the first thought of most people."

What you see is a crisis of soaring costs, but what I see is a once-in-a-lifetime strategic opportunity.

Fang Wenshan was stunned and didn't react for a moment.

How did soaring costs become an opportunity?
Instead of explaining directly, Chen Bingwen changed the subject and asked a seemingly unrelated question: "Director Fang, have you calculated that at our current expansion speed, it will take time to achieve full channel coverage in Japan, Southeast Asia, North America, and Europe?"

How much capital would be needed to establish our own bottling plant and production lines covering all our products?

As the CFO, Vincent Fang is extremely sensitive to numbers and answered almost without hesitation: "Preliminary estimates suggest that we will need at least HK$3 million in continuous investment over the next 18 months."

This includes establishing its own bottling plants, acquiring or building its own key raw material production bases, establishing a dedicated logistics network, and having reserves to cope with potential price wars from competitors.

“3 million Hong Kong dollars.” Chen Bingwen repeated, and continued to ask, “With our current monthly profit of over ten million, after deducting operating expenses and reinvestment, how many years would it take to accumulate that amount?”

Fang Wenshan silently calculated for a moment, his expression changing slightly: "At least three to five years. And that's assuming there's no cutthroat competition in the market and everything goes smoothly."

"Three to five years?" Chen Bingwen chuckled. "Will the market give us three to five years?"

Will Suntory and Coca-Cola just stand by and watch us grow stronger? Will Lipovitan willingly withdraw from the market? In three to five years, it will be too late!

He turned around and stared intently at Fang Wenshan: "Our previous steady and pragmatic strategy was correct and laid a solid foundation for us."

But now, we have reached a bottleneck.

To achieve a meteoric rise and transform from a successful company into an industry giant, one must leverage the power of capital and seize the window of opportunity presented by the times!

Fang Wenshan seemed to have caught something, his eyes lighting up: "Mr. Chen, you mean going public to raise funds?"

“That’s right! Now is the best time to go public and raise funds!” Chen Bingwen said with certainty. “Only by going public can we obtain a huge amount of funds that we would have difficulty accumulating in the next three to five years.”

Only then can we support leapfrog development, seize the first-mover advantage, and build a moat that our competitors cannot cross!

"However, as you know, the stock exchange stipulates that a company must have at least three years of operating records to be eligible to apply for listing."

Our Chen's restaurant has only been around for a year at most, we're simply not qualified.

Fang Wenshan nodded, which was precisely why he had previously felt that going public was a distant prospect.

“Therefore,” Chen Bingwen changed the subject, “we have no choice but to take the route of backdoor listing!”

"And now is the best time to buy a shell company!" Chen Bingwen said, becoming more and more excited.

At that time, the Hong Kong securities industry had four exchanges (Hong Kong Securities and Futures Commission, Far East Securities and Futures Commission, Gold and Silver Securities and Kowloon Securities and Futures Commission), and the supervision was relatively relaxed with many loopholes in the rules. The review of backdoor listings was not as strict as it would later become.

Moreover, there is no requirement to introduce strategic investors for listing, which allows for greater flexibility and relatively lower costs.

He looked at Vincent Fang, "More importantly, this crisis of soaring international sugar prices has created an excellent market environment and acquisition targets for us!"

Fang Wenshan was completely captivated, and his body unconsciously leaned forward: "Market environment? Acquisition target?"

"Think about it," Chen Bingwen analyzed, his logic crystal clear, "who is most affected by the surge in sugar prices?"

"They are small and medium-sized food and beverage factories that lack brand premium, the ability to pass on costs, and have tight cash flow!" Fang Wenshan immediately realized.

“Yes!” Chen Bingwen lightly punched his palm. “Especially those companies that have good production equipment, regional channels, or well-known brands, but mainly produce products with high sugar content, such as soft drinks, candies, and biscuits.”

With sugar prices soaring, their profits will be wiped out instantly, and they may even suffer huge losses.

Companies facing cash flow problems, plummeting stock prices, and shareholders cashing out become prime "shell companies" or extremely cheap acquisition targets in the capital market!

Upon hearing Chen Bingwen's wildly imaginative development ideas, Fang Wenshan gasped in surprise.

He was impressed by his boss's bold strategic vision.

This isn't dealing with a crisis; it's using a crisis to hunt!

"Mr. Chen, are you planning to simultaneously purchase a shell company for listing and raise funds, while taking advantage of the sugar price crisis to acquire listed or unlisted companies that are in trouble but possess certain high-quality assets (such as production lines, distribution channels, and brands) at low prices, and then carry out mergers and acquisitions?"

Then, should we inject these assets along with our business into the listed company to achieve rapid expansion?

After all, he is a professional. Fang Wenshan hadn't thought of this because Chen Bingwen hadn't mentioned it before, and Chen Bingwen had previously said that the listing should be done at the most appropriate time.

Now that Chen Bingwen has clearly stated that this is the best time to go public, and has linked the sugar price crisis with "shell companies" and "merger targets,"

Fang Wenshan instantly understood Chen Bingwen's strategic intentions.

“That’s right, exactly!” Chen Bingwen nodded emphatically, confirming, “This is not only to cope with the cost pressure of rising sugar prices, but also a key step for us to break through the current development bottleneck and achieve leapfrog growth!”
"It's even possible to achieve two goals with one move, or even multiple goals with one move!" The booming sales in the market, coupled with monthly profits of over ten million, gave Chen Bingwen unparalleled confidence.

His prophetic insight into the sugar price crisis allowed him to be greedy when others were panicking.

He knew that after the storm, countless valuable "shells" would be left on the beach, and he wanted to be the shell collector with a net of capital.

Chen Bingwen stood up, paced around the office for a couple of steps, and said, “Think about it, if we follow the established procedures and rely on profit accumulation to build factories and establish distribution channels, the market structure will have already solidified in three to five years, and we will at most be a regional powerhouse.”

But now, with the sugar price storm raging, the industry is facing a reshuffle, and this is the time for big fish to eat small fish and fast fish to eat slow fish!
Those companies teetering on the brink of collapse may hold what we all dream of: ready-made production lines, well-established regional distribution channels, or even long-standing but poorly managed brands!

Fang Wenshan was fully engaged and began to consider the feasibility: "Mr. Chen, I understand what you mean."

This is indeed a once-in-a-lifetime window of opportunity.

However, in practice, we must proceed cautiously step by step.

Both backdoor listings and industry mergers require huge sums of money and are interconnected; a single misstep can lead to complete failure.

“Funding is key, but not a dead end.” Chen Bingwen stopped and looked intently at Fang Wenshan. “Our current cash flow is healthy, which is the foundation.”

Futures hedging can help us lock in some costs and may even generate additional profits.

More importantly, once we successfully achieve a backdoor listing, the door to the capital market will be opened!
We can raise funds through various means such as issuing new shares and bonds to provide a continuous source of capital for subsequent mergers and acquisitions.

In his plan, he intends to implement a three-step strategy, with each step closely linked and executed in a measured manner, to tell a compelling capital story.

First, use futures instruments to lock in some raw material costs and hedge against the short-term impact of rising sugar prices.

This is a defense, ensuring you won't be the first to fall in the storm.

Secondly, taking advantage of the relatively relaxed regulatory window of "four meetings coexisting" (referring to the four regulatory bodies), and taking advantage of the sugar price storm causing the stock prices of some small-cap listed companies (shell companies) to plummet and shareholders to be eager to sell, they can acquire controlling stakes at a relatively low cost and at the fastest speed, thus completing a backdoor listing.

Finally, leveraging the status and reputation of a listed company, they launched a financing machine (issuing additional shares and bonds).

He used the huge amount of funds raised to precisely target companies that were teetering on the brink of collapse amid the sugar price storm but possessed high-quality assets that he desperately needed.

These assets were acquired at low prices and quickly integrated into the listed company system.

Every successful acquisition strengthens the platform's value, tells a more compelling growth story, and thus obtains more and cheaper capital to carry out the next round of acquisitions, forming a self-reinforcing closed loop of capital and industrial expansion.

The core driving force behind this closed loop lies in the premium paid by the capital market for "growth stories".

Chen Bingwen was extremely familiar with this matter.

He is not just buying assets and expanding production capacity, but also weaving a grand narrative about the "rise of an Asian functional food empire".

Every acquisition adds a new chapter to this story and injects new growth expectations.

The market is willing to pay a high price for this expectation, providing a continuous stream of cheap capital, which in turn accelerates the realization of the story, forming a perfect positive feedback loop.

When Chen Bingwen laid out his entire concept, Fang Wenshan was completely shocked.

His previous understanding of mergers and acquisitions was horizontal expansion, which is based on economies of scale.

But what Chen Bingwen described was a strategic nuclear weapon that used capital as a link, mergers and acquisitions as a means, market value as leverage, and ultimately achieved the geometric expansion of an industrial empire!

This completely transcends traditional business thinking and has risen to a higher level of capital operation art.

If Chen Bingwen knew what Fang Wenshan was thinking, he would definitely reply, "Basic stuff, don't be ridiculous!"

The tricks that capital had exhausted in the past were now like a nuclear bomb-level attack in Hong Kong at this time!
Chen Bingwen looked at the undisguised shock and a hint of bewilderment in Fang Wenshan's eyes, and a barely perceptible smile appeared on the corner of his mouth.

He understands Vincent Fang's feelings.

In this era, the concept of capital operation is still in the rudimentary stage of "listing for financing and building factories". For most entrepreneurs and CFOs, the three-in-one capital nuclear weapon of "backdoor listing + merger and acquisition + market value management" is nothing short of a fantasy.

However, Chen Bingwen was not prepared to explain everything clearly.

There was plenty of time for Vincent Fang to understand the subsequent procedures.

The immediate priority is to establish long positions in raw sugar futures.

The Hong Kong Island Commodity Futures Exchange, established in 1977, only allows trading of cotton, soybean, and gold futures.

Raw sugar futures were not listed for trading until 1982.

At this point in time, if you want to trade raw sugar futures, you either need to go to the New York Mercantile Exchange.

It's either the London International Financial Futures Exchange.

Trade via telephone through three international brokerage firms: Baoyuan, Yifu, and Huoduoli.

However, the London International Financial Futures Exchange only trades a few thousand lots per day, a much smaller volume than New York.

Chen Bingwen wanted to hedge raw sugar, but with low trading volume, it would be difficult to enter and exit the market, making it easy to expose his intentions or even be targeted by large investors. It simply wouldn't work!

The New York Mercantile Exchange is the only realistic option.

The scale is large enough and the liquidity is good enough to accommodate Chen Ji's hedging positions without causing drastic price fluctuations and exposing his intentions.

As for the London International Financial Futures Exchange?

That's a drop in the ocean, so we can rule it out immediately.

“New York is the only option,” Chen Bingwen told Fang Wenshan. “London is too small. If we go in, it will be like an elephant entering a bathtub. The commotion will be too great, and the price fluctuations will make us very uncomfortable, or even attract our attention.”

Which of Baoyuan, Yifu, and Huoduoli offers the most stable and efficient commodity trading channels in New York?

Fang Wenshan pondered for a moment: "Baoyuan's New York commodity futures department is the strongest. They represent many Far East clients, are experienced, execute quickly, and have strict risk control."

Jardine Fleming is second best, but their advantage lies in their stocks.

Huoduoli has only recently undergone a transformation, and its commodity futures business is still under development.

(End of this chapter)