Rebirth in Hong Kong: From Dessert Shop to Industrial Empire

Chapter 150 Canton Fair (Seeking monthly votes, recommendations, and continued reading)
Cheng Long agreed to go to South Korea to promote Chen Ji's products.

Chen Bingwen naturally needs to put more effort into the product side to make the promotional effect better and more lasting.

The hype surrounding celebrity endorsements comes and goes quickly.

To transform this fleeting attention into sustained market share, we must focus on product implementation and consumer outreach, and the key to this lies in the distribution channels.

Therefore, Li Ming, who was in Japan consolidating sales channels with Ling Peiyi, was urgently transferred back to Hong Kong Island.

For the beverage industry to expand its scale, the proportion and control of distribution channels are often more important than brand awareness alone.

No matter how good a beverage tastes or how loud the advertising is, if it cannot be efficiently distributed to every corner of the city and reach every consumer's doorstep, then it's all just castles in the air and cannot be converted into real sales and market share.

Dongpeng Special Drink was able to carve out a niche for itself in a market dominated by Red Bull, thanks to its channel strategy.

It made full use of the low- and middle-income groups and the vast lower-tier market that Red Bull had not paid enough attention to at the time.

Higher channel profit incentives, denser terminal coverage, lower prices, and larger quantities have unlocked a huge incremental market.

Although Chen Bingwen adopted an exclusive distributor model in South Korea, Chen Ji's products were sold to Kim Sung-soo at the ex-factory price, and Kim Sung-soo then determined the terminal price and channel strategy.

However, the South Korean market is an important part of Chen's internationalization strategy, and he cannot completely ignore it and let Kim Sung-soo operate in the traditional, extensive way.

At that time, South Korea's economy was just starting out, and its per capita income was far lower than that of Japan, and even lower than that of Hong Kong and Singapore.

Although Kim Sung-soo is very enthusiastic, his distribution network is mainly concentrated in limited areas of major cities such as Seoul, and he is more skilled in traditional distribution.

There is a lack of systematic strategies and execution experience on how to quickly, efficiently, and accurately deploy a new product to the widest range of terminals, especially the streets and alleys where ordinary people consume daily.

The publicity generated by Cheng Long is short-lived. If the distribution channels cannot keep up, the product will quickly fade away once the hype is over, and all the initial investment will be greatly reduced.

Therefore, after Li Ming returned to Hong Kong Island, Chen Bingwen specifically called him to his office and gave him a task concerning the Korean market.

“Amin, Kim Sung-soo of Seoul Food Trading, although he has passion and channels, does not have a deep enough understanding of the refined channel management and market penetration of modern fast-moving consumer goods.”

The South Korean economy is still in its early stages and consumer spending power is limited, so we can't simply copy the strategies we used in Japan.

We need to help them, or rather guide them, to find channel strategies that are more suitable for South Korea's national conditions.

He paused and continued:
"Your task is to 'assist' him and also to supervise him."

The core work consists of two things:

First, short-term supervision. We taught him step-by-step how to build a ground promotion team, develop channel strategies targeting low-income groups and lower-tier markets in South Korea, and replicate our "high-profit incentive, high-density distribution" approach.

We want to ensure that consumers can immediately purchase our products from any small street-side shop.

"Secondly, a long-term backup option." Chen Bingwen lowered his voice, his tone becoming extremely serious. "You have an even more important mission on this trip: to secretly assess Kim Sung-soo's true abilities and execution capabilities."

If we find that he lacks ability, has outdated ideas, cannot keep up with our pace, or his sales consistently fail to meet targets...
You must immediately and secretly look for new candidates.

It's impossible for Kim Sung-soo to be the only person capable of running a food trade, let alone Seoul or Busan.

We must be prepared with backup plans at all times; we must not put all our eggs in one basket regarding the entire South Korean market.

"Understood, Mr. Chen." Li Ming immediately grasped Chen Bingwen's deeply hidden bottom-line thinking.

"Also, please bring Angela Leong along this time," Chen Bingwen added. "She's new to the company and not yet familiar with the Asia-Pacific business."

Take her on a tour of the Korean market so she can quickly familiarize herself with its distribution channels and operational models.

Once she's capable enough to manage the situation, she'll take over the daily supervision and coordination of the Korean market. You should focus your energy back on the overall picture.

The four people interviewed recently, including Liang Anqi and Li Weiming, have started working.

Apart from Angela Leong having Li Ming taken to South Korea to be in charge of the South Korean business,

Zhao Liming will replace Li Ming and take charge of the Japanese market.

Zhou Zhiqiang is responsible for channel maintenance and expansion in Hong Kong Island.

Li Weiming was appointed as the newly established public relations manager of Chenji, responsible for external public relations and product promotion.

"Understood! I will bring Liang Anqi out and help her become capable of handling things independently as soon as possible." Li Ming nodded in agreement.

“Remember,” Chen Bingwen emphasized in the end, “you should give Kim Sung-soo your full support on the surface, fully respect his status as the exclusive distributor, and help him make money.”

But fundamentally, we must firmly grasp the initiative and control over the market.

Exclusivity is permissible, but performance must never spiral out of control.

Chen Bingwen would never have entered the South Korean market on a large scale before 1992.

After all, there are too many unpredictable factors involved.

With Kim Sung-soo paving the way and helping Chen Kee cultivate the functional beverage consumption habits of Korean consumers, he was naturally happy to see it happen.

It wasn't until after liberalization in 1993 that large-scale entry into the South Korean market was truly possible.

Before that, consider it as training and deployment.

As we entered mid-March, the period of Iran's complete halt to oil exports was drawing ever longer.

Crude oil prices have broken through $20 per barrel, a full 30% increase since the beginning of the year.

Chen Bingwen knew perfectly well that this was just the beginning.

Oil prices are expected to continue rising over the next two years, potentially reaching a high of $40 per barrel, a record high at the time.

However, faced with rising crude oil prices, he could only think about it.

In 1979, there were no true crude oil futures contracts in the world.

The world's first standardized crude oil futures contract, light sweet crude oil futures, was not until 1983.

As for the Brent crude oil futures that everyone is familiar with, they were not listed on the London International Petroleum Exchange until several years later in 1988.

At the same time, the chain reaction caused by rising crude oil prices is beginning to emerge.

The oil-related industries immediately relayed this feedback to downstream industries.

Fang Wenshan walked into Chen Bingwen's office and placed a latest procurement cost analysis report on the table.

"Mr. Chen, the price of raw materials is rising faster than expected."

Three major PET bottle suppliers on Hong Kong Island sent price adjustment notices today, with increases ranging from 15% to 22%.

The impact of rising crude oil prices has been fully transmitted.

The cost of petrochemical raw materials has soared, leading to an increase of more than 10% in shipping and land transportation costs.

All three companies indicated that if oil prices continue to rise, further adjustments may be needed next month.

Chen Bingwen took the report, his eyes quickly scanning the key data, and said with some relief, "Fortunately, we are using a franchised bottling model in Singapore and Malaysia."

The cost pressure was mainly borne by the Xingzhou plant and the Hongfa plant.

However, for our bottled products in Hong Kong Island and the Japanese and Korean markets, we have to absorb this cost increase ourselves.

Unfortunately, there are currently no financial instruments like resin futures to hedge against this risk; otherwise, our pressure would be less.

Fang Wenshan nodded solemnly: "That's true. Currently, there are no futures products for plastic raw materials globally. The price fluctuation risk of petrochemical products must be absorbed entirely through spot purchases and long-term agreements."

He opened his notebook, looked at the contents, and said, "I checked the commodity exchanges in New York and London, and currently only metals and agricultural products have futures contracts."

There are currently no financial hedging tools available for plastic raw materials, which are industrial intermediate products.

The only way to deal with this at present is to increase spot purchases to build up safety stock, or to sign long-term price lock-in agreements with suppliers.

However, both of these methods tie up a significant amount of working capital.

“Especially now that oil prices are rising continuously,” Fang Wenshan added, “suppliers are unwilling to sign long-term fixed-price contracts.”

They prefer a floating pricing model based on "crude oil price + processing fee," transferring all the risk to downstream companies.

After listening to Fang Wenshan's report, Chen Bingwen frowned slightly.

"This floating pricing model is too disadvantageous for us."

Since the supplier wants to transfer all the risk to us, we have to find ways to diversify that risk.

When Chen Bingwen heard that the three PET bottle suppliers on Hong Kong Island had raised their prices, he did consider purchasing from chemical plants in mainland China.

But the thought only flashed through my mind for a moment before it faded away.

PET stands for polyethylene terephthalate, a polyester resin polymer invented by British scientists in 1941.

In 1973, DuPont engineers applied it to beverage bottles.

The formal commercialization of Coca-Cola began in 1978 with the introduction of PET bottled cola by Coca-Cola and PepsiCo.

These two giants, leveraging the lightweight and unbreakable properties of PET bottles, spearheaded a packaging revolution in the North American market, completely transforming the distribution landscape of carbonated beverages.

At that time, there was neither a food-grade PET resin production line nor the equipment to manufacture bottles in mainland China.

They lacked even the relevant technology and talent, so they had no idea where to begin if they wanted to produce PET bottles.

To address the rising price of PET bottles, a multi-pronged approach is necessary.

"So, you should do two things immediately: First, have Ling Peiyi find a PET bottle blowing factory in Japan."

Since crude oil prices and transportation costs are both rising, producing PET bottles locally can save a significant amount on shipping and tariffs.

“Second,” Chen Bingwen said after a moment’s thought, “we will begin negotiations on long-term contracts with these three suppliers.”

While they favor floating pricing, we can propose a compromise: setting a price adjustment range based on the current oil price.

We will bear the losses within a certain range of oil price fluctuations; any excess will be shared between both parties.

Fang Wenshan chimed in, "This plan may have more advantages than pure floating pricing."

However, we need to conduct a detailed cost calculation first.

"Complete the cost calculation as soon as possible."

Chen Bingwen nodded and gave the instructions.

"I'll make arrangements right away."

After saying that, Fang Wenshan turned and left in a hurry.

After Fang Wenshan left, Chen Bingwen picked up the PET bottle cost report, ready to take a closer look.

The phone on the table rang.

"Hello, this is Chen Bingwen."

"Mr. Chen, good afternoon. This is Li Guowei from China Resources." A familiar voice came from the other end of the phone.

"Manager Li, hello." Chen Bingwen was slightly surprised.

"Did I disturb you?" Li Guowei's voice sounded very warm on the phone.

"No, I'm just looking at some documents. Is there something you need, Manager Li?"

“That’s right,” Li Guowei said with a smile, “China Resources is hosting a buffet reception at the Furama Hotel this weekend as a warm-up for the Spring Canton Fair next month and to build relationships.”

We invited many friends from Hong Kong's business community, including those in the food, textile, electronics, and toy industries.

Mr. Chen is now a leader in the food industry; you must do me the honor of coming!

Chen Bingwen's heart stirred.

While China Resources certainly deserves our respect, what he values ​​even more is the enormous opportunity to enter the mainland market that this reception represents.

The key to all of this is the Canton Fair.

The China Export Commodities Fair, commonly known as the Canton Fair, has been China's sole window and barometer for foreign trade since its inception in Guangzhou in the spring of 1957.

The Canton Fair is held twice a year, in spring and autumn, bringing together high-quality export commodities from all over the country and attracting merchants from all over the world.

For Hong Kong and foreign businesses intending to enter the mainland market or find mainland suppliers, the Canton Fair is an excellent occasion to establish high-level relationships.

As one of the organizers and co-organizers, China Resources' pre-conference reception served as a high-end platform for early screening and resource matching.

The deeper meaning behind Li Guowei's invitation at this time, and his specific mention of "warming up the Spring Canton Fair," is self-evident.

Moreover, such occasions also provide an opportunity to meet business people in Hong Kong, laying the foundation for future connections.

So Chen Bingwen readily agreed: "Manager Li personally invited me, I will definitely go. What time is it?"

"Friday evening at 7 pm. I'll send someone to deliver the invitation this afternoon."

"Okay, thank you."

Li Guowei paused, then added meaningfully, "By the way, Mr. Chen, Mr. Wang Jianjun might also be coming that day."

Chen Bingwen immediately understood.

This is not just a social gathering; perhaps it has other deeper meanings.

He replied calmly, "That's wonderful. It's been a while since I've seen Mr. Wang."

"It's a deal then. See you on Friday."

See you on Friday.

After hanging up the phone, Chen Bingwen was slightly lost in thought.

Li Guowei's seemingly casual last addition kept echoing in his mind.

The appearance of Wang Jianjun at China Resources' reception in Hong Kong itself carried a certain signal.

Moreover, at this time, on the southwestern border, hundreds of thousands of soldiers were brutally beating up the monkeys of Nanyue.

At this crucial moment, Wang Jianjun's arrival in Hong Kong Island inevitably gave Chen Bingwen much to think about.

He leaned back in his chair, trying to piece together fragmented pieces of information in his mind: the war in the southwest, the China Resources party, Wang Jianjun's southward march, and Li Guowei's final, meaningful reminder.
Is there some kind of inherent connection between these events?

(End of this chapter)