Rebirth in Hong Kong: From Dessert Shop to Industrial Empire

Chapter 169 Crisis Management (Seeking monthly votes, recommendations, and subscriptions!)
However, this is also a good thing, as Huoduoli's rather conservative valuation actually provides him with a more favorable starting point for negotiations.

With this valuation report in hand, negotiations between Chenji and Hutchison Whampoa regarding the acquisition of Watsons officially began.

At the negotiating table, both sides clearly stated their positions.

Representatives from Hutchison Whampoa used the HK$92 million valuation of Walmart as a benchmark, emphasizing the intangible value of Watsons' century-old brand and distribution network, and attempted to push the transaction price to over HK$100 million.

Chen Bingwen had anticipated this.

He instructed the negotiation team led by Vincent Fang to focus on the HK$32 million land loan and the "non-performing asset" in Yuen Long, in order to lower the valuation of Watsons.

Finally, after some back and forth, the two parties reached a consensus on a price of HK$78 million and signed an acquisition agreement in the presence of Mr. Huo Duli.

The agreement stipulates that Chan Kee Foods will acquire all shares of Watsons Limited for HK$78 million, including the majority stake held by Hutchison Whampoa and all shares held by minority shareholders such as Tsui Sai-man and Lau Chi-tong.

All of Watson's assets, liabilities, contracts, and personnel were transferred accordingly.

The day after the agreement was signed, Hutchison Whampoa published an announcement on the front page of the Sing Tao Daily and the Commercial Daily, announcing that it had sold all of its shares in Watsons Limited to Chan Kee Foods Limited for HK$78 million.

The announcement was concise, stating that the move was to "optimize the group's asset structure and focus on its core business."

A stone stirred up a thousand waves.

The announcement caused an uproar in the beverage industry and the entire business community in Hong Kong.

The Oriental Daily's financial section headline read: "Hutchison Whampoa sells off century-old Watsons for a paltry 78 million; Chan Kee's attempt to swallow an elephant may be difficult to digest."

The article cites the opinion of an anonymous "industry expert," who claims that Watsons' brand value far exceeds its valuation, and that Hutchison Whampoa's move is "killing the goose that lays the golden eggs," questioning the short-sightedness of its management.

The article further points out that although Chen Ji Foods has been established for less than two years and is moving rapidly, its management experience and financial strength may not be sufficient to operate such a large retail network and complex assets as Watsons. It predicts that "the integration process will inevitably lead to chaos, and the future of this century-old brand is worrying."

Ming Pao commented: "Another microcosm of the British capital withdrawal wave? Hidden worries behind the change of ownership of Watsons."

The article places this acquisition against the backdrop of British companies gradually reducing their investments in Hong Kong Island, implying that Hutchison Whampoa's intention to get rid of its burdens is obvious. As a newly emerging Chinese-owned enterprise, whether Chan Kee can carry the Watsons brand is a big question mark.

Meanwhile, the Commercial Daily, which mainly publishes business news, commented: "Watsons changes hands, and the future of time-honored brands is uncertain."

On a radio financial program, several guests were arguing incessantly.

One analyst bluntly stated: "Mr. Chen Bingwen is a marketing genius, but retail is a tough job that requires meticulous operation and cost control."

Watsons has 72 stores, thousands of employees, and a complex supply chain. Chen Ji had never had similar experience before, so learning from their mistakes was inevitable.

As public opinion fermented, the emotions of some citizens were ignited.

The following day, as soon as the Watsons flagship store in Causeway Bay opened, it was greeted by a group of excited citizens.

A middle-aged man, holding a newspaper from the day before, loudly questioned: "Watson's is a collective memory for Hong Kong people!"

How can we sell to a new company that makes sugary drinks?

We don't trust Chen's!
They demanded that Wong retract her decision!

The store manager tried to explain: "Sir, the acquisition is a done deal."

Chen's promise is to continue operating and even invest more resources.

“What’s the use of a promise?” another woman interrupted the shop manager. “Chen’s desserts are good, but running the shop is another matter!”

If we mess things up, where will we buy drugstore cosmetics?

Will these long-time employees be fired?

The crowd echoed this sentiment, attracting onlookers.

Similar small-scale protests have occurred at multiple Watsons stores in Hong Kong Island and Kowloon.

Although no conflict occurred, the impact was negative, deterring many customers and causing anxiety among the staff.

Watsons stores saw a sharp decline in sales immediately.

Faced with the sudden brand crisis, Chen Bingwen remained calm.

He knew very well that any emotional reaction at this moment would only exacerbate the chaos.

He immediately convened his core team in the conference room on the top floor of the Weiye Building: Vincent Fang, Gu Yongxian, and Li Weiming.

And Ling Pei-yi, who had just returned from Japan and was in charge of the integration of Watsons, and Xu Zhi-wen, who was temporarily acting as the general manager of Watsons.

"The backlash from public opinion was expected."

Chen Bingwen set the tone right from the start, calmly stating, "Hutchison Whampoa is eager to get rid of the company, so the price is not high. To outsiders, it naturally looks like a fire sale of an old brand."

The public is panicking because they're afraid that we, the dessert vendors, will ruin the long-established brands they trust.

What's needed most right now is emotional support, not confrontation.

Crisis public relations tests a company's ability to translate strategic intentions into precise execution at critical moments.

He wouldn't be like the owner of Xibei Restaurant, who made a mess of things by blaming a customer for just one complaint.

Therefore, with his extensive experience in dealing with crises from his previous life, Chen Bingwen directly issued instructions:

First, within 8 hours, all 72 stores must display the unified "Letter to Customers" poster.

I emphasize: no store closures, no layoffs, and no price increases. I will personally sign every poster to show my commitment.

At this point, Chen Bingwen looked at Li Weiming: "Manager Li, arrange for the part-time college students hired by the public relations department to go to stores where consumers gather and do a good job of guiding them!"
Print more five-yuan "consumption vouchers" and distribute them to the gathered consumers to quell their animosity.

"Yes, Mr. Chen. I'll arrange it immediately."

Li Wenming responded immediately.

Chen Bingwen nodded and then gave the instructions:
"Secondly, Director Ling will serve as the company's spokesperson and hold a press conference to answer questions from the media and provide a unified message to the outside world!"

No one other than her may make public statements without her authorization.

Especially Xu Zhiwen, Manager Xu, as the manager of Watsons, you will definitely be at the forefront during this period, so you must pay close attention to any comments made about Watsons.”

"Understood, I will be careful with my words and actions."

As a newcomer to Chenji's management team, Xu Zhiwen was well aware of his delicate situation and immediately expressed his opinion.

Chen Bingwen nodded slightly and continued to give instructions: "Third, immediately produce a 60-second television commercial."

The camera pans across old photos of Watson's pharmacies from 1900 to 1979, finally settling on the filling line as Watson's distilled water is dispensed into bottles. A voiceover adds: "A century of trust, now protected by the people of Hong Kong."

This will change consumers' emotional attitude towards Chan Kee's acquisition of Watsons.

In addition, Manager Xu, please personally invite that senior pharmacist from Watsons to appear on camera.

The dialogue was just one line: "I've served Watsons for XXX years, I trust my new employer, and I'm willing to come back to train young people."

Before the meeting, everyone was thinking about how to reverse the current public opinion crisis.

As a result, Chen Bingwen provided a complete solution in just a few minutes.

Chen Bingwen's response drew considerable attention from the core management team present.

This is an excellent crisis management technique, with a clear and logical structure.

As arranged by Chen Bingwen, everyone immediately split up and took action.

Li Weiming immediately contacted the university student union and recruited 200 articulate college students for part-time work within two hours.

After training, they went to 72 Watsons stores to persuade and guide consumers.

Ling Pei-yee drafted a "Letter to Customers," which Chen Bing-wen personally signed before sending it to 72 stores, instructing store managers to post it immediately. Meanwhile, at the headquarters of Tao Fa Tai Tung Company on the other side of Hong Kong Island, a completely different meeting was taking place.

The conference room at Taohua Datong was filled with smoke.

The senior executives, led by Liu Weixiong, were gathered around the conference table, tasting samples of the functional beverages that the R&D center had just developed.

As one of the three major local beverage manufacturers in Hong Kong Island, Tao Fat Tai Tung has always had a rather awkward position in the beverage industry in Hong Kong Island because it also does OEM for seven foreign brands and lacks a strong own brand.

Owning their own beverage brand is a dream that Taohua Datong's top management has long desired to achieve.

Therefore, after Chenji functional beverages were launched, Taohua Datong noticed this new phenomenon in the beverage industry.

In particular, after Chen Bingwen launched an advertising blitz, the senior management of Taohua Datong saw the lucrative profit margin of functional beverages and became even more determined to create their own functional beverage.

In their minds, Chen Ji was, after all, a new company that had just entered the beverage industry and had no foundation. As long as Taohua Datong made a move, it would surely defeat Chen Ji in the market and monopolize the functional beverage market share in Hong Kong.

And so, the scene before us unfolded.

"It's still too sweet."

The marketing manager put down the tasting cup, frowning. "Chen Ji's 'Pulse' has a refreshing taste and a sweet aftertaste."

Ours is sickeningly sweet.

The R&D director wiped his sweat: "We've already adjusted the formula three times."

Lowering the sugar content will affect the taste and also increase costs.

Liu Weixiong interrupted him: "Cost is not a problem."

The key is whether we can defeat Chen's Group.

As he spoke, he picked up the report on the table, “In the past three months, Chen’s ‘Pulse’ has taken away 15% of our Green Treasure Orange Juice’s market share.”

This not only affected our immediate profits, but more seriously, it undermined our leading position in the ready-to-drink market.

Chen Ji's success with the new functional beverage category is eroding our long-established channel relationships and consumer mindshare.

If we don't fight back in time, we may lose the next generation of young consumers.

Moreover, if this continues, our year-end financial statements will look terrible.

Everyone fell silent.

Taohua Datong, a long-established beverage giant in Hong Kong, has never encountered such a strong challenge.

Chan Kee's rise was astonishing; it quickly achieved economies of scale and carved out a significant share of the beverage market in Hong Kong.

“Chen’s has now acquired Watsons,” Liu Weixiong continued.

If they succeed in integrating us, we will face a double blow.

On the one hand, Watsons' 72 stores will become the exclusive channels for Chen Ji products, and our products may be marginalized.

On the other hand, by leveraging Watsons' retail network, Chen Ji can promote new products more quickly, further squeezing our market space.

We must seize the opportunity while they are busy with integration and their internal processes are not yet streamlined, and launch our own functional beverage to regain the initiative in the market.

“But there’s the patent issue,” the legal counsel hesitated. “Chen’s recipe has already been patented.”

We have to completely bypass it.

Liu Weixiong sneered, "Then let's play it safe."

Adjust the formula, change the name, and differentiate the packaging design.

Let's call it "Jin Neng" (劲能).

The key is to be quick. Take advantage of Chen Kee's current predicament of integrating Watsons and catch them off guard.

We need to let consumers know that Chen Ji doesn't have the final say in the functional beverage market.

Just as Taohua Datong was busy preparing for the new product, Chen Bingwen's crisis management had already begun to show results.

After the "Letter to Customers" posters were posted, store managers personally explained the promises to customers, and with Chen Bingwen's handwritten signature, consumers felt Chen Ji's sincerity, and doubts were significantly reduced.

The 200 college students in red vests also played an important role in working part-time at various stores.

They not only distributed 5-yuan "consumption vouchers," but also proactively communicated with consumers, successfully transforming the protesters into consumers.

The following afternoon at 17:30 PM, Ling Pei-yi held a press conference at Watsons headquarters to report on the progress of the acquisition and integration, and to answer questions from the media.

During prime time that evening, the 60-second commercial was broadcast simultaneously on TVB and RTV.

The camera pans from faded old photos of Watsons to neon-lit modern stores, finally settling on a scene of Chen Ji's modern production line injecting new formulas into Watsons products.

The narration, "A century of trust, now protected by the people of Hong Kong," instantly moved viewers in front of their televisions.

It's important to understand that although Watsons has a century-long history, it was ultimately a brand created by foreigners. Now it's been acquired and managed by Hong Kong people, which, to some extent, is a sign of the rise of Chinese-owned enterprises.

What's even more touching is the interview with 85-year-old retired pharmacist Li Zhaotang.

On the front page of the Oriental Daily, the old man sincerely said, "I have worked at Watsons for 47 years, witnessing its glory and experiencing its lows."

Chen's has given me hope for revitalizing an old brand, and I'm willing to come back to train young people.

Chen Bingwen's three-pronged approach to crisis management showed remarkable results within just a few days, before public opinion could even take hold.

On the third day after the measures were implemented, the headline of the financial section of Sing Tao Daily quietly changed to "Chinese capital takes over century-old stores, Chan Kee shows the wisdom of Hong Kong businessmen".

The Commercial Daily even devoted a full page to reporting "Watsons welcomes a new life, Chen Ji injects innovative vitality".

The 180-degree turn in the attitudes of these two newspapers was not accidental.

Following Chen Bingwen's instructions, Li Weiming prepaid HK$50,000 in advertising fees to the two newspapers under the guise of "annual advertising cooperation".

This sum of money was a huge amount for the Hong Kong Island Press in 1979, enough to make the editors-in-chief re-examine their reporting angles.

The Sing Tao Daily reported: "Chan Kee Foods' acquisition of Watsons for HK$78 million sets a precedent for Chinese-owned enterprises acquiring century-old British-owned businesses."

This not only demonstrates the growing strength of Chinese-owned enterprises, but also highlights the changing landscape of Hong Kong's business community.

The article also quoted Chen Bingwen as saying, "Our acquisition of Watsons is not to change its soul, but to give it new vitality."

Meanwhile, the Sing Tao Daily, which published Chen Ji's report on "the first Chinese-owned company to acquire British-owned assets," was circulating in the conference room at the headquarters of China Resources.

Several senior managers, including Li Guowei, sat around the conference table, intently reading the newspaper.

“This Chen Bingwen is no ordinary man.” A middle-aged man put down his newspaper. “In just a few days, he not only quelled the public opinion crisis, but also took the opportunity to package the acquisition of Watsons as a benchmark case of Chinese-funded enterprises.”

Another, slightly older manager nodded and said, "Indeed. We noticed Chan Kee's rapid development when we were evaluating Chinese-owned businesses on Hong Kong Island."

But I didn't expect them to complete the acquisition and integration of Watsons so quickly; their execution is quite rare.

"More importantly, this case has symbolic significance," the first man to speak continued. "During the transition period of Hong Kong's return to China, the acquisition of a long-established British company by a Chinese-funded enterprise has a very valuable demonstration effect."

Chan Kee has set a good example, providing an excellent model for encouraging more Chinese-owned enterprises to participate in Hong Kong's economic development.

A chorus of agreement rose in the conference room.

At this moment, Zhang Jianhua, the general manager of China Resources, who was sitting in the main seat, slowly spoke up: "Since Chenji has set an example, we should give it more support."

Li Guowei, you've been in contact with Chen Ji for a while, what are your thoughts?

(End of this chapter)