Rebirth in Hong Kong: From Dessert Shop to Industrial Empire

Chapter 173 Inspection (Seeking monthly votes, recommendations, and subscriptions!)
The next morning, as more information and data were gathered, Chen Bingwen listened to reports from various departments in his office.

Gu Yongxian reported first: "Mr. Chen, we have carefully studied the legal aspects."

Although the packaging design, trademark registration, and advertising slogans of "Jineng" show obvious signs of imitation, they cleverly avoid direct infringement, and there are currently no obvious legal loopholes to exploit.

They're currently operating in a gray area.

“As expected.” Chen Bingwen nodded. “Taohua Datong is also an established manufacturer, so there won’t be any obvious legal issues with them.”

Make a note of this first, and continue to observe their subsequent actions. The more perfect the imitation seems, the easier it is for them to slip up during their later expansion.

Following that, Li Weiming reported the latest market research data:

"Jineng's distribution momentum was very strong in the first two days after its launch, mainly relying on Taohua Datong's traditional convenience stores and some chain convenience stores.

However, due to the low price, there were indeed some early adopters who made purchases.

However, starting yesterday afternoon, sales at some outlets seemed to have slowed down, and the repurchase rate data was still unclear. It will take a few more days of observation to determine whether they can retain customers.

After listening to Gu Yongxian and Li Weiming's report, before Chen Bingwen could express his opinion, Fang Wenshan interjected, "Mr. Chen, if we want to carry out targeted promotional activities, I suggest we don't use price reductions."

While it may be possible to compete with rivals by compressing profit margins in the short term, it will damage brand value and profitability in the long run and is not a good strategy.

Moreover, once we set this precedent, all our competitors will be counting on us to lower our prices.

Chen Bingwen nodded, agreeing wholeheartedly with Fang Wenshan's statement.

Using price reductions to compete with other products in the market is tantamount to killing a thousand enemies while losing eight hundred of your own.

"You're right, price wars are a double-edged sword; they should never be used lightly."

He paused, then sneered, "Taohua Datong wants to wage a price war, but we can't follow their lead."

We must adhere to two principles.

First, 'Pulse' will not lower its price.

Second, no additional commissions or fees will be given to distributors.

As he spoke, he looked at everyone and said, "If we lower prices or increase channel fees, it's tantamount to admitting to the market that our products need to compete on price, which will seriously damage the brand image we've worked so hard to build."

Moreover, this would set a bad precedent.

"If any competitors emerge in the future, the distribution channels will expect us to offer further discounts, and there will be no end to it."

"Then what should we do? We can't just stand by and watch 'Jineng' seize market share!" Li Weiming asked with some doubt.

"Of course we can't ignore it."

Chen Bingwen said in a deep voice, his gaze sweeping over the several senior executives present.

"We need to take the initiative, but not through a price war. Manager Li, the marketing department should immediately plan a 'blind taste test' event."

"A blind test to try it out?" Li Weiming asked with some doubt.

"Yes, just like the 'Pepsi Challenge' that Pepsi created specifically to compete with Coca-Cola for market share in the North American carbonated beverage market."

Chen Bingwen explained, "Pepsi conducted a large-scale blind test, allowing consumers to taste two cola brands without knowing the brands, and as a result, many people chose Pepsi."

This helped them break Coca-Cola's myth and seize market share.

“We can learn from this approach and set up free 'Pulse' tasting points in areas with the highest concentration of 'Jineng' products, such as streets or business districts with high foot traffic.”

Two beverages, one called "Pulse" and the other "Energy," are served in opaque paper cups. Consumers are allowed to taste them without knowing which is which, and then vote on which one they prefer.

Let consumers experience the quality difference for themselves, and the answer will be revealed on the spot.

Li Weiming's eyes lit up, and he said excitedly, "I understand! This way, we can avoid directly attacking our competitors and causing unnecessary legal disputes, while also allowing consumers to experience the advantages of our products in the most direct way!"
I'll arrange it right away!

“Okay!” Chen Bingwen nodded, then turned to Ling Peiyi, “Director Ling, the integration of Watsons needs to be accelerated, and ‘Pulse’ should be fully integrated into all Watsons stores as soon as possible to obtain better display positions.”

"Mr. Chen, I was just about to report this matter to you!"

As soon as Chen Bingwen finished speaking, Ling Peiyi replied with a solemn expression.

"Oh? You tell me!"

"The first phase of Watsons' integration work has been basically completed."

As she spoke, Ling Peiyi placed a thick folder on Chen Bingwen's desk. "In terms of personnel, the core management team and key employees in stores and factories have all been retained, and their morale is basically stable."

The inventory and verification of finances and assets have also been completed; here is a detailed list.

Chen Bingwen nodded, flipped open the folder and quickly browsed the summary section: "Well done, faster than expected."

So, are there any problems that need to be addressed?

The reason Chen Bingwen asked this question was because Ling Peiyi's expression just now clearly indicated that something was wrong with Watson's.

Ling Peiyi sighed softly: "The biggest challenge is not people or assets, but the products themselves. Mr. Chen, Watsons' product line is just too complicated."

She pointed to the documents on Chen Bingwen's desk: "According to our preliminary statistics, there are more than fifty SKUs in the soft drink category alone, including different flavors and packaging specifications."

There are hundreds of types of cosmetics, personal care products, and private-label daily necessities and general merchandise.

Many products have extremely low sales, but production and the supply chain have been maintained, consuming a significant amount of human and material resources, resulting in very high management costs.

After listening to Ling Peiyi's account, Chen Bingwen frowned slightly: "Tell me more specifically, which products are the obvious burden?"

Ling Peiyi said: "The most typical example is some niche flavors of soda factories, such as cherry cola and pineapple sarsaparilla. The annual output is less than 100,000 bottles, but it requires separate production line configuration and raw material procurement. Taking into account the shared management costs and warehousing, each bottle is losing money."

There are also some private label brands in the cosmeceutical division, such as this 'Pear Brand' cold cream. Its formula is outdated, its packaging is obsolete, and it's almost ignored on the shelves, but it's still being produced according to plan.

"What about the employees?" Chen Bingwen pressed. "If we cut these products, how many people will be affected?"

"There are about 200 assembly line workers directly involved, plus related purchasing, quality inspection, and warehousing personnel, totaling nearly 300 people."

After saying that, Ling Peiyi looked at Chen Bingwen with some concern, "Mr. Chen, many of these employees are experienced masters with skilled techniques."

If we lay off employees directly, I'm afraid…

After a moment's thought, Chen Bingwen decisively said, "People cannot be dismissed."

Integration is meant to improve efficiency, not to create conflict.

So, Director Ling, you and Manager Xu should work together to come up with a product line optimization plan as soon as possible.

The principle is to retain core profitable products, eliminate products that have been consistently unprofitable and have no market prospects, and for products that are unique but have low sales volumes, assess whether they can be improved or if niche markets can be explored.

Just kidding. Watsons has a total of 680 employees. If they lay off 300 people at once, it will not only cause huge labor disputes and social pressure, but also severely damage the morale of the remaining employees and completely destroy the human foundation of this century-old store.

Chen Bingwen would never consider such a short-sighted approach.

“I’ve discussed this with Manager Xu several times,” Ling Peiyi said. “We also believe that we need to conduct a thorough product line review and optimization, cut out those inefficient and ineffective SKUs, and concentrate resources on core products.”

But this relates to Watsons' future business direction. Many products, although not profitable, have been around for many years and even have some long-time customers.

so."

She paused for a moment, then said solemnly, "Manager Xu and I both believe that Mr. Chen, you need to personally visit all the key locations of Watsons, especially the soft drink factory and several representative stores."

Only when you personally witness the actual situation can we jointly determine the specific plan and scale for the next step of in-depth integration.

After listening to Ling Peiyi's words, Chen Bingwen pondered for a moment and nodded: "You're right."

Theory without practice is ultimately superficial.

Okay, you can make the arrangements, and we'll go to Watsons' soft drink factory and a few key stores tomorrow morning.

Let's invite Manager Xu along.

"Okay, Mr. Chen. I'll arrange it right away."

Ling Peiyi immediately agreed.

The next morning, accompanied by Ling Pei-yee and Tsui Sai-man, Chan Ping-man arrived at the Watsons soft drink factory in Aberdeen.

After initial integration, the factory area looks clean and orderly, and the workers' morale is better than expected.

However, upon entering the production workshop and finished product warehouse, Chen Bingwen was deeply moved by what he saw.

Alongside the long production line, various types of bottled soft drinks with different packaging flowed by, while the adjacent storage area was piled high with boxes of different sizes, making it appear somewhat crowded.

Xu Shiwen proudly introduced to Chen Bingwen, "Mr. Chen, this is our best-selling soda, mainly supplied to bars and Western restaurants for mixing whiskey. It has the number one market share in Hong Kong Island."

The production line next to it produces tonic water; we're the only one producing it locally, and we even export it to Southeast Asia.

As he spoke, Xu Shiwen pointed to another bottling line: "This is our ginger ale, the designated beverage for Cathay Pacific."

Over there is Sarsaparilla, made with a local plum juice formula. And this is our cola-flavored soft drink, launched in 77. It's caffeine-free and goes for a healthier option.”

Xu Shiwen's detailed and knowledgeable introduction only made Chen Bingwen's brows furrow even more.

He discovered that Watsons had more than twenty different products in the soft drink category alone, each targeting a specific, sometimes even extremely narrow, market segment.

Many product lines are clearly underutilized, but they are still operating.

"How profitable are these products?" Chen Bingwen interrupted Xu Shiwen's introduction and asked directly.

Upon hearing this question, both Xu Shiwen and the factory director standing next to him showed a hint of embarrassment.

Before they could speak, Ling Peiyi took over and calmly reported: "According to our consolidated financial data, apart from a few core products such as soda water, distilled water and tonic water which have stable and good profits, more than half of the soft drink products are in a state of low profit or even loss."

Especially for niche-flavored soft drinks and concentrated syrups, low production volume, frequent production line changes, and high costs mean they barely survive, relying almost entirely on profits from other products.

(End of this chapter)