Rebirth in Hong Kong: From Dessert Shop to Industrial Empire

Chapter 175 Blind Test (Seeking monthly votes, recommendations, and subscriptions!)
A few days later, a detailed financial report on Watsons' product line optimization and preliminary background information on "Wanglaoji" and Wang Jianyi were placed on Chen Bingwen's desk.

In the conference room, Ling Peiyi first reported on the preliminary plan for streamlining the product line.

"Based on financial data and on-site research at stores and factories, we recommend optimizing the existing 587 SKUs to around 150."

Ling Peiyi pointed to the charts on the slides and reported, "The first batch of products recommended for elimination includes 12 niche flavors of soft drinks from the soft drink factory, 38 slow-moving proprietary products from the cosmetics department, and 21 inefficient products from the daily necessities department."

These products account for less than 8% of total annual sales, but consume over 35% of warehousing and management resources, and are generally operating at a loss.

“This measure is acceptable, but the力度 (intensity/strength) could be increased.” Chen Bingwen placed his hands on the table, his gaze sweeping over Ling Peiyi and Xu Shiwen present. “Our current thinking is still at the ‘optimization’ level.”

But Watsons' problems cannot be solved by optimization; they require a complete overhaul.

He gestured for Ling Peiyi to turn to the later pages of the report: "Look at these figures: more than 30% of SKUs contribute less than 5% of sales revenue, but occupy nearly 40% of warehousing and management resources."

This isn't an optimization problem; it's a structural problem.

Ling Peiyi hesitated slightly: "Mr. Chen, what do you mean?"

“What I mean is that 150 SKUs is still too many.” Chen Bingwen pointed out the key point directly: “We should set the target at less than 50, and only retain the core products that can truly generate profits and have market influence.”

"A short, sharp pain is worse than a long, drawn-out one." Chen Bingwen's attitude was unusually firm. "What we need to do is not patch things up, but completely rebuild."

I believe it can be achieved in three specific steps.

The first step is to re-evaluate existing products.

There is only one standard.

Can we achieve a top-three ranking in our niche market?
Those that don't meet the requirements will be eliminated. At the same time, we will focus on developing two directions: first, leveraging the existing Watsons distilled water business to expand the household bottled water market.

Second, we need to accelerate the research and development of electrolyte water.

The second step was to close down inefficient factories and concentrate production capacity at the Tsuen Wan Soft Drink Factory.

The third step is to complete product line consolidation within six months and launch new products within nine months.

Chen Bingwen's words silenced the meeting room.

His proposed three-step plan was more radical than anyone expected.

Cutting the number of SKUs from 587 to less than 50 means eliminating more than 90% of the product lines.

Upon hearing this number, Xu Shiwen couldn't help but gasp and asked worriedly, "Mr. Chen, isn't this too radical?"

What will distributors think if more than 90% of the product line is cut at once?
Will loyal customers who are used to buying certain niche products backfire?

Many products may not sell in large quantities, but they have a loyal customer base in specific regions and among specific groups of people.

Ling Peiyi added, "Yes, Mr. Chan."

The drugstore's slow-moving proprietary products, while resulting in overall losses, include some long-established brands favored by older customers for decades. Suddenly removing them from the shelves could cause dissatisfaction.

After listening to their concerns, Chen Bingwen remained calm and said, "I know there will be labor pains."

But have you considered that maintaining the status quo might come at a greater cost?

He pointed to the data on the report: "Of these 587 SKUs, more than 400 are products with annual sales of less than HK$50."

Not only are they not profitable, they are also constantly consuming our management resources and warehousing costs.

"We need to consider the big picture, not the small details."

Retaining these products may seem to preserve some sales revenue, but in reality, it is dragging down the overall operational efficiency of the company.

Releasing these resources and focusing them on core products with high potential will generate benefits far exceeding the lost sales revenue.

“As for the issue of long-term customers,” Chen Bingwen turned to Ling Peiyi, “a transitional solution can be adopted.”

For products with a stable customer base, a minimum inventory can be maintained initially, and a pre-sale or periodic supply model can be adopted.

At the same time, we will strengthen communication with customers and guide them to our core products.

He then looked at Xu Shiwen: "The lack of distribution channels is not a problem. The empty shelves are perfect for introducing our new products, such as the upcoming tea beverage series."

We need to fill the gap with products that have higher profit margins and faster turnover.

Zhou Zhiyuan then interjected, asking, "Mr. Chen, you just mentioned expanding into the home bottled water market and developing tea beverages. What are the specific priorities?"

“Bottled water will be given priority,” Chen Bingwen answered without hesitation. “This is a natural extension of our existing advantages.”

Watsons distilled water already has a good brand recognition, and expanding into the bottled water business in the home and office markets requires little investment and yields quick results.

Electrolyte water requires more research and development time and can be used as a reserve for new products.

At this point, he glanced at everyone and said, "I know this decision was difficult."

But for Watsons to be reborn, it must go through this painful period.

"Understood," Ling Peiyi replied.

"In addition," Chen Bingwen added, "the production lines and funds released after optimization should be immediately invested in new product research and development and expansion of core products."

After discussing the internal optimization of Watsons, Chen Bingwen steered the conversation to Wanglaoji.

"Manager Xu, tell me about the situation with Wanglaoji."

Xu Shiwen continued his report: "According to our understanding, the 'Wanglaoji' branch on Hong Kong Island was founded in the 1880s by Wang Yukang, the great-grandson of Wang Zebang, and was first opened on Man Mo Temple Street."

At its peak, it had six branches throughout Hong Kong, with locations in Central, Causeway Bay, and Mong Kok.

But after the War of Resistance against Japan, soaring rents in the 1960s, and poor management in the 1970s, only this one old shop remains on Aberdeen Street.

Chen Bingwen nodded and sighed, "It's a pity that a century-old brand has fallen to such a state."

Who is currently managing the business?

“It’s mainly Wang Yukang’s granddaughter, Wang Jianyi, who is in charge,” Xu Shiwen replied. “Her brother, Wang Jianquan, comes to help occasionally, but he doesn’t seem to be focused on it.”

I heard their father runs a bakery in America and has been wanting the siblings to help out.

After a moment of contemplation, Chen Bingwen said to Ling Peiyi, "Director Ling, why don't you go and make contact with Wang Jianyi and test the waters?"

Under the guise of exploring cooperation, we'll see if there's any chance of obtaining the rights to use the formula and trademark.

He knew that when dealing with a century-old brand like Wanglaoji, it was better to gradually penetrate the market through cooperation and mutual benefit than to aggressively acquire it.

This approach can both lower the other party's guard and allow for continuous assessment of risks and value during the process.

Watsons' extensive distribution network and modern production capabilities are undoubtedly a huge attraction for Wang Jianyi, who is currently facing business difficulties.

"Understood," Ling Peiyi replied.

While Chen Bingwen was focused on the internal restructuring of Watsons and the acquisition of Wanglaoji, the "blind taste test" activity planned by the marketing department was launched as scheduled.

In the traditional advantageous areas of Taohua Datong, such as Shanghuan and Xihuan, several eye-catching "Pulse" free tasting points have been set up.

The blue sunshade, the college student part-time staff in uniform, and the enthusiastic greeting of "Free samples, please give us your feedback" attracted many passersby to stop and watch.

"Sir, would you like to try our energy drink?"
Free samples, please give me some feedback?

The staff greeted passersby warmly.

Many consumers participated in blind tests without their knowledge.

Each tasting station had two large, opaque containers, one containing "Pulse" and the other "Energy," which were distributed to passersby in uniform paper cups by staff. A voting board was also set up, inviting consumers to vote for their preferred flavor after a blind taste test.

On the first morning, the event attracted many curious citizens. "Free samples, please give us some feedback?" the staff greeted passersby warmly.

After tasting both glasses, a middle-aged housewife carefully savored them and pointed to the glass in her left hand, saying, "This glass has a more refreshing taste and a moderate sweetness."

The other one was a bit too sweet.

The staff revealed the answer: she had chosen "Pulse".

A middle school student in a school uniform drank two cups in one go, wiped his mouth and said, "The one on the right is more fizzy and quenches my thirst better!"

The results showed that he chose "Powerful".

Ms. Chen, a white-collar worker who came out of a nearby office building, said after carefully tasting the drink, "The one on the left has a better aftertaste and doesn't stick to your throat." She also chose "Pulse".

After several days, statistics show that among the consumers who participated in the blind test, about 60% chose "Pulse", 35% chose "Energy", and the rest said they could not tell the difference or refused to vote.

The reputation of "Pulse tastes better" has begun to spread quietly among some consumer groups.

Although "Jineng" still attracts price-sensitive customers with its low price advantage, some quality-conscious consumers are starting to choose "Pulse" again.

Taohua DT's marketing department quickly noticed this situation.

"Mr. Liu, Chenji is conducting blind taste tests on our turf, which is clearly targeting us!" The marketing manager reported to Liu Weixiong in a somewhat exasperated manner.

Liu Weixiong frowned as he looked at the report: "What impact will this blind test have on our sales?"

"According to our monitoring, the growth rate of energy sales in some stores has slowed down."

Although overall growth is still occurring, the momentum is not as strong as it was a few days ago.

"This is a blatant conspiracy!" Liu Weixiong slammed his fist on the table. "They know it's targeting us, but they can't directly oppose it!"

Are we supposed to protest that they're offering free drinks to customers?

What's even more troubling for Taohua Datong is that several influential media outlets have also taken notice of this novel marketing approach.

The business section of Sing Tao Daily published an analysis article titled "New Tactics in the Beverage Market: Blind Testing May Become a Touchstone for Quality." Although it did not name the brand, it clearly described "Pulse's" strategy of improving quality perception through blind testing.

The Commercial Daily went even further, directly titled "Functional Beverage Duo Clash: Taste Becomes the New Battlefield," bringing the competition between "Pulse" and "Energy" to the forefront.

"Mr. Liu, several newspaper reporters have called to ask for our views on the blind test activity."

The marketing manager asked, "How should we respond?"

Liu Weixiong pondered for a moment: "We will maintain a unified message to the outside world, saying that we welcome market competition and believe that consumers will make wise choices."

It also emphasized the cost-effectiveness advantage of Jineng.

However, in response to Chen Ji's "blind taste test" event, Liu Weixiong still convened an emergency management meeting to devise a countermeasure.

"We cannot sit idly by and wait for Chen Ji's evaluation activities to fail."

The R&D department is accelerating the improvement of new products and will launch the upgraded version of Jineng as soon as possible.

The marketing department has increased promotional efforts, adding buy-one-get-one-free offers specifically for blind testing areas.

He added, "In addition, check whether there are any loopholes in Chen Ji's blind taste test activity, such as whether it is suspected of disparaging competitors."

"Let the Ministry of Justice look into it."

However, Chen Bingwen had anticipated this possibility from the very beginning of the planning.

All staff members undergo rigorous training and only guide tasting; they never offer their own evaluations, and all conclusions are drawn from the consumers themselves.

Taohua Datong's legal department racked its brains but could not find an effective legal breakthrough.

On the other side, Ling Peiyi arrived at the Wanglaoji herbal tea shop.

After buying the herbal tea, she casually struck up a conversation with Wang Jianyi.

"Boss Wang, your herbal tea is indeed authentic."

A friend of mine owns a small shop in Causeway Bay and has been wanting to add some unique drinks. I wonder if you'd be interested in supplying a small batch to try?

Wang Jianyi wiped the counter and said with a wry smile, "Thank you for your kindness. But I make all of this by hand, and I don't make a large batch. I'm also afraid it will lose its flavor."

“We don’t need a large quantity, just supply a few dozen cups a day to test the market response,” Ling Peiyi said casually. “Packaging and delivery can be handled by my friend.”

Wang Jianyi hesitated for a moment: "This... I need to discuss it with my brother."

In the evening, Wang Jianquan came to the store to help tidy up, as usual.

After closing the door, Wang Jianyi wiped the counter and casually mentioned, "Brother, a Ms. Ling came to the store today, saying she was representing a company and wanted to discuss cooperation."

Wang Jianquan stopped what he was doing, looked up and asked, "Cooperation? What kind of cooperation?"

She said her company was optimistic about our herbal tea and wanted to invest in expanding its business, or... directly buy our formula and trademark.

Wang Jianquan's eyes lit up immediately: "Buy it? Who is this person? How much are they asking?"

Seeing her brother's reaction, Wang Jianyi's heart sank: "I didn't ask specifically."

But brother, this is our family business, the legacy passed down from our great-uncle. How can we sell it?

“Ancestral property? Business foundation?” Wang Jianquan’s tone rose a few decibels. “Ayi, look at this business now!”

I work from dawn till dusk every day, and the money I earn is just enough to pay rent and make ends meet!
Why did Dad go to America to open a bakery back then?

"Isn't it because the herbal tea business is tough?"

“That’s because we haven’t found a good method yet! As long as we stick to quality and innovate our business,” Wang Jianyi argued.

“Innovation? What can we innovate with?” Wang Jianquan interrupted her. “We don’t have money for advertising, we don’t have money to expand into new stores, and we even hesitate for a long time to change to better packaging!”

Do you know how Dad's bakery in America is doing now?
He wrote to say business was booming and he wanted us to come and help expand the bakery!

Wang Jianyi stubbornly shook her head: "I'm not going to America. I want to protect this family business."

"Defend? How do we defend?"

Wang Jianquan excitedly pointed into the shop, "Look! Besides a few old neighbors, how many young people come to drink herbal tea?"
The Watsons next door sells all the new-style soft drinks!
What about us?
They're still guarding this big bronze kettle!

"Our herbal tea is healthier than those sodas! It's made with the real best ingredients!" Wang Jianyi raised her voice.

What's the use of health?

"If no one buys it, it's useless!" Wang Jianquan almost shouted. "Ayi, don't be so stubborn!"
Dad is getting old and needs our help.

American bakeries are readily available businesses; you can take them over anytime soon. But what about this herbal tea shop?

Should we continue to live a life of hardship and cling to it?

“I’m not stubborn! I just don’t forget my roots!” Wang Jianyi’s eyes reddened. “These are the roots of the Wang family!”

"Roots? Roots need to survive too!" Wang Jianquan slammed his hand on the table. "Think about it yourself!"
Should I stay and run this hopeless old shop, or go to America and start a new life?

With that, Wang Jianquan slammed the door and left, leaving Wang Jianyi alone behind the counter, looking at the ancestral copper kettle, tears finally falling down her face.

(End of this chapter)