Rebirth in Hong Kong: From Dessert Shop to Industrial Empire

Chapter 207 The Devil's Price Tag (Seeking monthly votes, recommendations, and subscriptions!)

High fructose corn syrup has a less-than-honorable nickname in another time and space—"Devil's Candy".

But its ability to sweep through the entire food industry is not due to magic, but rather to naked economic laws.

The initial motivation for developing it was simple: to find a sweetener that was cheaper than sucrose.

Corn starch is hydrolyzed into glucose, and then, through the action of immobilized glucose isomerase, a portion of it is converted into sweeter fructose, resulting in mixed syrups with different fructose contents.

The process isn't particularly complex, but the key issue is cost.

Corn is one of the cheapest agricultural products in the United States. With large-scale production, the cost of high-fructose corn syrup can be 40 percent or more lower than that of sucrose.

The first and second oil crises drove up the prices of all basic commodities, including sugar.

This huge cost advantage is an irresistible temptation for any profit-seeking food company.

Moreover, the U.S. Food and Drug Administration has confirmed that it meets recognized safety standards.

As a result, high-fructose corn syrup has become ubiquitous, appearing in everything from carbonated drinks and baked goods to jams and salad dressings.

It not only provides a stable sweetness, but also improves the texture, color, and shelf life of food, making it almost a "universal key" for industrial food.

In the 1980s, American beverage giants will replace sucrose in their products on a large scale with high-fructose corn syrup.

This is not just about saving money; high-fructose corn syrup provides a more stable sweetness, has a longer shelf life, and is better suited for modern large-scale production and distribution.

Chen Bingwen knew that this thing was inextricably linked to the surge in health problems such as obesity and diabetes.

But these were not Chen Bingwen's biggest concerns at the moment.

He is concerned with the present, the strategic window of opportunity.

If beverage manufacturers fall behind in this technology, they may find themselves in an extremely passive situation in the future.

The cost difference is too large.

One ton of high fructose corn syrup is nearly 40 percent cheaper than one ton of cane sugar. When this figure is factored into the annual usage, it is an astonishing number that can determine the life or death of a company.

Once competitors fully adopt this low-cost raw material, they will have an overwhelming advantage, whether by launching a price war or investing more funds in channel competition and advertising blitzes.

The advantage in raw material costs will ultimately be reflected in every corner of the end market.

Now, high-fructose corn syrup has begun to be used in the food industry, and its application is even expanding in the carbonated beverage sector.

In Chen Bingwen's memory, low cost was one of the key weapons that enabled Coca-Cola and Pepsi to sweep the market later. The most crucial factor was the use of high-fructose corn syrup to replace expensive sucrose.

In the 1980s and 1990s, China did not have the capacity to produce high-fructose corn syrup, and beverage companies generally still used expensive cane sugar.

This led to a decline in market competitiveness, ultimately resulting in being overwhelmed by the two major Chinese liquor brands.

Chen Bingwen's ideas were practical.

By seizing the opportunity, high-fructose corn syrup was used to replace sucrose in "Pulse" energy drinks, energy bars, and chewing gum, significantly reducing product costs.

At the same time, leveraging its cost advantage, the company launched a more aggressive promotional campaign in the North American and European markets to rapidly expand its market share.

We aim to secure a leading position in the functional food market before a large number of competing products emerge.

Almost at the same time, in the HSBC Building's top-floor conference room in Central, Hong Kong Island.

The HSBC board of directors is currently holding a meeting with only one core agenda item: to review the transfer of HSBC's stake in Hutchison Whampoa to Cheung Kong Holdings, with a preliminary agreement on 10.65%.

Shen Bi sat in the main seat, his expression calm.

Given the previous anonymous letter controversy and his private dealings, both Swire Group's Swire and Jardine Matheson's Newbigent, two senior directors, were present in person today.

Sure enough, after Shen Bi briefly explained the proposal, Niu Bijian was the first to launch an attack.

Swire Group's Swire was relatively restrained, after all, this sale was not of all shares and the amount was not large.

But Jardine Matheson's Newman looked very unpleasant.

the reason is simple.

In the previous bidding for the development rights of the properties above Admiralty Station and Central Station of the MTR, Jardine Matheson's Hongkong Land Group was originally determined to win, but Cheung Kong Holdings suddenly emerged and snatched the prize from their grasp.

This matter left Newbie in a deep grudge.

More importantly, the battle of Kowloon Wharf.

As the two flagship companies of the Jardine Matheson Group, Wharf Holdings and Hongkong Land are like two wings.

Li Ka-shing dared to secretly acquire Wharf Holdings shares. Although the shares were later transferred to Pao Yue-kong and Li Ka-shing did not directly obtain them, this act of challenging Jardine Matheson's core interests was, in New York's view, an act of usurping their exclusive rights and an intolerable betrayal and provocation.

In his mind, Li Jiacheng was a smiling tiger who didn't follow the rules and had inflated ambitions.

Now, with Sir Michael Sandberg proposing to transfer the equity of such a high-quality asset as Hutchison Whampoa to Cheung Kong Holdings, New York felt a surge of anger rising to his head.

“I oppose this transaction,” Newman said coldly, stating his position directly. “Hutchison Whampoa’s shareholding structure has just stabilized. HSBC, as a major shareholder, is transferring such a large amount of shares at this time, which will inevitably cause unnecessary speculation and turmoil in the market and is not conducive to the company’s stability.”

Moreover, I doubt whether Cheung Kong Holdings' experience in the real estate sector is sufficient to manage a complex conglomerate like Hutchison Whampoa.

His reasons sounded plausible, but everyone in the meeting room could hear the underlying personal emotions.

Shen Bi remained expressionless, having anticipated Niu Bijian's reaction.

He nodded and looked at the others, asking, "What are the opinions of the other directors?" Swire of Swire spoke up, "Sir Newbikin's concerns are not without merit."

However, if the price is reasonable and the procedures are compliant, partially reducing holdings to recoup funds is not out of the question.

The key is to examine whether the specific terms and consideration truly align with HSBC's interests.

Most of the independent directors remained on the sidelines or nodded slightly in agreement with Swire's neutral stance.

The pressure fell on Y.K. Pao.

He pondered for a moment, then slowly said, "Business decisions must ultimately be based on whether they benefit the company. Cheung Kong Holdings has developed rapidly in recent years, and Mr. Li Ka-shing's capabilities are evident to all."

If the terms of the transaction are favorable to HSBC and can achieve asset appreciation and efficient use of funds, I believe it is worth supporting.

Of course, the openness and transparency of the process are crucial.

While Bao Yugang's words seemed fair, they actually gave the green light to the deal.

Shen Bi was certain.

He knew that if Newbeg was the only one who opposed him, things would be much easier.

"Gentlemen," Sir Michael Sandberg began, "this proposed share transfer is not a hasty decision. Based on a prudent assessment of the market and Hutchison Whampoa's future development, we believe that introducing a powerful and dynamic strategic investor like Cheung Kong Holdings will help unleash Hutchison Whampoa's potential and is in HSBC's long-term interests."

Regarding pricing, it will naturally be based on the current fair market value, and strict transaction protection clauses will be set. HSBC's interests are always paramount.

He looked around, his gaze finally settling on Newbridge: "I understand Sir Newbridge's concerns. But business decisions cannot be entirely dictated by personal likes and dislikes."

I believe that, within the framework of a sound agreement, this transaction will be a new beginning for both HSBC and Hutchison Whampoa.

Niu Bijian's face was ashen. He knew that Shen Bi's mind was made up, and with the support of most of the directors, he could not stand alone.

He snorted coldly and said nothing more, but still firmly cast his vote against it.

Ultimately, the vote passed.

HSBC has formally agreed to transfer its 10.65% stake in Hutchison Whampoa to Cheung Kong Holdings at a 50% premium.

Although the news was not immediately made public, people in the industry have gradually become aware of it.

Li Jiacheng has finally obtained the first and crucial ticket to enter the core stage of Hutchison Whampoa.

Chen Bingwen soon received news of the HSBC board meeting results.

Fang Wenshan stood in front of his desk and reported: "Mr. Chen, the news has been confirmed."

HSBC's board of directors approved a proposal to transfer a 10.65% stake in Hutchison Whampoa to Cheung Kong Holdings.

"As expected." Chen Bingwen was not surprised.

Li Jiacheng had been colluding with Shen Bi for two or three years, and any resistance was not enough to make Shen Bi change his plans.

"After Li Ka-shing receives this 10.65%, he will soon request to join the Hutchison Whampoa board of directors."

"Hmm." Chen Bingwen pondered for a moment, "What is our current shareholding situation?"

"Currently, it's around 13.2%, and to avoid attracting attention, Christensen's team is taking a slow approach to acquisition."

“Just keep this pace,” Chen Bingwen instructed. “Our focus should be on integrating Qingzhou Yingni and the North American market first.”

Let Li Jiacheng go and work things out with Wei Li first.

He knew that after Li Ka-shing joined the Hutchison Whampoa board of directors, his first challenge would not be Sugar Heart Capital, but rather the management team led by Wayne Li.

With two tigers fighting, he could sit back and observe the situation while accumulating strength.

But sitting and watching doesn't mean doing nothing.

It is not in Li Ka-shing's interest to allow him to gain a firm foothold on the Hutchison Whampoa board of directors.

We must create some trouble for Li Jiacheng and slow down his integration process.

With this in mind, Chen Bingwen made a decision.

“Let’s make an appointment with Chairman Wei Li,” Chen Bingwen said to Fang Wenshan. “Just tell him that I have some things to discuss with him privately regarding the future development of Hutchison Whampoa. He can decide the time and place.”

“Okay, Mr. Chen,” Fang Wenshan nodded in agreement.

"In addition," Chen Bingwen asked, "how is the rezoning application for the Yingni Hung Hom plot in Qingzhou progressing?"

“The City Planning Department has given us initial feedback, believing that our concept of a modern beverage and food industrial park is in line with the direction of industrial upgrading, but the assessment of the land premium will take time, and the amount will probably still be quite large.”

Fang Wenshan looked troubled.

"It's alright," Chen Bingwen waved his hand. "As long as the direction is acceptable, that's fine."

The land premium can be negotiated or delayed.

The most important thing right now is to solidify this concept and get the market to accept Qingzhou Yingni's transformation story.

He needs this story to support the stock price and pave the way for subsequent capital operations.

(End of this chapter)