Rebirth in Hong Kong: From Dessert Shop to Industrial Empire.

Chapter 32 Crisis (Please add to your favorites, vote for this book, and recommend it!)

Inside the research and development center of the Kwun Tong Food Factory, the air is filled with the rich, sweet aroma of coconut milk and the fragrant scent of mango.

Professor Zhou is leading his team in the thirteenth stability test of mango pomelo sago.

Chen Bingwen, along with Zhong Qiang and Gao Zhenhai, carefully inspected the color, viscosity, and flavor retention of the latest batch of coconut milk sago pudding.

"Brother Wen, the aroma of this batch of coconut milk seems stronger than the last batch?" Zhong Qiang scooped up a spoonful of the white coconut milk sago pudding and sniffed it carefully.

Chen Bingwen nodded: "The samples sent by the Thai supplier are new coconuts from the new harvest season, which are of even better quality, as the rainy season has just ended."

If the taste remains consistent, we can consider signing a long-term contract to secure a high-quality supply.

He took a bite; it was smooth and creamy, with a rich coconut flavor and a natural sweetness—truly top-notch.

Just then, the door to the R&D center was pushed open abruptly, and Ah Chang, who was in charge of purchasing, rushed in, his face pale: "Boss! Something terrible has happened!"

"What's the panic!"

Chen Bingwen put down his spoon and asked seriously, "What is it? Tell me slowly."

"Thailand! A fax has arrived from Thailand!" Ah-Chang gasped for breath. "Our main coconut milk supplier, Golden Elephant Company, has just sent a formal notification!"

Starting next month, coconut milk prices will increase by 30%!

"What?!" Gao Zhenhai exclaimed in shock, "30%? Are they crazy?!"

Zhong Qiang was also stunned: "How is this possible? We just signed a quarterly contract and haven't even completed half of it yet!"

Even the usually calm Professor Zhou put down the test tube and looked at Chen Bingwen with a serious expression.

The 30% increase in coconut milk prices hit everyone like a hammer blow.

Chen Bingwen's face instantly turned cold, and he forced himself to calm down: "Reason? What reason did they give?"

"It is said that the main coconut-producing areas in southern Thailand have been hit by a series of typhoons, which have severely damaged the coconut trees and caused a sharp decline in production."

Coupled with soaring international shipping costs, they had to adjust their prices.

Ah Chang handed over a fax, his voice trembling, "They said...they said this is common practice in the industry, and they're only raising the price by 30% because they're a long-time customer."

Chen Bingwen took the fax and quickly scanned the cold English terms and the glaring "30%".

A chill ran up my spine.

Coconut milk sago pudding and mango pomelo sago pudding, these two flagship products that have just entered the high-end market and become new profit engines for Chen Kee, are all based on high-quality coconut milk!

The cost of coconut milk already accounts for more than 40% of the raw material cost in these two products.

A 30% increase means that the gross profit margin of these two products will be halved from the current 68% to below 40% in an instant!

This doesn't even take into account the risk that the prices of other ingredients such as mango and grapefruit might follow suit and rise.

"Brother Wen, what... what should we do?" Gao Zhenhai wrung his hands anxiously. "Our coconut sago and mango pomelo sago are already priced high, and customers are price-sensitive."

If costs rise so much, we either have to raise prices accordingly or maintain the original price! But if we maintain the original price, all the efforts we've made so far are essentially for the benefit of the raw material suppliers, and the profits are being eaten up by them.

"How about we offer unlimited supply, or find other raw material suppliers?"

Limited supply?

Chen Bingwen's mind raced with calculations.

Currently, coconut milk sago pudding and mango pomelo sago pudding have a combined daily sales volume of nearly 4,000 bowls across the five standard stores, which is key to attracting high-end customers and enhancing the brand image.

If prices are raised significantly due to cost issues, the hard-earned reputation for "great value for money" will collapse instantly.

Thinking of this, he didn't immediately respond to Gao Zhenhai's anxious question, but instead turned his gaze to Zhong Qiang.

"Brother Qiang, how long will our coconut milk supply last?"

Zhong Qiang quickly calculated in his mind: "Boss, we currently have 4 tons of coconut milk in stock. The daily demand is mainly for coconut milk sago pudding and mango pomelo sago pudding, which consume coconut milk."

Other products, such as red bean paste and sesame paste, use very little coconut milk, or even none at all.

If new product promotions and in-store tastings are stopped, and the production of coconut sago and mango pomelo sago is strictly limited, for example, to only 70% of the current daily supply, then the 4-ton inventory could last for about 45 days.

When he mentioned the limited quantity, his tone revealed obvious reluctance, which meant that he was voluntarily reducing the scale of the project he had worked so hard to build.

Currently, coconut milk sago pudding and mango pomelo sago are only sold in five standard stores. Once bottled, the monthly consumption will be several times or even dozens of times higher than it is now.

If we accept the price increase of raw materials from Golden Elephant, the loss in gross profit may not be significant in the short term, but in the long run, we will lose tens or hundreds of thousands of yuan every month.

Cutting flesh with a dull knife is just as painful; this is definitely not a long-term solution.

"Forty-five days," Chen Bingwen pondered.

These forty-five days are a precious buffer period, the final deadline for finding a way to survive.

Raising prices is almost like drinking poison to quench thirst; as he said, it will directly destroy consumers' perception of Chen Kee's brand as "high-quality ingredients and great value."

"We can't raise prices!" Chen Bingwen set the tone decisively. "At least not now! Our brand image has just gained a foothold in the mid-to-high-end market. Raising prices would be tantamount to destroying our own foundation."

We can't really limit the supply to 45 days and then run out of stock or have to raise prices in a ridiculous way.

The problem must be solved at its root!

"Limited quantity?" Zhong Qiang asked tentatively, "Only a certain number are supplied each day, while supplies last?"

Chen Bingwen shook his head: "Limited editions are just a temporary measure; they only address the symptoms, not the root cause."

Furthermore, limited editions can lead to customer dissatisfaction and speculation, which also damages the brand. We must address this issue at its root.

He walked to the window and looked at the busy workers and logistics vehicles coming and going in the factory area.

The Kwun Tong plant has just gotten on track, and the bottling R&D is in a critical phase. Training for newly recruited franchisees is also about to begin. At this crucial juncture of expansion, however, the supply chain has been strangled!

"Ah Chang, contact the Golden Elephant Company's office on Hong Kong Island immediately and arrange a meeting with their manager. I need to see them this afternoon!"

Chen Bingwen turned around, his tone leaving no room for doubt, "Also, find out for me whether the disaster situation in Thailand is true."

What are the current pricing levels from other suppliers? Is it possible to find alternative sources?

Inquire now! Use our largest purchasing volume to negotiate a lower price, while simultaneously gathering information on the actual market conditions in Thailand.

Investigate whether Jinxiang's claim of "general industry practice" is true! Are there other suppliers taking advantage of the situation to inflate prices or exploit the situation?

"Yes, boss!" Ah Chang quickly responded and ran out.

Gao Zhenhai said worriedly, "Brother Wen, Golden Elephant is one of Thailand's largest coconut milk exporters. If they're determined to raise prices, other smaller suppliers will probably follow suit."

"I know," Chen Bingwen said, his eyes deep. "Therefore, we must go to this negotiation! But not here; we must go to their source!"

He had already made up his mind.

Hong Kong Island has too little room for negotiation, and the other side is emboldened.

To break the deadlock, we must delve into the place of origin to understand the actual situation and look for new possibilities, or put enough pressure on Golden Elephant!

Coconuts are grown in the areas surrounding Hong Kong Island, including Thailand, the Philippines, Malaysia, and Hainan Island in mainland China.

Originally, Hainan coconuts were the preferred choice, but due to limited production and complicated procedures, they had to be abandoned.

The Philippines and Malaysia also produce coconuts, but they are subject to a 20% tariff on exports.

Thailand has no export tax and relatively cheap shipping costs, making it the best value for money overall.

Thank you all for your support!

(End of this chapter)