Is Zong Fuli stable this time?

Zebra Consumer Chen Xiaojing

By retreating to advance, Zong Fuli successfully achieved a major reversal of events and returned to Wahaha Group to regain control.

When faced with two evils, choose the lesser one. This is the result of a game where all parties got what they needed.

However, the reality remains that state-owned capital is the largest shareholder of Wahaha Group, making it difficult for Zong Fuli to be as firmly entrenched in her position as her father, Zong Qinghou.

Unless she can acquire the stake in Wahaha Group held by the Shangcheng District state-owned assets.

Major Reversal

Last Thursday, news of Zong Fuli being forced to resign from Wahaha Group spread like wildfire.

Just months after Zong Qinghou's passing, his daughter, Zong Fuli, Vice Chairwoman and General Manager of Wahaha Group, faced doubts from some shareholders about the rationality of her management and had to resign voluntarily, stepping away from operational duties.

In the following days, neither the Shangcheng District of Hangzhou mentioned in the "Letter to All Wahaha Group Employees," nor some shareholders, nor even Zong Fuli herself, made any direct response.

Meanwhile, the media and public remained highly interested, analyzing and speculating from various angles.

During this time, only Zong Zehou, Zong Qinghou's younger brother and Zong Fuli's uncle, publicly commented on the matter via his social media, calling Zong Fuli's resignation "a good thing." He pointed out that after taking over, Zong Fuli was too aggressive, embodying the ancient saying, "The rigid are easily broken."

He also highlighted a key point: Wahaha is essentially controlled by the state as the largest shareholder, so as a professional manager, one must tread carefully.

Zong Zehou clearly underestimated his niece's influence. Five days later, on the evening of July 22, the situation took a dramatic turn: Zong Fuli returned.

The statement, signed by Zong Fuli and stamped by Wahaha Group, read: "To ensure the stable and healthy development of the company, after friendly negotiations among shareholders, Ms. Zong Fuli has decided to continue her management roles at Wahaha Group."

The days-long "palace coup" at Wahaha Group ended temporarily with Zong Fuli's return. What agreements or consensus were reached among shareholders remains unknown.

Holding the Leverage

As the "Princess of Wahaha," Zong Fuli, born in 1982, is now 42 and far from an inexperienced newcomer.

After returning from abroad in 2004, she joined Wahaha, starting as a grassroots production manager to fully understand the business. Later, she independently managed ventures outside the group and founded the beverage brand Kelly One, named after her English name.

In 2018, she volunteered to become Wahaha Group's PR director. Her first move was replacing Wang Leehom, who had endorsed Wahaha for 20 years. Her goal was clear: to shift away from her father's traditional mindset and make the brand appeal to younger consumers.

Zong Qinghou had long pondered Wahaha's succession but was conflicted.

In a 2019 interview, he said: "Children will inherit wealth but not necessarily management, which should ultimately be handled by professional managers."

Yet two years later, he appointed Zong Fuli as Vice Chairwoman and General Manager, entrusting her with full management responsibilities.

After 20 years of experience, Zong Fuli's resignation was neither impulsive nor a surrender. Many saw it as a strategic retreat to advance.

To make such a risky move, she must have held significant leverage.

Beyond Wahaha Group, Zong Qinghou had a vast business empire, much of which has been transferred to Zong Fuli. Records show she holds shares or executive roles in over 100 affiliated companies.

For instance, Zong Qinghou's 100% stake in Hangzhou Wahaha Hongzhen Investment Co., Ltd. was transferred to Zong Fuli on March 28 this year. Hongzhen Investment controls dozens of Wahaha-named companies, dominating the group's supply chain.

Another key entity is Hongsheng Beverage Group, which operates subsidiaries nationwide as OEMs for Wahaha products.

Zong Fuli became Hongsheng's president in 2007, later rising to chairwoman, and earlier this month, to executive director.

Hongsheng Beverage is 98% owned by offshore company Hengfeng Trading Co., Ltd. and 2% by Zhejiang Hengfeng Investment Co., Ltd., the latter fully owned by Zong Fuli.

A previously circulated whistleblower letter alleged that Zong Fuli fully controls Hongsheng Beverage, accusing her of sidelining Wahaha veterans with her own people and potentially misusing state assets.

No authoritative media has verified the letter's claims.

Is It Stable?

In the 1980s, Zong Qinghou took over a school-run enterprise in Hangzhou's Shangcheng District and built the Wahaha beverage empire. In 2012, he became China's richest person on the Forbes list.

On February 25 this year, the 79-year-old passed away from lung cancer.

At his memorial, Zong Fuli spoke through tears: "His shoulders were once my lookout to the world; now my hands will continue his beverage legacy... I will take the baton and uphold the brand and company..."

This was both a tribute and a declaration of succession. For a private company, it would be straightforward.

But Wahaha Group isn't private. Its shareholders are Hangzhou Shangcheng District Wenshanglv (46%), Zong Qinghou (29.4%), and the grassroots labor union (24.6%). The state remains the largest shareholder, and Zong Qinghou's stake hasn't been transferred to Zong Fuli.

Zong Qinghou was Wahaha's founder and spiritual leader. While he lived, no one questioned his control.

But Zong Fuli lacks her father's authority. Without the union's support, she can't truly lead.

As early as 2006, Zong Qinghou mentioned plans for state capital to exit, but the Danone dispute delayed this. The issue remained unresolved at his death.

In 2023, Shangcheng District signaled its intent to divest from Wahaha again, even hiring firms to assess the 46% stake's value. But Zong Qinghou's illness and passing halted progress.

State capital's exit requires careful deliberation, but it’s inevitable.

Now, Wahaha's future depends on Zong Fuli's next moves.

The best outcome would be her acquiring the state's stake for full control. Otherwise, she must carefully manage relations with the union—her father's longtime allies.