CommonWealth Economic Forum
Ting Hhsin International Group Chairman
Ting Hsin International Group chairman Wei Ying-chiao shares his strategy for conquering the China market.
Ting Hhsin International Group ChairmanBy Ming-Ling Hsieh
From CommonWealth Magazine (vol. 492 )
He was born in Taiwan but seized the number- one position in the China market, even gobbling up a major international playersplayer. He didn't come armed with a flashy Ppowerpoint presentation, yet he won the continuous applause and laughters of from the foreign and domestic audience, locals and international visitorsguests alike, as he sharing gathered before him withed sage counsel his thoughts on his gleaned from after 20 years in the trenches. At this year's CommonWealth Economic Forum,He is Ting Hhsin International Group cChairman Wei Ying-chiao, making made the first public speaking appearance of his life At the "CommonWealth Magazine Economic Forum," his wife and daughter among those in the appreciative audience that day.
TinghsinTing Hsin's Master Kong brand has snared the top spots in the China's markets for instant noodles and tea-based beverages, with market shares for both in excess of 50 percent. The company's production of instant noodles now stands at 13 billion packets annually, enough to supply Taiwan for 26 years and Japan for three. Average growth rates in consolidated operating revenue has been in excess of 30 percent for the past 20 years, during which time they've It also succeeded in acquiring PepsiCo China, overturning the pattern of the past, in which former precedent of international giants taking over have taken over local China businesses in China.
Around 1990, Wei and his three brothers decided to head for China to develop their business. At the time the brothers were running a medium-sized enterprise reletively small business based out of Yuongchjing Township, in Taiwan's JChanghua County, selling edible oil products albeit with firmly established giant conglomerates like President, Taiwan Cement, Formosa Plastics and Cathay Holdings arrayed in competition against them.
"We couldn't catch up to them, and we certainly couldn't very well simply just complain that our parents had given birth to us too late," Wei says,. "But Wei believed that in China we mightwould have a shotchance anon a more even playing field. From that day on, ; we all took the ball and ran with it from that dayoff running. and I figuredbelieved, being young, I could run faster than othersthe rest."
Unlike many Taiwanese companies, they were not primarily motivated by China's low -cost workforce. Instead, but rather determined that they would decided to operate as if China were the global market.
Two decades ago China's business environment was a mess, with chain debt widespread.
"The money's in his pocket, the goods are in yours, I owe you, you owe him. In China, a lot of accounts receivable were pasted on the wall," Wei says.
But for the past two decades, since the first packet of Master Kong instant noodles was produced, they have insisted on receiving payment before shipping their goodsproducts. I; if the money doesn't come, they'd rather not produce the goods. To date, they continue to boast a record of "zero deadbeat accounts."
To maintain such an ironclad insistenceresolve, TinghsinTing Hsin relies upon solid research and development R&D to strongly entice local consumers, and on keeping the costsprices of their products low and their quality high.
Regionally, the Chinese palate maps out as sweet in the south, salty in the north, sour in the east and spicy in the west, so Master Kong has conducted a variety of taste tests involving thousands or even tens of thousands of people, aiming to come up with flavors that will appeal in each regional market before releasing new products.
"Master Kong has succeeded in unifying the Chinese belly through a bowl of instant noodles," Wei laughs.
Aside from coming up with the right flavors, the company must still keep prices agreeably low. Over the past two decades, commodity pricesprivately held assets in China have grown three-fold, but the cost of a package of Master Kong instant noodles has risen from RMB$2.2 renminbi to just RMB$3.8 renminbi, an increase of only 2772 percent over the same period.
To achieve the impossible mission of "having their cake whileand eating it too," TinghsinTing Hsin dove headlong into vertical integration in pursuit of economies of scale to bring down costs.
For example, the company reduced the weight of their beverage bottles from 20 grams each to 14 grams. This year, with the goal for this year is to shavinge another two grams from that, for achieving 12 grams per bottle. With annual production of 25 billion bottled beverages, for each reduction of one gram in each bottle's weight, the company reduces its consumption of PET pellets by 25,000 tons, or a savings of RMB$250 million renminbi.
"Tax incentives offered in each region [throughout China] will eventually be cancelled as the regions develop, [but] this isn't what really operational capability is about. Real operational capability lies in keeping operating costs down on a daily basis, Tthe point is to keep costs down and to be able to face your customers every day," Wei says.
The acquisition of PepsiCo China is indicative of TinghsinTing Hsin's strategy all along, that is, – keeping a close watch on the market leader, and while then joining forces with a secondary competitor in to going after the primary competitorrival.
"Lock in your targetFix your sights, make an all-out pursuit and overtake," Wei says.
In markets the world over, Coca-Cola is the number -one cardonated beverage brand, – except forin China, that is. TinghsinTing Hsin was already China's market leader in tea, fruit juices and bottled water, lacking only carbonated beverage offerings, so, consequently, it i's now more sangiune about widening its competitive lead. Currently, the scale of Master Kong is 120 percent 1.2-fold that of Coca-Cola in China. W; wiith the acquisition of PepsiCo China, that figure will swell to 1.7-fold170 percent.
Wei possesses unrivaled self-confidence and chivalry: "In 1996, a reporter asked President Group Cchairman Kao Chin-yen, ‘Master Kong is already China's biggest seller of food products, – what's your view on that?' Chairman Kao replied, ‘We'll overtake Master Kong in three years.' The next day the same reporter asked me the same question, and I replied, ‘President is a worthy competitor of ours, and I expect to keep them waiting another three years for eternitythe rest of all time.'"
Translated from the Chinese by Brian Kennedy