Chapter 273: The Opportunity in Herbal Beverages
Accompanied by several staff members, Yang Wendong entered the workshop, while Wei Zetao introduced the senior Chinese personnel at Watsons one by one.
"Mr. Yang," Wei explained, "even though Watsons was always under foreign leadership, most of the day-to-day operations were handled by local Chinese staff. The foreigners just held the decision-making power."
"Now that they're gone," he continued, "there's basically no impact on production or quality. As for distribution, our team is working quickly to reconnect with the original channels. Most are fine, though a few tied to foreign contacts are still in negotiation."
"That's alright," Yang nodded. "The product didn't have much market share anyway. Let Carrefour give them a decent shelf location and see how they perform."
In many British-owned companies in Hong Kong, the actual work was done by Chinese employees. British expatriates only came to Hong Kong if they were paid salaries higher than what they'd earn in the UK — just like the highly skilled engineers Yang had hired from overseas. Otherwise, why would they come?
As capitalists, these firms were naturally inclined to hire Chinese labor, which could cost only 10% of an expatriate's salary while often delivering better results. Only due to skin color and institutional bias were Westerners kept in upper management roles.
"Understood," Wei replied. "I've already spoken with Mr. Liu. He's agreed to allocate some good shelf space. But ultimately, whether the product sells depends on Watsons' soda itself."
"Of course," Yang smiled. "Carrefour's model is survival of the fittest. If this weren't our own business, with Watsons' current sales performance, they wouldn't even dream of getting prime placement."
Yang wasn't trying to squeeze profit out of Watsons through vertical integration. What he wanted was to create a financial feedback loop — to give the product more exposure and market data, which would help him improve it and eventually establish his position in the beverage industry.
Wei scratched his head, slightly embarrassed. "To be honest, I've tried Watsons' drinks before. The taste isn't great."
"Bring some over. Let's all have a taste," Yang said, pointing at the freshly bottled but unsealed drinks on the production line.
Several attentive staff quickly grabbed seven or eight bottles and handed them to Yang and the others.
"Thank you," Yang said politely before taking a sip. A strong ginger flavor hit immediately.
He turned to Tao Hui, the production head he had just met, and asked, "Watsons' soda — the main selling point is the ginger flavor?"
"Yes," Tao nodded. "This particular soda helps relieve fatigue, increase appetite, and aid digestion in the summer. In traditional Chinese culture, ginger has many health benefits."
"So the sales strategy was to market it as a health drink?" Yang asked again.
"Not officially a health product," Tao explained, "but our soda does have some health-oriented functions."
"Hmm," Yang pondered, then asked, "Is that why the drink is priced relatively high? Because of the cost of ginger?"
"Yes," Tao replied. "We use high-quality ginger, which is expensive. We've already minimized costs as much as possible through direct cooperation with China Resources."
"It probably is good for your health," Yang said after taking two more sips. "But this business model just doesn't suit the beverage industry. Do you really think people buy drinks for their health benefits?"
"Most people just want something sweet," Tao admitted after a pause. "But our company has always focused on this type of drink. We've built a small but loyal customer base.
We've tried entering the regular soda market before, but the competition was too intense, and we didn't succeed."
"That's not a product issue — that's a marketing problem," Yang said, nodding.
In the beverage industry, marketing was everything. Flavor mattered, but as long as a company had decent capabilities, it could always produce a good-tasting product. What mattered most was building a recognizable brand.
Wei added, "Mr. Yang, with our group's media and distribution resources, promoting a new drink shouldn't be difficult."
"No rush," Yang replied. "By the way — are all soft drinks in Hong Kong bottled in glass?"
On the current bottling line, all the containers were glass. And most of the drinks he'd bought in Hong Kong were also packaged that way.
"Yes," Tao said. "Worldwide, that's still the standard. But in the past couple of years, I've heard about metal cans being used in parts of Europe and America, though I've never seen them myself."
"Metal?" Yang guessed internally — he was probably talking about aluminum cans.
"Yes," Tao continued. "They're made of tinplate. But it's not suitable for Hong Kong. We have to import our metal, so production costs would be much higher."
"I see." Yang nodded thoughtfully. Then he asked, "This production line seems slow. Can it go any faster?"
Tao looked embarrassed. "Mr. Yang, our three production lines can output more than 30,000 bottles a day. But since sales are low, we've reduced the speed to save on labor and electricity."
"Fair enough," Yang laughed.
These older factories were rarely limited by production capacity — underperformance was usually due to poor sales.
He took a tour of the entire facility, then headed to the offices to understand the sales structure.
Watsons' primary market was still Hong Kong, with peak season in summer. Their ginger-flavored soda was effective at relieving heat, so it was naturally more popular in hot weather.
After everyone dispersed, Yang said with a smile, "Watsons' soda has an awkward position. It may really help with heat exhaustion, but the people who need it most can't afford it. And the people who can afford it don't need it."
"You're right," Wei said after a moment of thought. "Hong Kong's high-income earners usually don't do physical labor.
And those who do — aside from a few exceptions — are low-income workers. When they need to cool down, they'll just grab some salt water or herbal tea. It's much cheaper than a soda."
"So the entire business logic is flawed," Yang nodded. "Even without those incompetent foreign managers, this product was never going to scale.
Unless the economy develops to the level of the West, and even blue-collar workers earn high wages."
In regions with lower educational attainment, the wealthy were usually those with some level of education.
Hong Kong at the time was a prime example. A typical office worker in Central might earn around HKD 300 per month. Employees at major companies or foreign trading houses could make much more — HKD 1,000 or more wasn't unusual for capable staff.
For blue-collar workers, dock laborers were considered some of the best positions. Even then, they'd work themselves to the bone for a month and still struggle to earn HKD 300. Only those with technical skills and some education could hope to make more.
It was the exact opposite of a society where everyone had a college degree—like the mainland in Yang's past life, where average office clerks with degrees often earned less than manual laborers.
At its core, it all came down to supply and demand.
Wei Zetao asked, "So, are we going to reposition Watsons' beverage business?"
"No, we're keeping it," Yang Wendong replied, shaking his head. "Its functions—like boosting energy, relieving fatigue, and helping with heat—are still valuable.
It just doesn't suit Hong Kong. The market here isn't large enough. But in developed countries overseas, it might find its place.
My idea is to add a more standard line of beverages, and then we'll use our media company to push those heavily. As for this herbal soda—it doesn't have the right taste for international markets yet. It's not ready for export."
The fundamental reason people drink soda is for the experience—that refreshing satisfaction. That had to be the number-one priority. All the health claims, heat relief, and other benefits should come in addition to that refreshing sensation.
Every successful beverage had this trait.
"Got it," Wei nodded. "Human Resources has already made contact with a Chinese executive from Swire's beverage division. He's got a background in beverage marketing. I plan to meet him tomorrow. If I think he's suitable, I'll arrange for him to meet you the day after."
"Sounds good," Yang said with a nod.
He could pour all the resources he wanted into a beverage business, but what mattered most was people. The same investment could yield vastly different results in different hands.
The next day, Wei and HR manager Li Yuehua interviewed the Chinese executive from Swire. The feedback was positive.
On the third day, Yang met the man at Changxing Tower.
"Mr. Zhou, please have a seat," Yang said with a smile.
He always gave a certain level of respect to capable people—especially those who had managed to rise to executive positions in British companies. Most of them had real skills.
Sure, some might have made it through flattery, but that in itself was a skill. And even if their personal capabilities were average, they usually knew how to delegate to competent subordinates—something any boss could appreciate. In the end, results were what mattered.
"Thank you, Mr. Yang," said Zhou Haoran.
They chatted casually for a while. Yang quickly got a grasp of his background.
Zhou Haoran was born in 1915. In his youth, he'd even fought in the anti-Japanese resistance. He had the good fortune to survive until Japan surrendered, after which his whole family moved to Hong Kong.
Thanks to his decent education, he joined Swire and started from the bottom—as a clerk. He taught himself English and everything there was to know about the beverage industry. After more than a decade of hard work, he climbed to become the Deputy General Manager of Swire's beverage marketing division.
He hadn't gone any higher because Swire had an internal policy: core leadership positions had to be held by British nationals. Otherwise, he might've been promoted to General Manager or even head of the entire division.
"Mr. Zhou, your experience is quite impressive," Yang said with a smile.
"Nowhere near yours, Mr. Yang," Zhou replied. "I truly admire your rags-to-riches success story. I only wish you'd entered the beverage industry sooner—if you had, I would've joined you long ago."
"Haha, I appreciate that," Yang said. "Mr. Zhou, given your experience at Swire, what do you think it would take to make Watsons' beverage business profitable?"
Zhou didn't answer immediately. Instead, he asked, "Mr. Yang, are you planning to keep producing Watsons' existing sodas, or are you looking to develop new products?"
"Both," Yang replied. "The existing products aren't great, but they have an established market. There's no reason to abandon them.
And of course, I won't miss out on the biggest segment of the market—sugar-based carbonated drinks."
Zhou nodded. "Have you considered what kind of new beverage to develop?"
"I've been thinking about herbal teas," Yang replied.
He'd spent a lot of time recently considering the direction for a future beverage product. In his previous life, there had only been a handful of popular categories.
Cola was out of the question for now. Going head-to-head with Coca-Cola and Swire's distribution and marketing machine was suicidal.
Juice was also off the table—Hong Kong didn't have large orchards. Locally grown fruits were so expensive that even middle-class families couldn't afford to consume them freely.
Fruit-based drinks were even worse. Preservative costs were sky-high. Even in Europe and the U.S., fruit drinks were considered a luxury, let alone in 1960s Hong Kong.
That left herbal teas as the best option. Their main ingredient, tea leaves, could be imported from the mainland cheaply, with low transportation costs.
"Something like Wong Lo Kat?" Zhou asked.
Yang nodded. "Exactly. Wong Lo Kat started as a small herbal tea shop. I want to turn that kind of product into a mass-market beverage."
Wong Lo Kat had been founded long ago—around the same time as Watsons, in 1828. For over a century, it had operated like a small, traditional chain with hundreds of shops and a well-known brand.
It still existed in Hong Kong today—though whether those locations were officially licensed was another question.
"That's actually a great idea," Zhou said. "A lot of people already enjoy herbal teas. If we could package it as an affordable drink, the market potential could be huge."
"In theory, yes," Yang said. "But first, we have to create a product that actually works."
"I'm more of a marketing guy," Zhou said, "but I do know people in Swire who specialize in beverage R&D. Most of them are Chinese. If the salary is right, I could try to bring them over."
"Go for it. We'll offer everyone at least 30% more than their current salaries, plus year-end bonuses," Yang said with a grin. "You've probably heard—Changxing Group's benefits are top-notch."
Yang had always treated his employees well—especially technical experts. Even though he had the foresight of a transmigrator, he still needed professionals to turn his ideas into actual products. Without that, creativity was meaningless.
Besides, wages in Hong Kong weren't that high. If these experts could help him develop the products he envisioned, the return on investment could be enormous.
"Excellent. I'll contact them this afternoon," Zhou said enthusiastically.
"Good. You'll be in charge of building the team," Yang said. Then he paused. "By the way, Mr. Zhou—have you ever heard of aluminum cans?"
Thank you for the support, friends. If you want to read more chapters in advance, go to my Patreon.
Read 40 Chapters In Advance: patreon.com/johanssen10