Herbal gi­ant eyes op­por­tu­nity

Chi­nese herbal drinks re­tailer Hung Fook Tong is a house­hold name in the SAR, but Chair­man Don­ald Tse Po-tat hopes it will even­tu­ally be known all over the world, Sophie He re­ports.

China Daily (USA) - - HONG KONG - Con­tact the writer at so­phiehe@chi­nadai­lyhk.com

Hong Kong’s lead­ing re­tailer of Chi­nese herbal prod­ucts, Hung Fook Tong Group Hold­ings Ltd, is un­fazed by the cur­rent eco­nomic down­turn and is tar­get­ing bold ex­pan­sion op­por­tu­ni­ties amid the doom and gloom.

The com­pany’s Chair­man and Ex­ec­u­tive Di­rec­tor Don­ald Tse Po-tat told China Daily that the com­pany has 112 self­op­er­ated shops as of the end of June this year, and has al­ready opened seven new stores this year. He ex­pects to ex­pand to 120 by the end of 2016. Cur­rently in Hong Kong, Hung Fook Tong has 590,000 reg­is­tered mem­bers.

Mean­while on the Chi­nese main­land, Hung Fook Tong op­er­ates 20 shops in Guangzhou and it is also look­ing for fur­ther op­por­tu­ni­ties to ex­pand.

Tse says many of its Hong Kong stores are lo­cated near pub­lic trans­port ter­mi­nals such as MTR sta­tions, Hong Kong In­ter­na­tional Air­port and the Cen­tral Ferry Piers. Oth­ers can be found in shop­ping malls, on the street and near the Lo Wu and Lok Ma Chau check­points.

He points out that the re­tail busi­ness in Hong Kong, as well as the food and bev­er­age in­dus­try, is fac­ing the same chal­lenge of slower eco­nomic growth on the Chi­nese main­land and fewer Chi­nese main­land tourists com­ing to the city.

The in­dus­try is also fac­ing more pres­sure from higher rents, soar­ing raw ma­te­rial prices, and in­creas­ing wages of work­ers, Tse says. But Hung Fook Tung’s per­for­mance has been rel­a­tively sta­ble as its prod­ucts are for the mass mar­ket, he ex­plains.

“We are not sell­ing lux­ury goods, and mostly we are sell­ing to lo­cal cus­tomers. As you can see we have al­most 600,000 mem­bers in the city,” Tse says.

For the first half of 2016, Hong Kong-listed Hung Fook Tong recorded a profit at­trib­ut­able to own­ers of the com­pany of HK$1.4 mil­lion, rep­re­sent­ing an in­crease of 25.6 per­cent from HK$1.1 mil­lion in the same pe­riod of 2015.

Tse says while the Hong Kong econ­omy, par­tic­u­larly the re­tail sec­tor, is un­der some pres­sure, the city will re­cover soon.

“Hong Kong will bounce back, I’ve been in this in­dus­try so long to know that the city will re­cover from eco­nomic down­turns and fi­nan­cial cri­sis in a short pe­riod of time.”

Tse be­lieves that a chal­leng­ing eco­nomic en­vi­ron­ment also presents new op­por­tu­ni­ties, as land­lords are less ag­gres­sive in ne­go­ti­at­ing rents, so it is eas­ier for the com­pany to ex­pand.

“We plan to open more shops in Hong Kong in com­ing months,” he says, adding that he al­ways tries to ex­pand dur­ing chal­leng­ing times, like dur­ing the 1997 fi­nan­cial cri­sis and af­ter the out­break of SARS in 2003.

He says the com­pany is on the look­out for lo­ca­tions in the city with high foot traf­fic and rel­a­tively low rent. Although the prices of its ex­ist­ing leases are un­likely to be re­duced, there have been sin­gle digit per­cent­age drops in new leases.

“If the re­tail mar­ket is still un­der pres­sure in 2017, then we will con­tinue to ex­pand … in a more chal­leng­ing eco­nomic en­vi­ron­ment, it is eas­ier to hire peo­ple.”

In terms of its busi­ness on the Chi­nese main­land, Tse says that as herbal drinks orig­i­nated in Guangzhou, Hung Fook Tung has been fo­cus­ing on de­vel­op­ing the mar­ket and the brand in the city. The com­pany also hopes to ex­pand to other cities in the Pearl River Delta re­gion.

“I also hope that in the fu­ture, Hung Fook Tung could go be­yond China, and not just Chi­nese, but for­eign­ers all over the world would know our brand and prod­ucts.”

Hung Fook Tong pro­duces more than 100 dif­fer­ent types of drinks, with some sea­sonal spe­cials to sat­isfy cus­tomer de­mand, ac­cord­ing to Tse. It launched a fresh fit drinks se­ries in June that in­cludes ap­ple and bit­ter melon, and red bean and Job’s Tears seeds.

Tse said the com­pany’s most pop­u­lar prod­ucts in­clude tor­toise herbal jelly, canton love-peas vine drink, com­mon self­heal fruit-spike drink and brew­ing Amer­i­can gin­seng drink.

He also says there is a dif­fer­ence in tastes be­tween Hong Kong and Chi­nese main­land con­sumers. Hong Kong res­i­dents at­tach great im­por­tance to a healthy diet, pre­fer­ring prod­ucts that are not too sweet or too salty. This means Hung Fook Tung strictly con­trols the sugar and salt con­tent in its prod­ucts to cater to the lo­cal mar­ket.

How­ever main­land con­sumers pre­fer strong fla­vors that are sweeter or saltier, so Hung Fook Tung’s salted man­darin drink is far more pop­u­lar on the main­land than in Hong Kong, Tse says. He re­calls in the early years of the com­pany as the head of the re­search and de­vel­op­ment (R&D) about 30 years ago, Tse would read Chi­nese medicine books and learn from Chi­nese medicine prac­ti­tion­ers to fur­ther his knowl­edge. When he found a new for­mula of mak­ing tra­di­tional Chi­nese herbal drinks, Tse would first try the prod­uct him­self be­fore also ask­ing his friends to taste.

“But now I don’t have to do that any­more. We now have a pro­fes­sional team of around 10 peo­ple to do the R&D, and we also have a Chi­nese medicine prac­ti­tioner work­ing in the com­pany as our con­sul­tant.”

In the past 30 years, Tse says Hung Fook Tung has con­tin­ued to in­no­vate and im­prove, from its prod­ucts to its de­sign and even its busi­ness strat­egy. He says the com­pany is con­stantly work­ing on new prod­ucts, and launches about 20 new prod­ucts ev­ery year.

Edi­tor’snote:Thi­sisanex­tract­fromTheGovern­ingPrin­ci­ple­sof An­cien­tChina,base­don360­pas­sage­sex­cerpt­ed­fromthe­o­rig­i­nal com­pi­la­tion­ti­tledQun­shuZhiyao,orTheCom­pi­la­tionofBooks andWrit­ing­sonIm­por­tan­tGovern­ingPrin­ci­ples.Com­mis­sioned byEm­per­orTangTaizon­goftheTangDy­nastyinthe­sev­en­th­cen­tury, the­suc­cess­esand­fail­ure­soft­heim­pe­ri­al­go­v­ern­mentsofChina. To­day­it­con­tin­uesto­berel­e­van­tasasource­ofin­spi­ra­tionfor­selfim­prove­ment,

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