Chapter 343: Completing the Beverage Industry Chain
Yang Wendong continued, "That revenue might look like a lot, but it's not money we should earn. Do this—talk with the Changxing Charity Foundation, calculate their expenses on the water relief stations across different areas, and use the profit on your side to offset those costs. The goal is to reach break-even.
That way, we're using the money of the rich to help people in the shantytowns. And in the future, when the time is right, this whole matter—along with the data—might be made public. We're not here to profit from a natural disaster."
HKD 1.5 million in profit per month sounded impressive—multiply that by twelve and you were easily into eight-figure territory. But if that profit ever came to light, it could tarnish Yang Wendong's reputation. Even if there were no legal or commercial issues, it would give people with bad intentions something to twist and use against him.
So it was better to be open about it: take that profit and use it for water purchases and deliveries. If that didn't fully offset it, then apply it later to other charitable activities. Yang Wendong had long planned to expand into philanthropy anyway—it was something every large corporation and ultra-wealthy individual had to do. Besides, he genuinely wanted to help poor Chinese families, especially children and the elderly.
And honestly, he didn't care about a few million here or there. By 1966, buying just two pieces of land in the right spot would earn him much more than that.
Zhou Haoran agreed, "Understood, I'll coordinate with them right away."
"Mm. Good." Yang Wendong nodded. "Our short-term goal is to make the herbal tea drink a success and to use that as an entry point to develop our international beverage distribution channels. That way, when we roll out more drinks—or even foods—it'll be easier."
Herbal tea was only the first drink they'd launched, chosen specifically to match the needs of Hong Kong and the surrounding subtropical regions. When the time was right and they were better prepared, they would release other beverages. The market was massive and couldn't be ignored. Especially once the water shortage ended around 1965, a lot of the logistical and production issues would become much easier to handle.
Of course, building an international brand would take enormous resources. That meant he had to elevate his financial position even further.
"Understood," Zhou Haoran nodded. "Will we also move into food in the future?"
Yang Wendong replied, "Yes, we will—but that depends on the strength of our distribution channels. If the channel isn't solid, then whether it's beverages or food, it'll be hard to succeed."
In beverages and food, Yang Wendong's "future knowledge" wasn't that useful. For example, milk and fruit juices required advanced packaging and sterilization techniques—without something like Tetra Pak's technology, these industries couldn't really scale. And Hong Kong didn't have the agricultural base to support it.
Even Red Bull, one of the most well-known beverage brands of his past life, wasn't successful because of its taste or caffeine content—it succeeded thanks to aggressive marketing. It was the first brand to take that route and actually win. If Yang Wendong were to replicate that model, it could work—but it would require a huge advertising budget. That wasn't feasible just yet.
So for now, his beverage and food ambitions had to follow a step-by-step approach. Only after they'd established solid supply chains, quality control, and distribution could they start expanding further.
"Right, beverage distribution is everything," Zhou Haoran agreed. "Swire's beverage business is doing so well because they partnered with Coca-Cola. That gave them instant access to a world-class distribution network."
"We've got our own cola line too. Do you think we should invest some money to revive it?" Yang Wendong asked.
Most people didn't know that Watsons had its own cola back in the day—simply called "Gola" (a direct phonetic translation of "cola").
Even the name sounded like a failure. Coca-Cola had long dominated the Hong Kong cola market. Watsons' Gola could only compete on price, and it was perpetually losing money.
When Yang Wendong acquired Watsons, he found out about this cola line and realized there was little hope of reviving it. Even though it was a local brand, its costs were higher than Coca-Cola's. His early focus had been on herbal tea—a segment with no real competition. Cola could wait.
Zhou Haoran paused for a moment and said, "That would be tough. Coca-Cola has already saturated the market. But if we leverage Carrefour, our media channels, and your upcoming television station, we might be able to revive Gola.
Still, I think the potential is limited. Coca-Cola has already locked down Hong Kong. The market isn't big, and breaking into international markets would be even harder. Competing with Coke and Pepsi? That's a long shot."
"True." Yang Wendong nodded. "How much higher are our costs compared to Coca-Cola's?"
Beating Coca-Cola or Pepsi? That had never been done. Other cola brands might survive, but none had ever risen to dominate.
Still, there were plenty of markets Coca-Cola hadn't penetrated yet. Maybe there was an opportunity there.
Zhou Haoran answered, "Three major reasons. First, brand awareness. Coke's decades of ad spending have cemented its name. Even if we outspend them today, we'd still need several times their budget just to get close.
Second, economies of scale. As you know, the more you produce, the lower the unit cost. Even though Coca-Cola shares profits with Swire, their scale means they still have a huge cost advantage.
Third, sugar. One of Coca-Cola's biggest costs is sugar, and Swire has been in the sugar business for over a century. Their production costs are the lowest in the region."
"Sugar?" Yang Wendong raised an eyebrow. "We're buying our sugar from Swire too, aren't we?"
"Yes," Zhou Haoran confirmed. "In Hong Kong, no matter who you are, if you're making beverages, you're buying sugar from Swire. They have the entire chain locked down—from sugar plantations in Southeast Asia to local processing plants, their own shipping fleets, and factories in Hong Kong."
"With full control over the entire chain, they're untouchable." Yang Wendong nodded.
Changxing Industrial was already working toward this model—controlling raw materials like glue, plastic, and paper. Their goal was always full vertical integration. When they had more power, they'd push further upstream.
Glory Electronics and other divisions would follow the same path, though it would be more difficult.
"But Yang Sheng," Zhou Haoran said, "our group actually has the potential to replicate Swire's sugar chain."
"In theory, sure. We have our own ships." Yang Wendong thought for a moment. "But we lack demand. Without enough end customers, investing heavily isn't cost-effective. Building a sugar refinery is easy, but running overseas plantations is not."
Zhou Haoran agreed. "True. But there is a way to rapidly increase demand. Pepsi's Hong Kong office contacted me. They want to use our canning plant to produce Pepsi locally. I haven't responded yet, but I've been thinking about a bigger possibility."
"Pepsi?" Yang Wendong immediately caught on. "You're thinking of replicating Swire's model with Coca-Cola by partnering with Pepsi?"
If anyone could compete with Coca-Cola, it was Pepsi. Backed by the U.S. government, they had similar political support. The rest was a matter of execution.
In Yang Wendong's past life, Pepsi never quite caught up to Coca-Cola globally. But in the 1970s and 80s, they came close—almost dethroning Coke.
"Yes," Zhou Haoran nodded. "But such a partnership would require major investments and long-term planning. So I've been cautious."
Yang Wendong nodded. "Theoretically, it's viable. But there are a lot of hurdles. Right now, Coca-Cola dominates Hong Kong. Breaking in won't be easy."
"Pepsi entered Hong Kong too late. By then, Coca-Cola was already dominant and had partnered with Swire. Pepsi never stood a chance," Zhou Haoran said. "But I'm not talking about Hong Kong—I'm talking about Southeast Asia.
Pepsi is preparing to make a big push into Southeast Asia. They need a local partner—someone like Swire—to manufacture for them."
"If we could supply Pepsi to even a few Southeast Asian countries, that would be a game-changer," Yang Wendong said, thinking deeply.
Beverages were bulky. Once you factored in shipping, profits vanished. That's why Coca-Cola relied on local partnerships.
And back in the 1960s, building overseas factories was a nightmare. You had to deal with local laws, currency risks, shady politics, cultural clashes—even the risk of war.
Even in the 21st century, most countries outside the West were still difficult to invest in. China's stable environment was the exception.
A few foreign factories could be managed directly, but global beverage companies needed hundreds of them. It wasn't feasible to run them all solo. Outside Europe and the U.S., partnerships and outsourcing were the only real options.
Zhou Haoran added, "If we land the Pepsi deal, their volume could justify building our own sugar refineries. That would slash our own beverage costs.
Even more importantly, we might—just might—get access to their distribution network."
"That's unlikely. If they hire us to manufacture, they won't give us access to their sales channels." Yang Wendong shook his head. "But that's fine. If we can use their business to expand our own industry chain, that's already a win.
Sugar is essential for every drink we'll ever make. Even our future food lines will need it."
People liked beverages because they liked sugar. Even snacks followed the same logic. From a biochemical perspective, even refined carbs like rice and flour were just sugar in another form.
"Exactly. Then I'll start by negotiating a contract manufacturing deal," Zhou Haoran said. "When Pepsi first approached us, it was just about using our canning facility. But now I think we should aim for a full partnership."
"Right. And as long as they can give us enough volume, we'll be able to lower our costs to match Swire's. They know we own Watsons. They've seen what we've done in industry. I think they'll take us seriously.
This could be a win-win for both sides," Yang Wendong said.
Foreign giants partnering with local ones had always been the ultimate win-win. Even when Yang Wendong eventually expanded into Southeast Asia, he planned to use the same approach.
"Alright, I'll schedule a meeting with Pepsi's Hong Kong director in the next few days," Zhou Haoran said with a smile.
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