In Hong Kong, we build a global business empire

Chapter 720 Two Tigers Fight, Li Jiacheng Has Mixed Feelings
Actions against Hutchison Whampoa have already begun.

At this time, although Li Ka-shing knew that Hongkong Land Group was targeting Hutchison Whampoa, he was completely unaware that Lam Ho-yin was actually plotting to take over Hutchison Whampoa.

In his view, the other party might simply be trying to suppress Hutchison Whampoa, seize its business, and retaliate against its previous actions.

After all, it is a well-known fact that Cheung Kong Holdings holds a 40% stake in Hutchison Whampoa.

Given such a high shareholding ratio, it would be difficult for anyone to have any ulterior motives towards Hutchison Whampoa.

While it cannot be said with absolute certainty that no one would dare to get involved, such a shareholding ratio would normally not attract any covetousness.

Therefore, no one, including Li Jiacheng, ever imagined that Lin Haoran would set his sights on Hutchison Whampoa.

However, Lin Haoran was an exception.

For him, Hutchison Whampoa would be his for the taking sooner or later.

Last time, when Li Ka-shing retaliated against Hui Fung Bank, routing it and even causing it to suffer a broken capital chain, both of his companies, Cheung Kong Holdings and Hutchison Whampoa, were greatly affected.

Lin Haoran also took the opportunity to have Galaxy Securities acquire shares in many Hong Kong giants, including Cheung Kong Holdings and Hutchison Whampoa.

At that time, Cheung Kong Holdings held 16.25% of the shares, while Hutchison Whampoa Holdings held an even higher 18.71%.

And this happened a month ago.

Since deciding to acquire Hutchison Whampoa, Lin Haoran has instructed Galaxy Securities to secretly continue accumulating shares in Hutchison Whampoa and Cheung Kong Holdings. The acquisition must be done slowly and carefully, without being discovered by Li Ka-shing's side. More than half a month has already passed.

Despite the slow pace, Galaxy Securities now holds more than 21% of Hutchison Whampoa's shares, while Cheung Kong Holdings' stake has reached over 19%.

It is still a long way from Cheung Kong Holdings holding a 40% stake in Hutchison Whampoa, and with fewer and fewer shares available on the secondary market, the difficulty of acquisition is increasing dramatically.

But Lin Haoran was not impatient. He knew that this game was a protracted war, a contest of patience, funds, and timing.

He is confident that he can break through this impenetrable barrier, even if Cheung Kong Holdings holds a 40% stake in Hutchison Whampoa, once the time is right.

While a 40% shareholding is a strong barrier, it is not unbreakable.

Besides the secondary market, it's not just Cheung Kong Holdings and Galaxy Securities that hold shares; there are many other shareholders with substantial stakes.

Lin Haoran had already secretly investigated the shareholding situation of these shareholders. Although there was no public information disclosing other influential major shareholders, there were still some institutions and individual shareholders holding a considerable proportion of the shares.

The shares involved, as revealed by the investigation, amount to approximately 13%.

These shares, if used properly, could be the key to overtaking Li Ka-shing.

As for now, it is not advisable to take any rash actions.

Li Jiacheng has been in the business world for many years and is extremely vigilant.

If he rashly makes a move on that 13% stake, there is a possibility that the news will leak out, which could alert Li Jiacheng and allow him to take precautions in advance.

Sunday, August 30th, morning.

Today, nearly 40 Wellcome supermarkets across Hong Kong simultaneously displayed eye-catching red promotional posters.

The slogan, "Shocking the whole city! Prices as low as cost! More than 200 kinds of daily necessities, crazy discounts for 30 consecutive days!" was particularly eye-catching.

Flyers had already been distributed throughout Hong Kong Island, Kowloon and the New Territories, and TVB Jade's advertisements had been bombarding the area since early morning.

Almost simultaneously, all ParknShop supermarkets quickly changed their promotional posters, with brighter colors and larger fonts: "ParknShop spares no expense! Grateful for our customers! Core products at the lowest prices all year round, prices lower than ever!" The promise of a 35% price reduction was like a challenge to Wellcome.

The citizens of Hong Kong were in an uproar.

Housewives carrying shopping baskets, grandparents pulling trolleys, and even office workers taking advantage of their days off flocked to the nearest Wellcome and ParknShop stores.

Long queues formed in front of the checkout counters, and the shelves were emptied at a visible speed, especially the daily necessities such as rice, oil, canned goods, and paper towels, as well as the discounted fresh produce area, which was so crowded that the staff had to constantly restock from the warehouse.

"Wellcome's tissues are so much cheaper!"

"Quick! Let's go to ParknShop, their fresh pork seems to be cheaper!"

"Buy some from both! This will save you a lot of money this month!"

The market was filled with this excited discussion.

For ordinary families, this is undoubtedly a great opportunity to save money.

But for Li Jiacheng and Lin Haoran, who were observing from behind the scenes, this was a silent war, and every receipt sold meant a loss of real money.

In his office, Li Jiacheng listened to his subordinates report on the sales situation and customer traffic comparisons of each store every hour.

Initial data shows that ParknShop's larger price reductions did attract many customers, with some stores even temporarily surpassing Wellcome in terms of foot traffic.

But this did not make him feel any relief; on the contrary, his brows furrowed.

Sales have increased, but this is all achieved by selling at prices far below cost. The more they sell, the more they lose.

His constant urging of the purchasing department to negotiate with suppliers only resulted in extremely limited temporary discounts, which were woefully inadequate compared to the huge price difference.

Meanwhile, at the Kang Le Building, Lin Haoran and Ma Shimin looked at the preliminary report and smiled at each other.

"Boss, it seems Mr. Li is determined to stick with us to the end. He's spending far more money than we have," Ma Shimin laughed.

By controlling the fast-moving consumer goods giant, Langwei Group, they essentially have direct access to the source of goods, eliminating middlemen and their markups. Their procurement costs are already significantly lower than those of Hutchison Whampoa's ParknShop supermarkets.

In addition, Hongkong Land Group has ample funds, so they can afford to lose money!
It's normal for companies to burn money when competing for market share.

For Wellcome supermarkets, even if they don't make a profit for several months, with the support of Dairy Farm International and Hongkong Land Group, they can easily survive.

ParknShop supermarkets are a different story. Hutchison Whampoa's various businesses are generally experiencing a decline in performance and its cash flow is tight. ParknShop supermarkets' cash burning is tantamount to stabbing Hutchison Whampoa in its already riddled financial situation.

Lin Haoran leisurely picked up his teacup, took a sip, and a relaxed smile played on his lips: "I'd like to see how long they can hold out. By the way, is the factory in Pengcheng supposed to officially start production on September 3rd?"

Currently, due to shipping costs, the cost of most products remains high.

Products such as Heineken beer, L'Oréal Paris, Carlsberg, and Kraft Heinz are all transported from Southeast Asia, Japan, Europe, North America, and other places.

However, since the acquisition, plans have been made to establish a production base in Shenzhen, which will inevitably reduce costs further in the future.

On September 3, Lin Haoran needs to go to Pengcheng to attend the opening ceremony of the industrial park.

Ma Shimin quickly replied, "Boss, that's true. Although the industrial park hasn't officially opened yet, Wanqing Group has already built the factory buildings, and with the strong cooperation of the local government, our equipment has already been delivered ahead of schedule."

In terms of staff, the mainland has no shortage of human resources, and the cost is five or six times lower than that in Hong Kong. They have already recruited staff early on. When the time comes, whether it is employee salaries, factory costs, raw material costs, etc., they will be much lower than those of factories in other places, and the product cost will naturally be reduced.

The park officially opened on September 3rd, which means that all factories can simultaneously enter the production stage!

Therefore, starting next month, the costs of many products under our Langwei Group will drop significantly. At that time, the cost of supplying Wellcome supermarkets will be even lower, meaning we won't even need to burn money!

Lin Haoran nodded upon hearing this.

Setting up factories in Shenzhen and other cities in the Pearl River Delta can significantly reduce production costs, which was actually a key factor in the rapid rise of the entire Pearl River Delta region back then.

So, what are the bosses hoping to achieve by opening factories?
The answer is obvious: it's all about making money.

It's important to know that production in Hong Kong or elsewhere is very costly.

However, if the factory is located in Shenzhen, the costs of materials, labor, production site rental, and taxes will all decrease significantly.

Taking all factors into account, the cost of production in Shenzhen is expected to be at least 40% to 50% lower than that of importing products from overseas or producing them locally in Hong Kong, and possibly even lower.

Therefore, it's not a difficult task for Wellcome Supermarket to offer 30% off 200 kinds of products.

"Boss, many of the products at ParknShop supermarkets are now under the Langwei Group, such as Vitasoy, Lee Kum Kee, Lippi Beer, L'Oréal Paris, Carlsberg, and other products that are familiar to Hong Kong residents. Even if they know that these are products of their competitors, ParknShop supermarkets will not easily remove them from the shelves."

Many consumers are accustomed to using these products. If ParknShop removes these products from its shelves, these customers who are used to specific brands may turn to Wellcome Supermarket instead. This would be tantamount to cutting off one's own arm and handing over market share to others.

Langwei Group naturally cannot offer discounts on these products. The supply will continue, but if the other party wants to offer discounts to customers, they will have to subsidize the price difference themselves.

"This is tantamount to using our own money to promote our brand and solidify our product's market position," Ma Shimin added with a smile, a hint of sarcasm in his tone.

"That's why I decided to enter the FMCG industry. We need to control not only the retail channels, but also the source of the brand."

Lin Haoran put down his teacup, smiled, and continued, "Retail terminals are certainly important, but a brand with a high market share and the trust of consumers is the real moat."

Mr. Li's ParknShop supermarket is now essentially "carrying our sedan chair"—the more subsidies he provides, the higher our product exposure and sales, and the deeper our brand awareness. Meanwhile, he can only watch helplessly as his blood runs dry.

Even if we don't subsidize our products, it's fine. After comparing the prices of our products at Wellcome Supermarket and ParknShop Supermarket, customers will find that Wellcome has a more obvious price advantage and will naturally vote with their feet to switch to our stores.

Regardless of ParknShop's choices, the initiative remains in our hands.

Fast-moving consumer goods (FMCG) are the category that citizens encounter most frequently and consume most often in their daily lives.

Like the veins of urban life, they permeate every corner, from the toothpaste and toothbrush used for washing in the morning, to the three meals a day on the dining table, and to a drink for relaxation at night. Fast-moving consumer goods are everywhere and closely tied to the lives of citizens.

The Langwei Group now owns many of these well-known brands, making it impossible for ParknShop supermarkets to avoid them.

……

On this day, the streets and alleys of Hong Kong had never been so bustling with activity because of daily necessities.

This Sunday, the sun was blazing, but it paled in comparison to the enthusiasm of the citizens flocking to Wellcome and ParknShop.

The price war between the two supermarket giants was like a boulder thrown into a calm lake, instantly creating ripples. Every store seemed to become the eye of the storm, with crowds flowing in from the moment the doors opened.

On the contrary, some smaller supermarkets had almost no business today, and the owners or employees could only swat flies in the store.

"Excuse me! There's still oil here!" Inside a Wellcome supermarket in Mong Kok, a clerk shouted hoarsely as a cart of discounted cooking oil from the Langwei Group was snapped up in just a few minutes.

The housewives were quick and nimble, their shopping carts overflowing with tissues, canned goods, and cleaning supplies. They meticulously compared every price on the flyers, their faces a mix of excitement at snatching bargains and anxiety about buying up all the good stuff.

Meanwhile, the situation at ParknShop supermarket in Kwun Tong was even more booming.

The advertised price reductions were even more astonishing, attracting even more customers seeking the absolute best deals.

The personal care products section was particularly hard hit, with shelves for shampoo, shower gel, laundry detergent, and other products packed with people, and staff couldn't keep up with the pace of the buying frenzy.

The long line in front of the cashier stretched from inside the store all the way outside. Many people were calculating how much money they could save that day while waiting in line, and a collective consumer frenzy filled the air.

Wow! ParknShop tissues are really two cents cheaper per pack than Wellcome!

"Hurry up and grab a few more buckets of peanut oil! Wellcome's discounted oil is almost sold out!"

"Check both sides, and buy it wherever it's cheaper!"

Such dialogues are taking place in every corner of Hong Kong.

On public transportation, citizens carrying eye-catching shopping bags from the two major supermarkets can be seen everywhere;

In the tea restaurant, people no longer discussed the stock market or the real estate market, nor did they discuss the Kadoorie family losing control of the Hong Kong Grand Hotel. Instead, they talked about where they could still buy cheap goods.

This has almost become a nationwide "shopping festival," but the initiator is not doing it for profit, but for a deeper level of market competition.

In his office at Cheung Kong Holdings in Central, Li Jiacheng looked grave as he faced the hourly sales figures.

Initial reports indicated that ParknShop, with its more aggressive price reduction strategy, did indeed surpass Wellcome in customer traffic within the first few hours after opening, with some core stores even seeing a staggering 400% year-on-year increase in sales, and the supermarkets were packed to capacity.

This is because supermarkets have limited space, making it impossible for too many people to enter at once, and the checkout process is also relatively slow, which to some extent limits the further increase in customer traffic.

Otherwise, the turnover would only be even more terrifying.

The general manager of ParknShop said with a happy expression, "Mr. Li, it seems that our strategy has worked. Wellcome Supermarket obviously does not have as many customers as ParknShop, and its turnover is certainly not as high as ours."

Li Jiacheng slowly shook his head, his finger pointing heavily at the glaring "gross profit margin" column on the report: "Working? Look at this number carefully! The turnover has gone up, but every single item we sell is a loss! This isn't sales, it's subsidies! It's burning money!"

He saw things very clearly.

This is essentially selling something at a loss.

The reason why ParknShop's price reduction was slightly higher than Wellcome's was entirely based on Hutchison Whampoa bearing greater losses.

ParknShop's offer of a 35% discount means that every penny of the discount has to be squeezed out of Hutchison Whampoa's already tight cash flow.

"How are the negotiations between the purchasing department and the suppliers going?" Li Jiacheng asked in a deep voice.

“Mr. Li, the suppliers’ concessions are very limited, especially for brands under the Langwei Group, such as Heineken and L’Oréal. They are very firm on their prices and will not reduce them by a single penny. They say it is a group regulation that the global supply price is uniform.”

The general manager of ParknShop supermarket looked troubled. "We can only get a few discounts from some other local suppliers, but that doesn't help much in the overall battle."

Li Jiacheng's heart sank.

His worst fears are coming true.

When he proposed the 35% discount to ParknShop supermarkets, he did consider the Langwei Group's situation, but the current situation forced him to take a hard line!

Lin Haoran's control over the sources of some fast-moving consumer goods brands is tantamount to strangling the distribution channels.

ParknShop cannot remove these best-selling brands from its shelves, otherwise it will lose a large number of customers;

But if we offer discounts to these best-selling brands, we are essentially using our own profits to benefit our competitors' products, or even having to subsidize them.

This is truly a dilemma.

As time went on, another problem began to emerge: inventory.

Due to insufficient forecasting, or rather, underestimating the purchasing power of Hong Kong residents in the face of extreme discounts, many popular discounted items at ParknShop supermarkets began to sell out in the afternoon.

"Sorry, the discounted rice is sold out."

"Tissues? Wait a minute, the warehouse is moving goods, but I don't know if there are any left."

"Special offer laundry detergent? Try again tomorrow, or buy these products that aren't on sale."

Similar notices or verbal notifications from store staff have appeared in many ParknShop stores.

The shoppers discovered that many of their desired low-priced items were already sold out, and their disappointment was palpable.

In contrast, Wellcome supermarkets, which are better prepared and have stronger supply chain support, may have slightly fewer customers than ParknShop at its peak, but their product supply is relatively stable, giving consumers the impression that "this place is more reliable".

Some customers who were not satisfied at ParknShop naturally turned to the nearby Wellcome, where they continued to spend their enthusiasm and budget.

The shopping frenzy that lasted all day finally subsided around 10 p.m.

The two final sales reports were placed on the desks of Lin Haoran and Li Jiacheng, respectively.

At Shi Xundao Villa, Lin Haoran sat on the sofa in the living room on the third floor, looking at the report in his hand, but his heart was not too turbulent.

Beside me, Guo Xiaohan sat watching TV. The TV was showing the evening news, broadcasting the terrifying crowds at the two major supermarkets.

Lin Haoran glanced at the screen on TV, then turned his attention back to the documents in his hand.

This was faxed to him by the general manager of Wellcome Supermarket. He received it after the data was organized.

The promotional products listed at Wellcome Supermarket are mostly products from the Langvi Group, such as beverages, personal care products, beer, home care products, packaged foods, etc.

The Langwei Group has been making acquisitions for the past few months. In addition to some international brands listed by Lin Haoran, it has also acquired almost all the well-known fast-moving consumer goods brands in Hong Kong.

For example, Vitasoy, Lee Kum Kee, Liao Ma Kee Fermented Bean Curd, Mo Fung Plum King, Shuang Mei Mo Flower Water, Kowloon Vitasoy Milk, Green Treasure Orange Juice Soda, Red Swallow Beer, Chang Yuan Rice Wine, etc.

These products are mostly local Hong Kong fast-moving consumer goods that Hong Kong residents like to buy on a daily basis, and the acquisition of them by the Langwei Group does not require too much money.

After all, these are just some well-known local brands, with little international influence, and many of them haven't even ventured beyond the Hong Kong market.

This is why ParknShop supermarkets simply cannot avoid the Kaiwei Group.

If all the fast-moving consumer goods brands under the Langwei Group were to be removed from ParknShop supermarkets, many customers' first reaction upon entering the supermarket would be confusion, followed by disappointment.

After all, well-known local brands have considerable influence in the area, and many citizens are used to using a certain brand. Once this habit is formed, it is like a deeply rooted tree that is difficult to shake.

If ParknShop really removes all the fast-moving consumer goods brands under the Langwei Group from its shelves, it would be tantamount to cutting off its own arm, putting itself in an extremely disadvantageous position in a fiercely competitive market.

"Brother Haoran, I also went to the Wellcome supermarket near Central today. There were so many people, I couldn't even squeeze in, so I didn't get in after that," Guo Xiaohan said to Lin Haoran with great interest as she watched the news.

Lin Haoran smiled slightly, pinched her cute cheek and said, "Don't go and squeeze in. If something happens, I'll be heartbroken."

"I just wanted to join in the fun, and besides, I knew that Huikang Supermarket was owned by you, Haoran, so I was even more eager to experience it. Who knew there would be so many people?"

Guo Xiaohan playfully stuck out her tongue, snuggling up to Lin Haoran, her eyes still glued to the television screen, which kept switching between scenes of bustling activity in the supermarket and reporters interviewing consumers about their opinions on the price war.

Lin Haoran gently put his arm around Guo Xiaohan's shoulder, but his thoughts drifted far away.

Wellcome seemed to have gained a relative advantage on the first day of this price war, but he knew that this was only the first day. It all depended on how long ParknShop could hold out, and Li Jiacheng was not one to give up easily.

Moreover, the impact of this price war goes far beyond this; subsequent supply chain adjustments, changes in consumer psychology, and the reshaping of the market competition landscape are all fraught with uncertainty.

Meanwhile, in Li Ka-shing's office in the Hutchison Whampoa Building, the lights were still on.

Even though it was past 10 p.m., he still hadn't gone home.

Li Jiacheng held a report in his hand.

The report shows that ParknShop supermarkets set an unprecedented single-day sales record today, with a year-on-year surge of nearly 380%.

But what followed was an equally alarming figure of losses.

The huge customer flow failed to bring profits; instead, it accelerated the bleeding of profits.

The good news is that the market share has been maintained for the time being, and there has even been a counterattack;

The worry is that the financial situation has deteriorated rapidly, and this model is simply unsustainable.

In particular, he had hoped that the promotional products would boost sales of products that were not included in the promotion, but the reality was somewhat disappointing.

According to the report, although other products did see slight price increases, the magnitude of these increases was negligible compared to the losses incurred from the loss-making promotional products.

He knew, of course, that Hutchison Whampoa's current situation couldn't withstand such attrition for long.

Li Jiacheng frowned and paced back and forth in his office.

At this moment, he felt a mixture of joy and sorrow.

The good news is that the situation has been stabilized for the time being, preventing ParknShop from being completely defeated at the beginning of this fierce price war and allowing it to retain a certain level of competitiveness in the minds of consumers.
Worryingly, this huge loss is like a bottomless pit, constantly devouring the company's funds. If this continues, the company will inevitably fall into an abyss of no return.

(End of this chapter)