Wahaha sets out plaza plan for boutique brands

Hangzhou Wahaha Group, the Chinese drinks giant, is "in discussions" to bring a number of boutique European brands to its own new shopping malls across the country, according to its chairman.

Zong Qinghou, recently named China's richest man by Forbes Magazine, said during a tour of eight European countries which concluded in the UK on Friday, that many brand owners said they have had difficulty in finding a trusted Chinese distributor.

"And on the other hand, many Chinese distributors are reluctant to pay European manufactures upfront in case products are not delivered.

"But our malls will provide the perfect solution," Zong said.

Wahaha opened its first mall in Hangzhou earlier this year with an initial investment of 1.7 billion yuan ($273 million), known as the Waow Plaza, and it has plans to open 100 Waow Plazas across China in the three to five years.

He explained that Wahaha's brand reputation will make European companies feel safe about dispatching their products before receiving payments.

Its malls' economy of scale will also drive prices down to benefit Chinese consumers, he added.

In choosing his European brands, Zong said he prefers affordable luxury products, particularly those with unique design and good quality, targeted particularly at China's young middle class consumers.

"We are looking for mid-market boutique brands rather than luxury, because the percentage of the Chinese population that can afford mid-market brands is far greater," Zong said.

British brands within his list of potential partners include leather-satchel brand Cambridge Satchel Company, upmarket garment maker TM Lewin and designer shoe brand Nicholas Kirkwood.

Julie Deane, the managing director of Cambridge Satchel, said Zong's proposal had made her realize the Chinese market is more accessible than she previously imagined.

"I think Wahaha would be a good partner in China because they know the market very well," Deane added.

Zong explained that the Waow project illustrates the company's attempt to diversity, at a time when the food and drink sector is facing increasingly "low margins" and "greater competition".

Zong noted that he sees great potential for Wahaha to overhaul China's retail industry, adding he is confident because "the skills of doing business are highly transferable across industries, whether it be food or retail".

He said retailers in China are experiencing shrinking margins as commercial rents in shopping malls are rising, and landlords are frequently delaying payments of revenue to retailers.

"This is unhealthy, because retail brands are making very little profit. We will charge our retail brands fair rents, and be very honest in our business dealings. We will also make our malls unique," Zong said.

He said the Waow Plazas would offer consumers the ability to "enjoy life", by integrating shopping, dining and exercising facilities coherently to provide consumers with a one-stop shopping experience.

Zong said that more than 40 European retail brands have already hit the market in the Hangzhou Waow Plaza, although the challenge is to reduce product prices further for consumers.

"We only have one mall now, so the quantity sold is small. But in future we hope to further reduce prices as we make bulk orders for malls across the country," he said.

Wahaha, founded by Zong in 1987, grew to one of China's largest privately owned companies with revenue of 63.6 billion yuan in 2012.