Chapter 284: Progress at Watsons
As just one man—even one of the most powerful Chinese businessmen in Hong Kong—there was only so much Yang Wendong could do in the face of a citywide drought.
To do more, he needed to make greater use of his resources. On one hand, the Changxing Charity Foundation had begun accepting public donations. On the other hand, water would inevitably become a business—though without the authority to sell it, partnering with the Water Supplies Department was the best path forward.
The next day, Yang Wendong arrived at the Watsons headquarters in North Point, Hong Kong Island.
Zhou Haoran personally came out to greet him.
"Mr. Yang, welcome," Zhou said respectfully, accompanied by several staff members.
Although Watsons had been under new ownership for some time now, Yang hadn't visited much after the initial acquisition.
"This building's looking pretty outdated," Yang remarked as he looked around. "Find a time to demolish it and build something better."
He didn't care much about appearances, but some buildings were so old they made people uncomfortable. And this was a beverage production site. If it looked dilapidated, it wouldn't inspire consumer confidence.
"Of course," Zhou nodded immediately. "Once business improves, I'll see to it that this place gets rebuilt."
"Good." Yang nodded and followed the group inside for a tour of the facility.
Although the physical infrastructure hadn't changed, the staff had. Most of the old foreign managers and their close local allies had already left.
Zhou explained, "Mr. Yang, the current Watsons team is mostly made up of experienced professionals poached from Swire, United Beverages, and other local beverage companies. They've filled the gap left by the departing foreign staff."
"Makes sense." Yang didn't press further. For operations of this scale, staffing was delegated to the subsidiaries.
Zhou continued briefing him as they walked, eventually bringing him to the lab.
"What are you testing in here?" Yang asked.
"We're experimenting with various beverage blends—carbonated and herbal drinks, including the herbal tea concept you mentioned," Zhou replied.
"Herbal tea? Let me try one," Yang said with interest.
There was no way Watsons could compete with Coca-Cola in the cola market. Fruit drinks weren't feasible either—not with the current technology and environment. Tea-based drinks, better suited to Asian palates, were the development direction Yang had set for Watsons.
"Right this way," Zhou said, leading Yang into the lab.
Inside, the tables were covered with glass beakers and jars, each filled with liquids of varying color. Every glass container had a Post-it note with handwritten labels.
"Looks like Post-it notes really are versatile," Yang laughed.
"Yes, they're very handy," Zhou said. "Otherwise, we'd have to write directly on the glassware, which can be erased too easily. We've been using Post-it notes internally since '59."
"Aren't they easy to fall off? The adhesive isn't that strong," Yang asked.
He had seen similar products in the U.S., but Hong Kong didn't import many due to low demand—small markets always lacked variety.
Nowadays, however, Post-it note production had caught up with sales, and marketing campaigns were already underway.
"They do fall off sometimes," Zhou admitted. "But overall, they're very convenient. If we had a version with stronger adhesive, that would be even better."
"As long as it works," Yang said. "Now, where's the herbal tea?"
"Right here," a technician quickly brought over a few small beakers filled with pale green liquid.
Yang looked at the strange-colored liquids and hesitated. "Are these safe to drink?"
Seeing a bunch of unidentified liquids in lab glassware triggered a reflexive sense of danger—he instinctively didn't want to touch, smell, or even look at them too closely.
"Don't worry, Mr. Yang," Zhou reassured him. "Everything here is made with food-grade ingredients and drinking water. No chemical additives."
To prove it, he took a sip himself, followed by several other staff.
"Alright," Yang nodded, realizing he was being overly cautious.
Given the state of chemistry at the time, most "artificial" drinks were limited to basic ingredients like saccharin. There was none of the high-tech, shady chemical engineering seen in later decades.
Yang picked up a beaker and took a sip.
A clean, slightly sweet taste slid down his throat.
"What do you think, Mr. Yang?" Zhou asked.
"Not bad. It has a tea base and some sweetness. What kind of tea are you using?"
"We sourced six types of tea from China Resources and created a custom blend," Zhou replied. "We boil them together in specific ratios, then add a small amount of sugar."
"Not bad," Yang said. "How's the cost?"
"In the lab," Zhou explained, "a 500ml drink costs us about 30 cents. Tea is the most expensive component—even though mainland tea is cheap, we can't use too little or it waters down the flavor.
Sugar costs about five cents per serving, which is standard for the industry—unless you own your own sugar mill like Swire."
"That's manageable," Yang said. "We wouldn't sell 500ml cans anyway. Something like 200 or 250ml would be ideal."
"I wanted to talk to you about cans later," Zhou said. "Let's set aside time for that."
"Sure," Yang nodded.
He then sampled a few dozen different herbal tea prototypes. Each had a different combination or ratio of ingredients.
"Honestly, it's hard to pick," Yang admitted. "They all taste more or less the same to me."
"That's common in the beverage industry," Zhou said. "Especially for sweet drinks. There's no such thing as an objectively best flavor.
What we'll do next is conduct randomized blind taste tests in malls and streets. The final formula will depend on feedback from our target market."
"That'll take thousands of test subjects," Yang pointed out.
"Yes. It's a long process—very time-consuming and costly," Zhou agreed.
"Here's what we'll do," Yang said. "Talk to Liu Huayu at Carrefour. He can set up tasting booths in several of our stores.
That way, we don't need extra staffing, and Carrefour already attracts consumers with decent purchasing power—perfect for your target demographic."
Zhou's eyes lit up. "That's a brilliant idea, Mr. Yang."
"Yes, just internal resource sharing," Yang Wendong said with a smile. "In the future, whenever you're launching a new beverage, make sure you consider using our own internal resources first — including Changxing Media's newspapers and radio stations. That should give you solid results within Hong Kong."
While the local Hong Kong market was small, it was still large enough to support a viable beverage business.
Several of Hong Kong's homegrown beverage brands had survived purely on domestic sales — maybe exporting a bit to Macau or Taiwan, but not much further.
That was mainly because glass bottles dominated the industry at the time. Heavy and fragile, they created significant barriers to wider distribution. Even a giant like Coca-Cola had to rely on Swire Group for local production.
"Understood," Zhou Haoran nodded.
After a quick tour of the production line, Yang Wendong headed to a meeting room on the third floor of the admin building.
"Apologies for the humble setting, Mr. Yang," Zhou said with a slight bow. "It's not exactly a top-tier facility."
"No worries," Yang replied casually. "Still better than the place I grew up in." Then he asked offhandedly, "Have you ever seen what it's like inside a squatter house?"
Zhou shook his head. "Not in person. I've only seen photos in the papers. The conditions look pretty bad."
"They are," Yang said. "That's where I spent my childhood. You get used to it, and you can survive — but lately, things have gotten worse.
With the drought worsening across Hong Kong, those living in decent neighborhoods are merely inconvenienced. But for squatter residents, it's devastating."
"I'm aware," Zhou nodded. "You've been investing heavily in Kowloon to support those areas. But here at Watsons, I'm afraid we haven't been able to contribute much."
"You're not supposed to," Yang replied. "What you should be doing is focusing on growing the business. If you can get the company exporting at scale and creating jobs, then even if Hong Kong faces another crisis down the line, a stronger economy will help keep the poor from suffering so much."
In the end, it all came down to the economy.
If Hong Kong in the 21st century ever faced a drought — even without Dongjiang River water — countless merchants would find ways to ship water in because people could afford to pay for it.
"You're right," Zhou agreed. "If we want to export, switching to cans is the best way forward.
Many Western beverages are moving to pop-top cans for export. Swire, too — they recently signed a deal with German packaging company Krones for a full canning line: sheet pressing, shaping, mid-stage filling, and end-stage sealing and sterilization."
"What's the capacity of that line? And the cost?" Yang asked.
"One thousand cans per hour," Zhou replied. "Total cost is around $400,000 USD."
"A thousand an hour, $400k total…" Yang quickly did some mental math. "If we amortize the cost over five years, that's about five cents per can in depreciation alone."
"Correct. And each can uses about 100 grams of tinplate, which costs around 20 cents," Zhou added.
"So the packaging is more expensive than the drink itself," Yang remarked with a chuckle.
"That's true," Zhou admitted. "But in the beverage industry, packaging often costs more than the product. Transport is even more expensive — more than the combined cost of packaging and beverage in many cases.
The main advantage of cans is reduced transport cost. They're not fragile like glass, and much lighter. That's why in Western markets, cans are actually cheaper overall."
"So what you're saying is — in the West, the economics work out. But in Hong Kong, it's more expensive?" Yang asked.
Zhou nodded. "Yes. Recycling is also a factor. Both glass bottles and cans have established recycling practices.
Glass is heavier and more fragile, so collecting and transporting them back for reuse is costly. Cans can be crushed to save space.
But there's a catch — cans need to be sent straight to steel mills to be recycled. Hong Kong doesn't have those. The few small local foundries can't produce thin tinplate, so we can't reuse the materials efficiently."
"So we'd have to import all the raw materials. That's a disadvantage," Yang said, nodding in understanding. "Still, I think cans are more convenient than glass. If the cost is high, we'll just raise the retail price slightly. Our brand positioning can be a bit more premium."
Looking at future trends, glass bottles were clearly on the decline. Cans already had a major edge in transportation.
If he wanted Watsons beverages to scale, relying on glass was a non-starter. It might work locally in Hong Kong, but export costs would be unbearable — even with container shipping.
"In that case," Zhou said, "it shouldn't be a problem. Our herbal tea has almost no direct competitors anyway."
"Good. Then reach out to Krones or other international equipment manufacturers," Yang said. "I want us to purchase a canning line as soon as possible.
Also, find a suitable coastal location for the new plant. If water supply becomes tight, I'll arrange for ships to deliver it directly. We'll build a large reservoir on site as a backup."
Even with the drought looming, economic development couldn't be paused. If the drinks sold well, Yang could afford to buy water at a hundred times the amount used in production.
And drinks didn't need that much water anyway. A million cans required only a few hundred tons. If they could move a few million cans before the drought ended, that would be a huge success.
"Understood, Mr. Yang," Zhou said enthusiastically.
"Have the cosmetic and pharmacy stores been separated yet?" Yang asked.
"Yes. They're now running as independent units," Zhou replied. "I've also spoken with Mr. Zheng Zhijie. He'll help us scout new locations for the stores."
"Good," Yang said without asking further.
Now wasn't the time to focus on building a cosmetics or pharmacy chain. As long as those arms were running smoothly, that was enough for now.
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