Summary of Key Points
The established snack company Wangwang has recently drawn attention due to an internal letter from its owner, Cai Yanming, titled "Great Unity." The letter reveals that the company is facing a significant operational crisis: net profit in the first quarter of the 2026 fiscal year has decreased by nearly 40%, wholesale channel sales have declined by double digits, and the company's market value has evaporated by HK$130 billion from its peak. The company's response to the crisis has been a "passing the buck" approach, involving the layoff of about 1,000 employees and requiring frontline staff to fill out forms reflecting on their shortcomings, while senior management was not involved in this process. However, the employees do not have the authority to propose solutions, and the senior executives who could make changes are not willing to reflect on their own actions. In reality, the root of the crisis lies not with the frontline staff but with the management's failure to keep up with the times, a conservative and rigid organizational structure, and superficial reforms.
Detailed Analysis
1. **Performance Decline: From a Favorite During Festivals to a Crumbling Business**
Wangwang once thrived on its flagship products such as Wangzai milk and snow cakes, as well as its extensive distributor network in rural areas. In 2013, the company generated revenue of HK$23.4 billion, with Wangzai milk alone selling for HK$11 billion, and its market value reached HK$170 billion, making Cai Yanming the richest person in Taiwan. However, the company's fortunes have since taken a dive: revenue dropped to HK$19.7 billion in 2016, Wangzai milk sales plummeted to HK$8.4 billion, and the stock price was halved. The situation is now even worse—net profit has decreased by 40%, wholesale channels (once a vital lifeline) have declined, and the market value has shrunk by HK$130 billion. In simple terms, while people used to think of Wangwang during festivals, now it is only occasionally remembered, making business increasingly difficult.
2. **Three Blows from the Times That Wangwang Failed to Cope With**
Wangwang's decline is directly related to changes in the broader environment:
- E-commerce has stolen the attention of young people: Since 2014, the rise of e-commerce has led to the popularity of brands like Three Squirrels, which have gained fame through influencer endorsements and social media marketing, offering nearly a thousand different products. Wangwang, on the other hand, continues to rely on outdated advertisements like "Mom Li Ziming Sends Milk," with only half the number of products as its competitors. Young people prefer to watch short videos for product recommendations.
- Quantitative food stores have taken control of pricing in the lower-tier markets: These stores, such as Zhao Yiming's, have merged to become "super distributors," capable of negotiating lower prices with brands, weakening Wangwang's control over its distribution channels. The lower-tier markets were once Wangwang's stronghold, but now they have been taken over by these new players.
- Products do not align with health trends: Wangzai milk is a high-sugar dairy product, snow cakes are made with sugar and oil, and crushed ice is a processed sweet drink—these are all disliked by younger consumers who are focused on health and fitness.
3. **Reforms That Were Half-Hearted**
Wangwang has not been completely inactive, but its efforts have been superficial:
- Slow channel reform: The company restructured its distribution channels in 2015 and launched an e-commerce platform in 2016, but by 2023, new channels (e-commerce and quantitative food stores) only accounted for 25% of total sales. E-commerce marketing was neglected, with advertising spending consistently below 4% (compared to 11% for Yili and 6-9% for Mengniu).
- Meagre new product launches: In 2017, 50 new products were introduced, including low-GI and non-fried options, but few were successful. Children's pure milk sales exceeded HK$100 million, while the rest of the new products combined only generated HK$30 million, virtually negligible. Wangzai milk still accounts for half of the company's revenue, indicating a reliance on its old products.
- New channels erode profits: Quantitative food stores demand lower prices, and e-commerce has lower margins, competing with traditional distributors. Although revenue reached a new high of HK$24.4 billion last year, net profit decreased by 11.5%, indicating that despite increased sales, profits have actually decreased.
4. **The Management's Outdated Approach:**
The core of the crisis lies in the management's inability to adapt to the times:
- Family-style, rigid management: Cai Yanming holds both the roles of chairman and president, with his sons Cai Wangjia (CEO) and Cai Shaozhong (executive director) at the core. Most senior managers joined the company in the 1980s (for example, the 73-year-old marketing director, Huang Yongsong). There is a lack of professionals familiar with e-commerce and new consumer trends; a new head of the information center was only hired in June this year.
- An organizational culture that stifles innovation: Employees complain about strict restrictions on innovation, with lengthy approval processes and a focus on avoiding responsibility rather than finding effective solutions. For example, the marketing team does not understand how to engage with younger consumers through platforms like REDnote.
- Outdated hiring practices: Cai Yanming believes in "street wisdom" and thinks that highly educated people lack practical skills. However, today's street scene is dominated by delivery riders, not the business opportunities of the past. This mindset leads him to rely on acquaintances and senior employees, rather than bringing in professional talent.
5. **The Irony of the Company's Response: Blaming the Frontline and Exempting Senior Management**
Wangwang's crisis response highlights deeper issues:
- Blame on the workforce: The internal letter suggests that unproductive employees will be laid off, and frontline staff are asked to reflect on their mistakes, but senior management is not held accountable. Employees have no authority to propose solutions, while those in charge do not reflect on their own failures.
- Misattributing Responsibility: The management blames employees for lack of ambition and distributors for underperforming, but the real problems lie with the company's failed strategy, outdated organization, and ineffective reforms. How can employees with modest salaries bear the responsibility for a HK$130 billion market value loss?
Conclusion
Wangwang's problems are not due to the rapid changes in the times but rather the management's refusal to confront and address these issues head-on. After 30 years of success, the company is now experiencing growing pains, but the burden should not fall on its frontline staff. To turn things around, it needs to change its leadership—replacing old-fashioned managers with those who understand new consumer trends. Otherwise, the next crisis could be even more severe.