"The sustained development of a great enterprise depends on an institutional system, not personal authority."
On September 12, 2025, Zong Fuli formally resigned as chairwoman of the Wahaha Group; her tenure at the helm lasted only 378 days. The data decline during this brief term bluntly exposed the fatal flaw of the enterprise's "personal handover" model: terminal outlets plunged from 5 million to 80,000, AD calcium milk sales in East China crashed 37%, and purified-water market share shrank from 18% to 12%. Wahaha's predicament is, in essence, the conflict between "accidental success" and "inevitable longevity": it rose early on Zong Qinghou's personal judgment and the dividends of the era, but under Zong Qinghou's family-style governance culture it never built a complete institutional system, leading to today's fractured state.
01 The Essence of the Crisis: Personal-Authority Handover vs. Institutional Handover
The Wahaha of Zong Qinghou's era built its development core on the founder's personal prestige but never formed a sustainable succession system. After Zong Fuli took over, the fragility of this "personal dependence" erupted in full, triggering a systemic crisis.
(1) Institutional Defects in the Equity Structure
The ambiguity and legal flaws in the equity architecture became the first hurdle on the succession path. An August 2025 ruling by the Hong Kong High Court showed that the $1.8 billion offshore trust assets (HSBC account) set up by Zong Qinghou during his lifetime belong to his three non-marital children, and because Zong Fuli had not completed the statutory procedure for establishing the trust, the relevant assets were frozen by law. This ruling directly struck at her actual control over Wahaha's 29.4% equity, triggering strong market concern over the stability of the company's equity and directly halving online sales.
The tug-of-war between state-owned capital and employee shareholding further aggravated the governance predicament. In Wahaha's equity structure, the Hangzhou Shangcheng District Culture, Commerce and Tourism Group (state-owned) holds 46%, and the employee shareholding association holds 24.6%; yet after the 2018 equity buyback, although the employee shareholding association was in fact controlled by Zong Qinghou personally, the industrial-commercial change procedures were never completed. This unclear structure of rights and responsibilities meant Zong Fuli's reform decisions required unanimous consent from all shareholders; her plan to transfer 387 core "Wahaha" trademarks to the Hongsheng group was ultimately shelved due to state-owned opposition, leaving reform on the back foot.
(2) Tear-Through Reform of Organizational Culture
The violent turnover of management severed organizational memory. After taking office, Zong Fuli quickly replaced 6–7 core executives, demoted more than 30 mid-level managers, and brought in the "Hongsheng group" team on a large scale, directly causing concentrated departures of veteran employees from 13 departments. Wahaha's long-accumulated cultural identity of "uniting the small family" was thoroughly broken; the new and old teams lacked a consensus on values, leading to management chaos such as "morning meetings turning into struggle sessions," and a sharp drop in internal collaboration efficiency.
The radical adjustment of the channel system triggered market turmoil. To push channel reform, the company cleared out 4,000 distributors with annual sales below 3 million yuan and abruptly terminated its OEM cooperation with Jinmailang, directly causing the dual predicament of terminal out-of-stock and inventory pile-up, weakening the channel's trust in the enterprise.
(3) Adventurous and Wavering Brand Strategy
After losing the trademark fight, the new brand strategy hit an impasse. With the core trademark transfer blocked, Zong Fuli was forced to launch the new brand "Wahaozong (Wahaha Junior)," leaving the nearly 90 billion yuan of "Wahaha" brand assets idle (GYBrand 2025 valuation).
The blindness of product innovation intensified operating pressure. The company rashly shut down 18 of its own factories and spent 1 billion yuan building a new Xi'an production base, but the newly launched sugar-free tea, coffee, and other new products lacked differentiated competitiveness and could only rely on a "low price + promotion" strategy to sustain sales, driving distributors' net profit margin down to a historic low of 2–3%. The violent adjustment of production layout and the inefficient investment in product innovation formed a vicious cycle of "rising costs, falling returns."
02 Institutional Handover: New Hope's Smooth Transition
In sharp contrast to Wahaha, New Hope Group, by laying out institutional building in advance, achieved a smooth transition from founder to successor, demonstrating the core supporting role of institutional design in corporate succession.
(1) Stepped Design of Power Transition
New Hope's decade-long progressive cultivation laid a solid foundation for succession. Starting in 2002, Liu Chang entered New Hope's grassroots under an assumed name, "Li Tianmei," rotating through sales, finance, and other posts to fully learn the enterprise's operating logic. In 2013 she formally entered the core management as co-chairwoman; in 2025 Liu Yonghao completely exited the board, completing the full transformation from "observer" to "decision-maker." This stepped growth path fundamentally avoided the trust crisis triggered by "parachuted succession."
The co-chair mechanism built an effective risk buffer. The company innovatively brought in Chen Chunhua as co-CEO, forming a "strategy + execution" dual-core structure: Liu Chang focused on strategic planning and capital operations, while Chen Chunhua led reform implementation and daily management. During the 2023 low-pig-price cycle, the two jointly launched the "three pools, one network" dynamic inventory management model, successfully cutting farming cost from 18 yuan/kg to 13.4 yuan/kg, demonstrating the co-chair mechanism's collaborative value in crisis response.
(2) Checks and Innovation in the Decision Mechanism
A decision system led by professional committees safeguards the scientific nature of decisions. New Hope's board set up three professional committees — strategy, audit, and remuneration — with independent directors exceeding 30%; the addition of industry experts such as Wen Tiejun and Huang Yaowen strengthened professional judgment. Major investments must pass a three-tier veto procedure of "business-segment assessment — leading-group review — shareholders' meeting vote"; in 2024 the board vetoed the overseas expansion plan proposed by Liu Chang, successfully avoiding geopolitical risk.
Digital tools empower and improve decision-making. The company actively introduced innovative means such as genomic selection technology and AI nutritionists to upgrade feed formulas, reducing soybean-meal usage below 6%. The combination of technology empowerment and scientific decision-making helped New Hope achieve, in 2025, a development breakthrough of 24 overseas factories and 3–4 million tons of added feed capacity.
(3) Diversification and Echelon Building of the Talent Structure
The organic fusion of family and professional managers builds a composite management structure. In the management team led by Liu Chang, there are both externally recruited professionals such as Tao Yuling (swine-industry expert) and Yang Fang (finance expert), and retained veteran ministers such as Wang Hang and Huang Daiyun as advisors, achieving experience transmission through "passing on, helping, and leading." This "industry + finance + capital" talent configuration balances professional depth with corporate sentiment.
The equity-incentive mechanism achieves benefit sharing and team stability. In 2024, New Hope launched a restricted-stock incentive plan covering more than 300 core employees, directly linking personal returns to a performance target of ROE no lower than 8%. This move effectively stimulated team enthusiasm; in the first half of 2025, core-talent attrition fell to 3.2%, providing talent assurance for stable development.
Wahaha vs. New Hope: Five Dimensions of Institutional Design
The succession practices of Wahaha and New Hope show that building a systematic institutional system is the key for private enterprises to break through the succession predicament. This requires a governance ecosystem in which the founder, the successor, and the enterprise jointly exert force.
(1) Founder: Build the "Succession Plan" in Advance
The legal solidification of the equity architecture is the basic safeguard of succession. Founders should clarify equity ownership as early as possible through family trusts (such as Longfor's Wu Yajun model) or AB-share structures, avoiding legal disputes during succession. Take Zong Qinghou as an example: had he completed the title-confirmation procedure for the offshore trust five years earlier, he could have avoided the operational turbulence brought by the 35-billion-yuan equity lawsuit. At the same time, the hierarchy of will validity must be clarified, prioritizing the succession stability of the core enterprise's equity, to lay a legal control foundation for the successor.
The scientific design of a transitional governance structure reduces power-handover risk. Reference New Hope's buffer model of "co-chairman + professional manager," or Fotile's dual-track system of "family committee + corporate board," and set a 3–5 year power-transition period for the successor. Liu Yonghao's arrangement of serving as advisor until 2025 both safeguarded strategic continuity and provided Liu Chang with necessary decision support.
(2) Successor: Establish "Dual Authority"
Frontline practical experience is the core path to accumulating capability authority. The successor must go deep into frontline posts such as sales and production to accumulate experience; for example, Liu Chang's practice of running the market under the alias "Li Tianmei" effectively avoids the problem of reform detaching from reality. The enterprise can set quantitative assessment indicators, such as "raise regional sales by 20% within 3 years," letting the successor win internal recognition through real results.
Institutional authorization is the key means to build legitimate authority. Clarify the boundaries of rights and responsibilities between the successor and professional managers through the articles of association, such as the model where Liu Chang and Chen Chunhua jointly sign documents and appear together at press conferences, gradually strengthening the successor's institutional authority. Reform implementation should adopt a gradual "pilot – feedback – correction" model, first validating feasibility in local regions before gradual rollout, avoiding the risk of nationwide "shock therapy."
(3) Enterprise: Build a Risk-Resistant Governance System
The separation of ownership and management is the core requirement of modern corporate governance. Push family members back to the shareholder layer and hand management to a professional-manager team, such as Midea's power-transfer model from He Jianfeng to Fang Hongbo. At the same time, realize interest binding through mechanisms such as equity incentives and career-partner programs, like New Hope's 2024 restricted-stock plan, which both secured professional managers' enthusiasm and protected the family's long-term interests. Building a risk "firewall" between family and enterprise — prohibiting individuals from guaranteeing for the enterprise — can avoid the tragedy of Shanshan's Zheng Ju having his equity forcibly executed due to related-party guarantees.
Democratizing the decision mechanism enhances risk resistance. Establish a strategic decision committee, clarifying that major matters require approval by more than two-thirds of members; decisions such as new-product launches must pass the dual evaluation of consumer research and cost models. If Wahaha had piloted "tiered distributor management" in Zhejiang instead of directly clearing out 4,000 distributors, it could have effectively avoided the complete collapse of its channel system.
The ritualization of cultural inheritance is an important support for uniting the team. The enterprise should revise its "Cultural Guidelines" to clarify core values, such as Wahaha's philosophy of "integrity, health, win-win," and incorporate cultural identity into performance assessment (suggested at 20%). Regularly hold "old-and-new forums" to promote experience exchange, letting veteran employees share channel-management wisdom and Gen-Z employees contribute innovative ideas, realizing the intergenerational inheritance and iteration of culture.
03 Lessons from the Cases: The Management Shift from "Time-Teller" to "Clock-Maker"
Wahaha's succession predicament is, in essence, the profound conflict between "personal authority" and "institutional system": Zong Qinghou built a "national brand" with personal ability but never completed the role shift from "time-teller" to "clock-maker"; Zong Fuli's radical reform tried to break path dependence but fell into predicament for lack of institutional support. New Hope's practice proves that the core of private-enterprise succession is not finding a perfect successor but building an institutional system that lets ordinary people make correct decisions.
As Jim Collins said in Built to Last: "Great companies are built, not born." For Chinese private enterprises to break the curse of "wealth not surviving three generations," they must complete the transition from "founder dependence" to "institution dependence." Only by clarifying the boundaries of rights and responsibilities through layered power design, safeguarding scientific decisions through decentralized decision mechanisms, and achieving echelon building through talent-diversion systems, can "founder capability" be transformed into "organizational capability," allowing the enterprise to achieve sustainable development through succession and truly become a "century-old store" that crosses cycles.
