Header photo source: Hongsheng Group via Weibo.
Hongsheng Group, the beverage conglomerate controlled by Zong Fuli, announced on October 23 that it will continue using the Wahaha brand in 2026, according to 36Kr, citing two independent sources familiar with the matter.
The decision effectively ends the short-lived Waxiaozong brand that Zong had declared just slightly over a month earlier.
41 days ago, following Zong’s resignation, a deadlock emerged between Wahaha Group and Hongsheng Group: Wahaha held the trademark but lacked production capacity, while Hongsheng could produce but had no brand rights. To keep operations running, Zong Fuli introduced the Waxiaozong label.
Distributors, however, hesitated to renew contracts or make payments under the new brand, putting next year’s business at risk. The commercial pressure ultimately pushed both Zong and Wahaha Group back to the negotiating table.
“It’s very likely that state-owned capital stepped in to stabilize operations and prioritize continuity,” said a person familiar with the matter.
The days following Zong’s resignation were anything but calm. Her top-down reforms rippled through every corner of Wahaha and the Hongsheng network, underscoring how difficult corporate succession can be, and how uniquely this one has unfolded.
For more than two decades, Wahaha’s legal majority shareholder has been the Shangcheng district government of Hangzhou, while real control rested with the late founder, Zong Qinghou. The two sides maintained a tacit understanding that allowed Wahaha to grow into a beverage empire despite the blurred line between ownership and management.
Outwardly, Wahaha appeared stable for years. But after Zong Qinghou’s death, disputes over his estate and publicized family infighting reignited an old question: with the district government as the official shareholder, was the Zong family quietly shifting assets?
In fact, long before the tabloid headlines, Zong Fuli had already begun clarifying that divide when she took over Wahaha last year. Though recent events surrounding the company have been complex, her actions as successor can be distilled into two primary goals.
A sweeping overhaul
Zong overhauled Wahaha’s management structure, replacing most veteran executives and radically reorganizing its distribution channels. Her goal was to revive an aging giant that had seen little revenue growth in a decade.
Wahaha’s sales have hovered around RMB 50 billion (USD 7 billion) since 2014, constrained by an outdated product mix and a sprawling, loosely managed distribution network. Revenue saw a brief uptick only last year, following the passing of Zong Qinghou.
Meanwhile, China’s beverage market has evolved rapidly. Nongfu Spring’s annual revenue is approaching RMB 50 billion, fueled by strong demand for sugar-free teas. Genki Forest has surpassed the RMB 10 billion (USD 1.4 billion) mark with its lineup of sparkling water, electrolyte drinks, and wellness beverages. Wahaha, by contrast, has remained largely on the sidelines of this growth wave.
Zong Qinghou was a once-in-a-generation entrepreneur. Although Zong Fuli has been with the company since 2004, the task of reviving it now is far more challenging.
Clarifying ownership
First-generation entrepreneurs who built businesses during China’s reform era often operated under ambiguous ownership structures. On paper, their enterprises appeared to be collective or state-owned, but in practice, they functioned as private ventures. As these companies expanded, the mismatch between equity and control frequently led to conflict.
Zong Qinghou managed this delicate balance with a mix of political acumen and business pragmatism. Beyond the state-held Wahaha Group, he maintained an extensive off-group structure through the broader Wahaha network, which gave him practical control. Yet he never secured full ownership of Wahaha Group or its trademarks.
That is precisely the issue Zong Fuli has been determined to resolve, and on both fronts simultaneously.
In July 2024, before her resignation, Zong submitted a letter stating that the district government and certain Wahaha shareholders had questioned the rationale behind her management decisions. Observers believe this was linked to disputes over Wahaha’s trademark rights.
A week later, she was reinstated, reportedly after further consultation. But when the board accepted her resignation this time, it underscored that the underlying conflict remains unresolved.
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Father and daughter
Those who have interacted with both father and daughter often describe them as polar opposites.
Personable, pragmatic, and politically astute, Zong Qinghou was a man with unmatched informal influence inside Wahaha. Distributor Chen Li recalled seeing him at multiple national conferences, noting how he always carried a notebook to record questions and problems raised by distributors, regardless of their business size.
Nearly 20 years ago, the infamous Wahaha-Danone joint venture dispute made international headlines. Danone, which held a 51% stake in Wahaha, found itself unable to control the group. Zong operated profitable affiliates outside the joint venture, and the conflict soon erupted publicly. Danone even attempted to lure Wahaha executives through open statements, but, as media reports showed, most employees remained loyal to Zong. The episode cemented his reputation as a leader with an unshakeable loyalty network.
By contrast, Zong Fuli, Western-educated and focused on modern corporate governance, favors rules and performance metrics over personal ties. One small example: she avoids messaging employees after 10 p.m. or on weekends, maintaining strict professional boundaries.
Her personality is firm, perhaps a tad too firm. “She’s overly tough,” one insider said. “Inflexible to a fault.”
A longtime Wahaha employee recalled that in 2021, when Zong became vice chair and general manager, her father largely stepped back. But by late 2023, the group issued an internal notice requiring that all company documents bear the chairman’s signature to be valid.
“Many old executives were confused by her unilateral decisions,” the employee said. After the notice, “Zong Fuli stormed off to Japan for a month and ignored company business entirely.”
Her approach to corporate control reflected her temperament. Under Zong Qinghou, Wahaha Group was only one part of the broader Wahaha network. According to Economic Information Daily, by the end of 2022, Wahaha Group and its 16 subsidiaries accounted for just 15.7% of total assets, 2.7% of revenue, and 0.4% of net profit across the network. Most of the profits flowed through Hongsheng Group, which controlled key ingredient suppliers and contract manufacturers.
Lacking her father’s informal authority, Zong Fuli instead consolidated formal control. She transferred production contracts and sales channels to Hongsheng Group, her own holding company, and moved roughly 6,000 Wahaha employees’ labor contracts there. By October, sources said Wahaha Group itself had around 200 employees remaining.
That transfer provoked public backlash not only because it stripped employees of profit-sharing rights, but also because it touched on the sensitive issue of corporate ownership.
Wahaha’s equity is divided three ways: 46% held by the district’s SASAC (state-owned assets supervision and administration commission), 29.4% by Zong Qinghou’s estate (now inherited by Zong Fuli), and 24.6% by employees through an internal shareholding association. Though the district government is the largest single shareholder, Zong could have become the majority holder if he consolidated the employee shares.
In 2018, he began buying them back, offering employees RMB 3 (USD 0.42) per share while allowing them to retain dividend rights, effectively converting shares into profit-sharing units.
Zong Fuli later canceled those payouts entirely, triggering multiple lawsuits in September 2024. Former employees argued that the buyback price of RMB 3 per share was unfair and invalid.
One former worker, Chen Kang, told 36Kr that he bought tens of thousands of shares for RMB 1 (USD 0.14) each in 1999, when Wahaha’s valuation was roughly RMB 520 million (USD 72.8 million). “Now it’s worth far more,” he said. “We were told the company would repurchase our shares, but it turns out it was Zong’s side doing the buyback. RMB 3 per share feels too low.”
Because of the litigation, Zong has yet to transfer the employee shares into her name, meaning that, on paper, the Shangcheng district government remains Wahaha’s largest shareholder. Insiders said former executive Du Jianying and others are leading a workers’ committee in the ongoing lawsuits.
Zong has even petitioned China’s highest court and procuratorate, accusing the Shangcheng district court of delaying the proceedings.
Wahaha Group’s importance lies in one irreplaceable asset: the Wahaha trademark.
In February, Zong attempted to transfer 387 Wahaha trademarks from Wahaha Group to Hangzhou Wahaha Food, a company 51% owned by her. State capital partners discovered and blocked the move, arguing that it constituted self-dealing. Officials also insisted that Hongsheng must pay to use the trademark.
From that point, the rift deepened. In February, Hongsheng applied to register new brands such as Waxiaoha and Zongxiaoha. On September 12—the day she resigned—Hongsheng issued an internal memo announcing it would launch a new brand, Waxiaozong, starting in 2026.
That notice made the split explicit, stating that the current shareholding structure limits use of the Wahaha trademark to instances approved unanimously by all shareholders.
Can Wahaha Group continue using its own brand? Does Zong hold veto power?
According to Wang Mo, a lawyer at Beijing-based Hylands Law Firm, “If the above statement is accurate, Zong’s so-called veto power doesn’t derive from China’s trademark law or her shareholder status, but from the company charter or other internal agreements governing trademark use.”
The standoff persisted, and Zong’s inability to use the trademark reportedly prompted her resignation.
Unlike her father’s earlier battle with Danone, this dispute lacks a clear moral narrative. Zong Qinghou rallied public support by framing his conflict as resistance against foreign intrusion. Today, Zong Fuli faces the local government, and neither side wants to be blamed for losses to state-owned assets.
Unable to find a political way out, Zong chose the hardest path: building a new brand from scratch.
That is a daunting task in China’s fiercely competitive beverage market. “Distributors sell what’s proven,” one beverage entrepreneur told 36Kr. “That’s why even now, Nongfu is reviving its iced tea brand, as familiar products are the safest.”
If distributors rally behind her, Waxiaozong might still have a chance, just as the original Wanglaoji team succeeded in relaunching as JDB after a similar brand dispute years ago.
But Zong’s two-pronged strategy of restructuring ownership while reforming the distribution system has left her without the same loyalty base her father once commanded.
Dismantling the old system
Did Zong Fuli share her father’s philosophy? Hardly.
Ambitious and outspoken, she once said in an interview that she did not want to be an inheritor, but to succeed by acquiring Wahaha herself. Yet she still had to operate within the framework her father built.
In August 2024, during her first appearance as Wahaha’s legal representative, chairwoman, and general manager, Zong addressed employee delegates bluntly: “Some people push forward fearlessly, while others just coast, hitching a ride on past glory.”
Soon after, Wahaha underwent sweeping organizational reform. Departments including corporate management, branding and public relations, security, political affairs, and the second sales division were merged or dissolved. The board and supervisory committees were restructured, and veteran executives such as Zhang Hui, Wu Jianlin, and Pan Jiajie were replaced largely by younger managers.
“Old timers are now sidelined,” one employee said. “They sit in big offices doing nothing.”
Zong’s reforms extended far beyond internal staffing. Since last year, major changes to distribution channels have triggered demotions, layoffs, and unrest among regional sales teams.
In essence, Zong is dismantling Wahaha’s legacy sales system and attempting to emulate Nongfu Spring’s centralized model.
Under her father, Wahaha thrived by giving local distributors extensive autonomy in exchange for prepaid deposits, and it was a system that fueled explosive growth through the 1990s and 2000s. But it also left the company heavily dependent on distributors and with limited control over end channels, making it difficult to launch new products.
“Convincing distributors to drop old bestsellers for new ones is nearly impossible,” said industry veteran Chen Jing. “If they walk away, you lose the entire regional market.”
To fix this, Zong has sought to consolidate control. Since August, Wahaha has reportedly cut ties with underperforming distributors, particularly those with annual sales below RMB 3 million (USD 420,000). Although the company claimed that new signings exceeded terminations, insiders said smaller distributors are being systematically phased out.
Distributor Chen Li, who managed an eastern territory in China for more than 30 years with annual sales above RMB 10 million (USD 1.4 million), said her county was told only one distributor could remain. “The regional manager demanded RMB 5 million (USD 700,000) as a renewal deposit. The other distributor quit,” she said.
Even participation in Wahaha’s annual national distributor conference now requires more than RMB 10 million in yearly sales, a stark shift from Zong Qinghou’s inclusive tradition.
Zong also imposed strict key performance indicators on frontline managers, including visit quotas, sales growth targets, and demotions to “merchandiser” status for missed goals.
By comparison, competitors such as Coca-Cola directly manage their top 20% of outlets, while Nongfu Spring splits compensation between distributors (base salary) and the company (commissions), creating tighter oversight and better-trained sales teams.
To regain control, Wahaha has begun investing in direct infrastructure. In December 2023, it announced tenders for 100,000 smart coolers, signaling an effort to reclaim end-channel visibility.
But overhauling a 30-year-old distribution network overnight is a formidable challenge. “It’s a huge test of her execution and endurance,” one former employee said.
The perils of speed
“She moves too fast,” a former Wahaha staffer said. “She thinks she can fix everything at once. Zong Qinghou would never have shaken the foundation like this.”
Under her new sales policy, distributors and sales teams were required to post month-on-month growth. That was almost impossible, especially since early 2024 saw an emotional surge in Wahaha sales after Zong Qinghou’s death and a consumer backlash against Nongfu Spring.
“Even state-run cafeterias and government units swapped out Nongfu for Wahaha,” one entrepreneur said. “It was patriotic consumption.”
But the boom faded quickly. When sales failed to surpass last year’s record, distributors faced penalties. “Miss one month, you get a warning. Miss two, your account is closed,” said Chen Li, who ultimately lost her 30-year franchise in July.
Her inventory remains uncollected, and her regional manager was later dismissed for underperformance. Even more puzzling, her territory was reassigned to a small husband-and-wife wholesaler “with no warehouse, no trucks, no team,” she said.
Wahaha’s aggressive distributor purge has since spread nationwide. The company reportedly reduced its 6,000-strong distributor network to about 3,000. Internal data reviewed by 36Kr shows that in September, 58 distributors were terminated, 412 received warnings, and more than 250 saw sales drop by over 50%.
Sales managers have also been hit hard. “Miss one month’s target, and you’re downgraded to merchandiser pay,” said former manager Wu Ming, whose monthly income dropped from nearly RMB 20,000 (USD 2,800) to a few hundred RMB. Under Zong Qinghou, evaluations were annual, not monthly.
By midyear, labor unrest had become widespread. Roughly 6,000 employees whose contracts were moved to Hongsheng Group companies staged repeated protests at Wahaha’s headquarters in Xiaoshan. Videos obtained by 36Kr show senior executives Yan Xuefeng and Zhu Lidan trying to calm the crowds as Zong Fuli sat inside, expressionless.
The turmoil has taken a toll. According to Nielsen data, in the first half of 2025, Wahaha’s “AD” calcium milk sales in East China fell 37% year-on-year, while its bottled water market share declined from 18% to 12%.
Who built Wahaha?
Was Wahaha’s rise to a powerhouse the achievement of one person?
Under Zong Qinghou, it was a symphony of shared interests with employees, distributors, and the government all working in alignment.
At the brand’s 20th anniversary celebration in 2007, more than 5,000 employees, 3,000 distributors and suppliers, and 200 government officials attended. The city government presented Zong with a special award recognizing his contributions.
Two years later, during the Wahaha-Danone dispute, local authorities once again sided with Zong, publicly opposing what they called “foreign hostile takeovers of national brands.” Even the Ministry of Commerce intervened to mediate.
November, the time of Wahaha’s annual national distributor conference, has always been crucial. It’s when deposits are collected and new contracts are signed.
Zong Qinghou viewed it as the company’s symbolic “opening bell.” Even two months before his death in late 2023, he personally attended the event.
But this November looks far less certain.
Insiders told 36Kr that Hongsheng began urging distributors to pay deposits as early as September. Yet as of October 17, only one market had met its quota. “With July and August sales falling, a strong November is already impossible,” one source said.
A lack of renewals poses enormous risk. Hongsheng’s market division reportedly issued a notice requiring all deposits to be paid by October 28, with contracts explicitly confirming the use of the Wahaha brand and affirming that the November conference would proceed as planned.
For distributors, the message should be reassuring, but skepticism runs deep. “Too many policy swings, too much money at stake,” one said. “No one dares move first.”
Another insider said Zong had even considered halting all production in November and sending unpaid workers to confront the group, underscoring how tense the situation had become.
Now, negotiations revolve around one pragmatic question: if Hongsheng continues producing Wahaha-branded drinks, how will profits be divided?
For now, the fiery trademark dispute has been set aside. Because before anything else, Wahaha must simply survive. Only then will the rest of the battle matter.
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Zhong Yixuan for 36Kr.