Significant developments have occurred within Wahaha as internal dynamics have experienced a sudden reversal. Insights from two independent sources reveal that the Hongsheng Group, controlled by Zong Fuli, announced this evening that the “Wahaha” brand will continue to be used in 2026. This decision means the previously announced new brand “Wawaixiao Zong” only existed for 41 days.

As of the time of this report, Wahaha’s official response is still pending. Just 41 days ago, following Zong Fuli's resignation, there was a deadlock between Wahaha and Hongsheng—while Wahaha Group held the trademark, it lacked production capacity, and Hongsheng had to pivot to the new brand “Wawaixiao Zong.” However, distributors have shown reluctance to renew contracts and invest in “Wawaixiao Zong.” A source indicated that this situation suggests the government is stabilizing the market and ensuring the company's regular operation.

The internal situation has remained turbulent during the 41 days after Zong Fuli’s resignation. A reform initiated from the top by Zong Fuli has spread across Wahaha and the Hongsheng Group. This scenario reflects the challenges of second-generation succession, particularly in a unique context—over the past two decades, Hangzhou’s Shangcheng District has been Wahaha’s legal major shareholder, while the actual controller is Zong Qinghou, leading to a convoluted ownership and control dynamic that has propelled Wahaha into a giant with annual revenues in the hundreds of billions.

From an outside perspective, Wahaha appeared stable for many years until the conflict over inheritance following Zong Qinghou's death sent ripples through the media, raising concerns about the transfer of assets by the Zong family. Long before the high-profile inheritance dispute emerged, Zong Fuli had sought to clarify these distinctions when she took over Wahaha last year.

Recent developments at Wahaha are complex, yet they can be distilled into two significant points regarding Zong Fuli’s actions after officially taking over: First, a comprehensive operational overhaul aimed at revamping management structures, replacing almost all veteran executives, and adjusting distribution channels to reinvigorate a long-stagnant revenue figure that had remained flat at around 50 billion since 2014. Until the significant growth following Zong Qinghou's death last year, Wahaha's performance had failed to progress.

In this decade, the beverage industry has transformed dramatically. Nongfu Spring is expected to approach 50 billion in revenue by 2025, successfully tapping into the no-sugar tea segment; Yuanqi Forest is making waves with its sparkling water and electrolyte drinks. In contrast, Wahaha seems detached from these industry trends.

Zong Qinghou was a legendary entrepreneur, but Zong Fuli, who joined Wahaha in 2004, is now faced with the daunting challenge of achieving success that eluded her previously.

The second major focus is clarifying Wahaha's ownership structure. Many companies from China’s first wave of post-reform entrepreneurs have unclear ownership models; even as founders built enterprises, they often bore the titles of state-owned or collective enterprises. This lack of clarity has led to tumultuous scenarios across several entities, with some facing imprisonment while others exited. How to navigate these complex ownership dilemmas has perplexed many entrepreneurs.

Zong Qinghou managed ownership adeptly outside of the state-owned Wahaha Group, concurrently operating a sprawling entity known as the Wahaha System, maintaining control over both the internal and external mechanisms. However, he could not clarify the ownership of the Wahaha Group and its corresponding brand, something Zong Fuli aims to achieve.

Before this resignation, Zong Fuli had submitted her resignation letter in July 2024, explicitly citing concerns from the Hangzhou Shangcheng District government and some Wahaha shareholders regarding her management's legitimacy. At that time, speculation suggested this was related to her disputes with state-owned shareholders over the use rights of the Wahaha trademark. Just a week after her previous resignation, she returned to her position “after friendly negotiations.” However, this latest resignation has been approved by the Wahaha Group's board of directors.

Zong Fuli’s two resignations symbolize the ongoing and unresolved conflicts within the organization.

In terms of personal dynamics, those who have interacted with both Zong Qinghou and Zong Fuli often perceive them as representing starkly different managerial styles. Zong Qinghou was known for his relational approach, capable of rallying diverse interests and maintaining significant informal influence within Wahaha. Various distributors have recounted Zong Qinghou's habit of taking notes during distributor meetings to address queries and challenges.

Nearly twenty years ago, Wahaha faced a monumental conflict with Danone over ownership—a situation where Danone held a 51% stake but failed to control the group due to Zong Qinghou’s establishment of a highly profitable network beyond the Wahaha Group. The media reported that Danone attempted to destabilize Wahaha from within, yet Zong Qinghou maintained complete confidence that no employees would defect.

In contrast, Zong Fuli's upbringing in a Western education system leads her to favor modern corporate management structures, prioritizing contractual agreements and performance metrics over personal relationships. For instance, she has established rigid boundaries, refraining from sending work messages to employees after 10 p.m. on weekends.

Zong Fuli’s approach lacks the informal influence of her father and is seen as too rigid by some, making it challenging to command the same level of persuasion. In private discussions, several sources close to Wahaha have observed her tough personality, which can lead to conflicts.

In 2021, after Zong Fuli was appointed Vice Chairman and CEO, Zong Qinghou largely relinquished control. However, by the second half of 2023, Wahaha suddenly announced that all official documents would require the chairman's signature for validity. Employees speculated that this reflected internal disputes over Zong Fuli's decisions. Following the announcement, she reportedly took a month off in Japan, disregarding her responsibilities at Wahaha.

Zong Fuli’s methodology differs substantially from Zong Qinghou’s in addressing ownership issues. Under Zong Qinghou's careful planning, a substantial Wahaha network existed outside the state-controlled Wahaha Group. As an unlisted company, Wahaha's operational data isn't publicly accessible, but reported data shows that by the end of 2022, the Wahaha Group and its 16 directly invested subsidiaries made up only about 15.67% of the total assets of the “Wahaha system,” contributing a mere 2.74% of total revenue and just 0.39% of net profit.

Consequently, Zong Fuli, lacking her father's informal influence, has moved quickly to consolidate actual control: she has mandated that contract factories and sales channels transition to her purview at Hongsheng Beverage Group, transferring labor contracts of six thousand Wahaha employees to the companies under her control. Insiders claim that by October 2023, only “roughly two hundred” remained at the Wahaha Group.

This transfer of labor contracts has stirred significant public opposition, as it also meant the cancellation of employee bonus shares—crucially tied to ownership stakes in Wahaha. Wahaha’s shareholding is divided as follows: the Hangzhou Shangcheng State-owned Assets Supervision and Administration Commission holds 46%, Zong Qinghou personally maintains a 29.4% stake (which Zong Fuli has inherited), while several thousand employees collectively own 24.6%. In this scenario, although the Shangcheng District government is the largest single shareholder, if Zong Qinghou merges the employee-held shares, he could reclaim the position of being the largest shareholder.

As early as 2018, Zong Qinghou had begun repurchasing shares from employees. His proposal was designed to foster goodwill; once employees sold their shares back, they retained rights to bonuses. In contrast, Zong Fuli’s revocation of employee shares and bonuses directly affects their fundamental interests. In September 2024, some former employees launched a class-action lawsuit due to disputes over share repurchase pricing and labor contract changes.

One employee, Chen Kang, shared that the core issue in the lawsuit revolved around the cancellation of bonus shares. Many employees believe the repurchase price of 3 yuan per share agreed in 2018 is unreasonable given that they once acquired shares at 1 yuan per share in 1999 when Wahaha was valued at approximately 520 million, a figure that has soared since. "At the time, it was said the shares would be repurchased, but in reality, it seems that the family has effectively taken control, making 3 yuan per share exceedingly low," said Chen.

Due to the ongoing lawsuit, Zong Fuli has yet to formalize the transition of the employee stockholding meeting shares to her name, meaning, as of today, the Hangzhou Shangcheng government remains Wahaha Group's largest shareholder. An insider disclosed that “currently, Du Jianying and several core senior executives are leading the employee rights protection committee in this legal battle.”

Consequently, Zong Fuli has even lodged complaints with the Supreme People’s Court and the Supreme People’s Procuratorate about the slow progress of the Hangzhou Shangcheng Court, accusing it of delaying the filing of lawsuits related to the employee stockholding council.

The significance of the state-controlled Wahaha lies in its possession of a clear and immovable asset: the Wahaha trademark. In February 2025, Zong Fuli attempted to transfer 387 Wahaha trademarks from Wahaha Group to the Hangzhou Wahaha Food Co., Ltd. (in which Zong Fuli holds a 51% stake) but was intercepted by state assets. Prior to this, state assets insisted that the Hongsheng Group's use of the Wahaha brand should incur fees, failing which Zong Fuli would be “using her position to misappropriate benefits.”

Since then, the divide between Zong Fuli and Wahaha Group has deepened. In February of this year, Hongsheng Group applied for trademarks such as “Wawaixiao” and “Zongxiaohua.” On the day Zong Fuli announced her resignation as chairman of Wahaha Group, the Hongsheng Group distributed an internal notice indicating plans to adopt the new brand “Wawaixiao Zong” from 2026.

The notice illustrated the conflicts between both parties: “Under the existing shareholding structure, the use of the 'Wahaha' trademark requires unanimous consent from all Wahaha Group shareholders; otherwise, neither party has the right to use it.”

Thus, the pivotal question arises: Can Wahaha Group continue using the Wahaha trademark, and does Zong Fuli as a shareholder hold a veto right?

According to lawyer Wang Mo from Beijing Haotian Law Firm, this is a complex legal issue. If the contents of the notice are true, Zong Fuli's alleged veto right does not derive from the Trademark Law of the People’s Republic of China or her status as a shareholder but is contingent on whether the company's articles or equivalent agreements alongside internal regulations contain stipulations regarding trademark usage.

The parties remain at an impasse. Insiders revealed to 36Kr that the inability of Hongsheng Group to use the Wahaha trademark ignited Zong Fuli's recent resignation.

Unlike the situation from two decades ago with Danone, where conflicting claims were made against unauthorized usage of the Wahaha brand, with Wahaha invoking the narrative of “foreign capital infringing on a national brand” and gaining societal support, Zong Fuli faces the Hangzhou Shangcheng government, and neither side wishes the narrative to devolve into concerns over "loss of state assets."

With few opportunities for evasion, Zong Fuli's most prudent approach may be to attempt a fresh start with a new brand, necessitating a clear separation.

Given the fierce competition within the beverage market, the challenge of building a brand with comparable recognition to Wahaha’s is formidable. One beverage entrepreneur noted that distributors typically prefer to sell established products, which explains why longstanding items, like iced red tea, are readily revived.

However, with robust support from distributors, even a new brand like “Wawaixiao Zong” could outperform expectations. The historical context akin to the “Wanglaoji” brand dispute demonstrates that, despite facing significant challenges, success is achievable through established distributor networks.

Yet, Zong Fuli’s dual focus—clarifying ownership while overhauling the distributor system—occurs during a tumultuous period, which may not yield unwavering loyalty.

Eliminating a thirty-year-old “joint sales organization” model, Zong Fuli has shown ambition and vision. An early interview revealed her stance: “I don’t want to be merely a successor; if I succeed, I wish to acquire Wahaha.” Nevertheless, Zong Fuli has navigated within the framework defined by Zong Qinghou. Employees have reported tension between them, suggesting a strained relationship that is well-recognized internally.

While Zong Qinghou emphasized a familial culture, Zong Fuli's approach diverges sharply. At the employee representative meeting in August 2024, she employed phrases like “hitchhiking” and “taking a fast boat,” directly addressing internal issues: “Throughout Wahaha's growth, some have fearlessly persevered, while others have gradually slackened, attempting to rest on past achievements.”

Upon her succession, Wahaha saw an immediate overhaul of its organization. Many departments underwent mergers or closures, with significant restructuring occurring in various divisions, including corporate management and public relations. By employing younger management and pushing out almost all veteran executives, she aimed to make decisive changes.

Insiders revealed that very few remaining “old guard” members are still in key positions within Wahaha, often marginalized to the periphery of operation. Eager to make her mark, Zong Fuli has implemented numerous reforms beyond organizational restructuring within the past year.

Amid shifts in channels, many regional managers have been demoted or laid off, with mounting complaints from distributors regarding performance. At first glance, the situation seems convoluted, but the simplest summary is that Zong Fuli’s goal is to adapt the thirty-year-old “joint sales organization” model to enhance control over distribution channels while learning from Nongfu Spring.

Recently, Nongfu Spring’s no-sugar tea line “Dongfang Shuye” has experienced substantial success, with great admiration for Nongfu’s perseverance in pushing previously unpopular product innovations. Yet, distributors prefer tested categories; the inability to introduce successful new products stemmed from a lack of influence over distribution channels.

For three decades, Wahaha has relied on Zong Qinghou's created “joint sales organization” model, easily pre-collecting deposits from distributors while delegating many responsibilities to them. This model once showcased promising innovation and quickly propelled Wahaha into the age of hundreds of billions in revenue.

However, the flaws within this model have surfaced as Wahaha managed only primary distributors, leading to an outsourced control over regional business. “The difficulty in pushing new products is immense because shelf space is limited; introducing something new means removing an existing product. Convincing major distributors to sacrifice current income to promote new products is challenging,” stated industry expert Chen Jing. Yet, the larger corporate entity has limited power over major distributors—even minor disruptions could cause entire market upheavals.

Due to the sprawling management style and significant reliance on distributor channels, Wahaha struggles to convert “new products” into “hits.” The intention underlying the thirty-year-old management system reveals Zong Fuli’s clear objective: enhancing channel control.

Once, Nongfu Spring based its operations on Wahaha's model but transitioned to a much more effective distributor management system by 2016. They integrated direct sales personnel with distributor teams, thus rewarding performance directly.

Zong Fuli has publicly expressed admiration for Nongfu Spring, and observing her recent reforms reveals extensive evidence of her attempts to incorporate their channel management strategies.

Since August this year, rumors have circulated of Wahaha cutting ties with distributors generating less than three million in annual sales figures. Despite official responses claiming the number of new distributors exceeds those being let go, multiple distributors and sales personnel assert that Wahaha is systematically consolidating smaller distributors.

Reporting from late last year indicated that distributors such as Chen Li were told only one distributor can exist within a single county. As one of Wahaha’s longtime distributors, Chen managed over ten million in sales; she noted that her county had maintained two stable distributors until now. “The district manager issued a renewal fee of five million to one distributor, leaving the other to exit,” Chen explained.

The signs of inevitable change had long been in the making; sales representatives from Wahaha observed that since last year, the company’s crucial annual national distributor conference now requires participants to have a sales figure exceeding ten million—an unprecedented threshold in the Zong Qinghou era.

During this comprehensive reshaping of distributors, Zong Fuli has initiated radical reforms for frontline sales personnel. A significant decision includes imposing strict performance evaluations requiring regional managers to consistently meet quotas, with downgrades to sales representatives for failing to achieve targets.

Previously, Wahaha refrained from directly managing its sales personnel. In comparison, leading beverage companies like Coca-Cola have applied a case-by-case selection of their most critical channels while overseeing distributors, even knowing retailers personally. Nongfu Spring adopted a middle-ground strategy, where businesses oversee certain sales people while distributors manage others.

“Brand representatives often possess better qualifications than those at the distributor level,” said industry expert Chen Jing. Only when brands have tight control and management of their salespeople can they dominate distribution channels completely.

In a competitive environment where rival brands are continually introduced through skilled sales personnel, Zong Fuli’s Wahaha has accelerated efforts. In December of last year, Wahaha’s official site issued a tender for “100,000 intelligent freezers requiring maintenance and market deployment,” signaling its initial foray into channel management, which had previously relied heavily on distributors.

However, it’s crucial to recognize that Nongfu Spring took years to cultivate its extensive distributor network. Therefore, undertaking an overhaul of their system in under two years proves daunting for Wahaha.

This reform poses a substantial test of Zong Fuli's execution capabilities and determination.

Many describe Zong Fuli's approach as overly radical, contending she perceives herself as capable of accomplishing everything in one breath, which isn’t feasible. “Zong Qinghou didn’t push for drastic upheaval while he was alive,” remarked a former Wahaha employee.

This reorganization's core vortex focuses on stipulating clear sales targets for distributors and sales personnel, which cuts directly into both parties’ profit margins. According to numerous distributors, the monthly target for growth appears unattainable. Following Zong Qinghou’s death in early 2024, driven by emotional ties, consumer purchases surged for Wahaha products, coinciding with ongoing public sentiment benefiting Nongfu Spring. Last year, Zong Fuli announced a remarkable rise in Wahaha’s anticipated revenue for 2024, targeting 70 billion, marking a staggering increase of over 20 billion—a 40% surge year-on-year.

A beverage entrepreneur recently outlined the Northeast market's dynamics: heightened public sensitivity towards specific brands meant many state-owned and public restaurants replaced Nongfu Spring with Wahaha—a decision made purely for practical reasons.

Distributors like Chen Li understand the unusual influx of demand last year, which does not guarantee sustainable growth, yet the company’s measures contradicted this insight: “Every month they expect us to exceed revenue compared to last year; if we underperform one month, warnings come, and two months of failure leads to closure,” said Chen.

Consequently, Chen Li's thirty-plus-year distributor rights were abruptly rescinded before the peak sales season in July. There has yet to be an inventory check regarding remaining warehouse items; furthermore, the regional manager she previously collaborated with was also dismissed due to unsatisfactory performance.

What Chen Li found perplexing was this consolidation of distribution rights seemingly did not accumulate under stronger distributors. Ultimately, the rights for her county fell to a poorly equipped wholesale couple, lacking vehicles, warehousing, and team support.

In this Eastern county, a decisive and efficient shift at the distributor level feels stunted. Prior block sales managers, like Wu Ming, have witnessed a broad-scale consolidation of smaller distributors, reducing Wahaha’s distributor count from over 6,000 to approximately 3,000.

Furthermore, data acquired by 36Kr stated that in September alone, 58 distributors were closed, with over 412 receiving warnings. A staggering 259 distribution lines reported negative growth exceeding 50%, while 122 saw over 30% negative growth for two consecutive months.

Simultaneously, substantial base-level sales managers at Wahaha also experienced this aggressive approach firsthand. “If monthly performance isn’t met, you’re demoted to a delivery person,” Wu Ming noted. By early this year, his monthly earnings plummeted from nearly 20,000 to merely a few hundred yuan.

He emphasizes that Zong Fuli’s methods contrast sharply with Zong Qinghou’s. Under Zong Qinghou, employee evaluations occurred annually, with subsequent adjustments based on performance.

It’s evident that Zong Fuli failed to adequately prepare for a comprehensive transition. Wu Ming described fluctuating assessment criteria even within a day, with demands such as “visits to 180 terminals” appearing regularly.

The “joint sales organization” model had solidified within Wahaha over the past thirty years. Zong Fuli faces an incredibly challenging path to dismantle it and build a new distribution system within an extremely short timeframe.

As we transit into 2025, numerous Wahaha employees have initiated collective rights protection campaigns due to wage reductions and labor contract reallocations within Hongsheng. By mid-year, employees had reportedly besieged Zong Fuli's office multiple times at the Hongsheng headquarters, intensifying internal conflict.

In user-released footage, Zong Fuli remained composed and untroubled while observing chaos outside her office—the mounting tensions have thus generated a brewing operational crisis.

Nielsen’s data indicates a striking 37% year-on-year drop in sales for AD Calcium Milk within East China during the first half of 2025, while Wahaha’s market share in pure water plummeted from 18% to 12%.

“Beginning in April, all Wahaha products, including major ones like AD Calcium Milk and Nutritional Express, have seen uninterrupted performance declines,” several employees attested.

Ultimately, is Wahaha's impressive journey from scratch to a giant with annual revenue of 50 billion the sole accomplishment of a single “hero”?

In Zong Qinghou's era, the environment was one of collective effort and balanced interests.

In November 2007, Wahaha hosted a grand celebration for its 20th anniversary, attended by over 5,000 employees and strict government representation, showcasing its critical alliances. The government even granted Zong Qinghou the “Special Contribution Award.”

Just two years later, in the “Danone-Wahaha dispute,” Wahaha emerged victorious, largely bolstered by firm governmental backing, with officials publicly opposing foreign acquisition attempts of domestic brands.

November has held significant operational weight for Wahaha, as the yearly nationwide distributor conference usually occurs during this month, coinciding with the last phase for collecting distributor deposits, thereby determining the renewal status for the coming financial year. Historically, maintaining this “opening red” has been of exceptional importance to Zong Qinghou.

However, this November appears fraught with uncertainty, given the recent tensions. Insiders disclosed that the Hongsheng Group began demanding that distributors complete deposit payments by October 28; failure to comply would inhibit renewal agreements for the upcoming year, explicitly specifying the requirement to employ the “Wahaha” branding.

While theoretically this notification offers reassurance to distributors, many have expressed concerns about recent changes—caution remains as stakes involving millions of dollars hang in the balance.

In this tumultuous landscape, Zong Fuli initially planned an all-staff holiday in November to impede productivity—allowing employees unable to receive salaries to contest against the conglomerate.

“The crux of negotiations now revolves around how profit distributions will occur if Hongsheng continues as the manufacturer for Wahaha’s brand,” disclosed an insider.

The overwhelming trademark disputes are temporarily overshadowed. Ultimately, the priority remains clear: Wahaha must continue its operations for any negotiations to hold significance.