• 6 minute read

Talking to CEO: Donald Tse

Chan, Andrew Chi-fai(陳志輝)

Hung Fook Tong Chairman and Executive Director shares the success of his company and how it overcame difficult periods

Translated by Xu Jiayan, PhD Candidate, Department of Decision Sciences and Managerial Economics, CUHK Business School

Donald Tse Po-tat is the Chairman and Executive Director of Hung Fook Tong Group Holding Limited. As one of the founders of Hung Fook Tong(鴻福堂), Tse is responsible for the company’s overall direction, business strategy and corporate communication. He has nearly 30 years of experience in commerce and the herbal drinks industry. After joining Hung Fook Tong Group in November 1988, he developed central production facilities and product delivery logistics and managed the leasing and renovation of retail shops.

In this episode of Talking to CEO on Radio Television Hong Kong (RTHK), hosted by Prof. Andrew C. F. Chan, EMBA Program Director of CUHK Business School,Tse shares the success story of Hung Fook Tong.

Prof. Chan: Today, Hung Fook Tong retail stores are flourishing everywhere. What are the motivations driving you to further carry forward the development of Hung Fook Tong?

Donald Tse: It is the McDonald’s business style. In the beginning, I thought it would be nice if we could open our herbal tea shops all around the world, like McDonald’s. Our oldest shops were located in Sham Shui Po in the 1980s, and I chose Tuen Mun as the next destination.

I used to drive a taxi and would go all around Hong Kong so I was familiar with many places. I chose Tuen Mun because there was no competition. At that time in Hong Kong, only Sham Shui Po, Yau Ma Tei, Mong Kok and Wan Chai had some herbal tea shops. I needed to find new places to open new shops.

For the specific location, I chose Tuen Mun Town Plaza to follow Yaohan(八佰伴)1 which had opened a shop on the second floor of the shopping center. Based on my observations, there were always lots of people around Yaohan. And as I expected, our business in Tuen Mun flourished and we earned 1 million every year.

Encouraged by the success in Tuen Mun, I made up my mind to make Hung Fook Tong known to all Hong Kong residents, and my next goal was Sha Tin, another new town. I opened a 1,800 square feet shop in New Town Plaza since there was also a Yaohan store nearby. Lots of customers patronized these two shops and we made a lot of money.

Prof. Chan: Did you encounter any setbacks when running Hung Fook Tong? Was SARS the greatest challenge?

Donald Tse: SARS was indeed a great challenge for us. During that time, everyone wore masks and there were few people on the street. The business in all our shops suffered and I was very nervous.

At that time, some herbalist doctors said that Radix Isatidis (板藍根), a traditional Chinese medicine herb that is used for treating influenza) could prevent SARS. We happened to have some stock of Radix Isatidis in our warehouse but I decided not to make money by taking advantage of the crisis. On the contrary, I delivered all our herbal tea to hospitals for free.

The financial status of our company was terrible during the SARS period. With little to no sales, we still needed to cover rents and payrolls. At the end of that year, I even borrowed some money from my friends to survive. But during SARS, I didn’t fire anyone and actually even doubled their wages. After SARS, our business had great turnover, probably because we had done a lot of philanthropy.

Prof. Chan: How did you overcome this difficulty?

Donald Tse: I successfully borrowed a large amount of money from the Bank of America, thanks to the efforts of Dr. Wing Fu Szeto (General Manager of Hung Fook Tong Group). At that time, he had just returned to our company. Before that, he was enticed by a headhunting company to leave our company and work for some bank with a high salary, which went bankrupt during the crisis. He was also heavily in debt with several millions. So he got in touch with me and wanted to come back to Hung Fook Tong.

I said to him that I couldn’t offer a high salary since I was in debt as well and needed to pay 30 million Hong Kong dollars to banks. He understood my situation and said that he was willing to accept one-third of his previous salary, but wanted to be allowed to give lectures in a university two days a week so that he could earn some money for housing loans. I said yes and immediately asked him to write a loan proposal so that I could borrow money from banks.

At the end of 1998, the situation was so difficult that all Chinese-funded banks were not willing to lend money. I could only resort to the Bank of America. The vice president (Phee Boon Kang, Founder and President of Boon Associates, a consulting firm serving the financial services sector in Taiwan, China and Japan) and his three assistants had a half-hour meeting with me. Finally, the VP said to his assistants, “Try your best to do whatever to help Tse’s company”.

I remembered at that time one of my real estate investment was valued at about 17 million Hong Kong dollars. Generally, I could only borrow 10 million Hong Kong dollars with it, but the bank gave me 27 million Hong Kong dollars. With that money, I paid back my debt to the other banks and kept on running my company.

Before long, I had a dinner with the president and vice president of the Bank of America and asked the vice president, “Mr. Kang, I was heavily in debt, and the pledged real estate valued little. Why were you still willing to lend me such a huge amount of money?” He answered, “I have been in the bank industry for over 40 years and have done business with numerous people. I read your loan proposal and tax return, studied your companies’ operation and met with you. I know well that you are a trustful and hard-working businessman, so I was confident to cooperate with your company.”

Prof. Chan: Besides bottled herbal tea, your company also sold soup afterwards. Is there any story behind that?

Donald Tse: The decision was also related to the financial crisis. Our business was stagnant then, especially during the winter. I wanted to do some extra business to make some money. One of my partners gave me a book called Chicken Soup for the Soul. Suddenly, an idea came into my mind and I realized that selling soup might be a good choice. Later I found soup in bowls were inconvenient since customers cannot take the soup home. So we made some bagged soup, which was well received by our customers.

About Talking to CEO

Since 2002, CUHK EMBA has been running the Talking to CEO TV/radio program with Radio Television Hong Kong. Distinguished business leaders, academics and government officials have been invited to share their experiences and insights with CUHK alumni and students.

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