SCMP
Sunday January 14 2007
After 125 years, retailer considers turning over a new leaf
Enoch Yiu
Lessons from HK enterprises that have passed down generations
Sometimes you have to be willing to give up what you most cherish to let it thrive. This is as true for children as it is for businesses that have passed down through the generations.
That is why the current crop of Chans managing the 125-year-old Ying Kee Tea House have been mulling over whether to go public.
‘We have been lucky to be able to run the tea house for four generations, but we do not know if our fifth generation, which is still very young, would like to do it,’ says fourth-generation director Lawrence Chan.
‘If we are a listed company, we could modernise the structure of the firm and hire professionals to run it. In this way, we can assure the brand Ying Kee continues to run for a long time.’
To that end, the company, which sells about 6 tonnes of tea leaves annually, also plans to expand its overseas operations and update its business scope to include a younger, hipper clientele.
The oldest and largest tea leaf retailer in Hong Kong, with 10 shops in the city and two in Tokyo, Ying Kee was started in Guangzhou by Chan Chau-ying in 1881, in the eighth year of Emperor Guangxu, the penultimate Chinese emperor.
Now it is managed by its six directors, comprising two of the founder’s grandsons and four of his great grandsons, belying the Chinese adage that ‘wealth does not pass through three generations’.
Being a famous traditional brand means it has a stable of mostly elderly customers, but Wilson Chan, another director and cousin of Lawrence, who is also in his 40s, says plans are afoot to expand from a pure leaf retailer into a tea-drinking chain, where people can relax and enjoy the different brands of Chinese tea with dim sum or snacks.
‘We have many loyal customers who have bought the tea leaves for many years, but we would like to attract a younger generation of customers,’ says Wilson.
To overcome their lack of knowledge of restaurant operations, the cousins say they are now scouting for partners to work with them on the new concept.
Another big plan of the fourth generation is to expand into the non-Chinese market and onto the internet. In 2002, it set up a website, then last year, it opened two shops in tourist areas – one in Causeway Bay and another on The Peak – stocked with English brochures to explain the tradition of tea drinking and the six major types of leaves.
It has also held talks with potential agents in South Korea, where it hopes to reach a franchising agreement similar to the one it has in Japan, where its two shops are run by a domestic high-end food purveyor. ‘The same model of co-operation could be made in other Southeast Asian countries, and we think this would work well to expand the tea house in the region,’ says Wilson.
While the closely held company would not provide financial figures, Lawrence maintains it has managed to run a profitable business for most of its 125 years, with turnover of about HK$6 million during its annual two-week mid-autumn sale. ‘It is profitable enough to feed our family of more than 30 people,’ he says.
The innovations contributed by succeeding generations have been as much a key to Ying Kee’s longevity as its strong brand and the inherited knowledge of how to access and price the different leaves, says Lawrence.
Founder Chan Chiu-ying established three shops in Guangzhou set firmly on the rule that they sold only the best quality leaves ‘and would never compete on price’, he said. It was also the first tea house in China to advertise in a newspaper.
Chan Sing-hoi, the cousins’ grandfather, moved the business to Hong Kong in 1950, a year after the takeover of China by the Communist Party. ‘A key strategy adopted by our grandfather was to open branches and buy properties for the shops. Having branches around Hong Kong and Kowloon gave people the impression of our scale and imparted trust on our brand,’ says Wilson.
The third generation, which still shares control over the enterprise, continued the branch expansion plan and in 1988, accepted an invitation by Japan’s Kataoka to join its stable of imported luxury brands.
Ying Kee is certainly deluxe. Its most expensive leaf – 45-year-old pu-erh – sells for HK$20,000 per 600 grams. Its cheapest costs HK$48 per 600 grams, compared with the HK$20 you might pay for tea at a supermarket.
But being a family business has pros and cons. For one thing, it solves the problems of recruitment. Before joining the business, both Wilson and Lawrence worked in other industries for more than a decade – Lawrence at a ceramics factory in Nigeria, and Wilson in exports. In 2000, they both agreed to join Ying Kee upon the request of their respective fathers, also directors of the company.
‘The business was running well and our fathers needed help, so we came back to help them out,’ says Wilson. Coming to an established name meant they did not have to worry about the initial investment, brand building, or establishing a customer base. But it did create other challenges.
Some staff who worked for Ying Kee were much older than the new bosses and were reluctant to accept changes proposed by the younger generation, such as pre-packaging some tea in tins or gift wrapping it before it was sold.