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May 11, 2014 7:03 pm
Small things sometimes make or break a career. For Edward Zhu, it was a rubber hose.
Asked by Del Monte Foods in 1995 to see if he could source some cans of mandarin oranges as a trial, Zhu delivered the fruit. But on checking the product, his Del Monte contact said the taste was off. The rubber hose used to pump syrup into the mixture had been cooked along with the fruit. The mandarins were ruined.
It could have been the end of the road for Zhu’s foray into the fruit processing industry. Instead, he turned the mistake to his advantage. He asked Del Monte to send technicians to China to help identify the problem and fix his canning plant, winning their trust in the process.
By 2000, within five years of that first tainted batch of mandarins, Zhu’s CHIC Group had become one of the world’s biggest exporters of canned fruit, selling to customers from Walmart to Coca-Cola. For a man who hoped to be an investment banker, it was an improbable but welcome twist of fate. “I had never thought about going into the food business. It’s amazing how these things happen,” says Zhu, speaking in his airy office.
Picking fruit, cooking them in syrup and canning them is a very straightforward business proposition. But the curved glass façade and sky bridges of CHIC Group’s new Shanghai campus – designed by the architects who made Google’s global headquarters – serves notice that Zhu wants CHIC, a privately held company, to outgrow its earthy beginnings.
Already CHIC has developed into an organisation of some 10,000 employees, with plants in Thailand, Spain, the US and of course China, where about 90 per cent of its staff are based. As the company has grown, Zhu has drawn both on Buddhist philosophy and formal business education to meet the changing demands.
His full head of grey hair – a rarity in a country where black dye is de rigueur for business and political leaders – is the first thing that marks Zhu, only in his mid-40s, as different from the mainstream of China’s corporate elite.
Zhu is also unusual in having started by going global; he is just now looking to the Chinese market as the next frontier. It is the opposite of the conventional route in China. Most of his peers, from banks to property developers, established themselves domestically first.
“China used to not be able to afford the price we wanted to sell our products at. That’s changed and now China’s price can be higher than other markets,” he says.
Zhu got his start in the fruit trade at a cocktail party in California in the early 1990s. At the time he was shuttling between Shanghai and San Francisco, trying to broker cross-border investment deals. A Del Monte buyer at the party was intrigued to find a man who could move easily between the two countries – far less common back then – and gave Zhu that first pivotal order for mandarins.
The boiled rubber hose was one of a catalogue of problems that Zhu faced initially. Workers often left cans of fruit in the open gathering dust. He needed to find a way to impress upon them the importance of keeping the cans clean, since overseas customers expected to be able to open a box and put them directly on store shelves.
In those years, it was customary in China to get new clothes once a year for the Chinese new year festival. After one holiday, he told his workers to bring their prized dresses and suits to the packing plant and place them where they had stacked the cans, and then leave them for a week to accumulate dust. “After that they remembered not to put the product out in the open,” he says.
Zhu has applied similar ingenuity to address a deficiency that persists in China to this day: an absence of large-scale farming. Most land is divided into tiny plots for individual farmers, making it hard for food companies to make big orders and harder to ensure consistent quality, since there are so many producers to supervise.
Zhu reckons that CHIC buys fruit from hundreds of thousands of growers. His approach to managing them? “We call it peer pressure.”
He circles an area of, say, 10 acres with as many as 20 growers. “If we find out one grower’s product has a pesticide issue, we will then put the whole 10 acres of land on the blacklist. So everyone keeps an eye on everybody. They help us guard our interest,” he says.
If that sounds crude, CHIC is now at the forefront of using technology to monitor its products. Every piece of land feeding into the supply chain is assigned a barcode-like QR code. Every basket of fruit, truck and palette in every packing plant also receives a code. The case that arrives on a customer’s doorstep is assigned a code as well. These are linked together, creating a detailed history for each can. “The customer can trace the product all the way from his shelf to the farmer,” Zhu says.
Zhu has, to a certain extent, lived his entrepreneurial life backwards: building up businesses first and only then learning about business. In 1999 he attended a fast-track diploma in management programme at the China Europe International Business School (Ceibs), the first Chinese business school to crack the top 10 in the FT’s global MBA rankings. (Zhu says the school has “really closed the gap between China and the world”.) Then in 2006 – after also dabbling in the fashion industry, textile production and logistics – he obtained an executive MBA from Ceibs. And in recent years, he has honed his skills with short-term executive courses.
“I created value but I didn’t ‘get’ it. Somebody needed to help me explain why,” he says of his business education. “I was there trying to understand why I made money, to come up with an idea of how systematically I could make more money and build a bigger company.”
But while Zhu learnt a lot at business school, he says, it cannot compare with what he learnt from Buddhism. He does not practice on a daily basis but makes time to go to temples for study sessions every year. Buddhist teachings on being happy even in the face of suffering underpin his philosophy on life. “Any success I have today is all related to that,” he says.
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Much as the Chinese government is now trying to guide the economy up the value chain, from being a producer of low-end goods to a fulcrum of innovation, so is Zhu aiming for a similar evolution at CHIC. If his earlier success was guided in part by intuition and good luck, his strategy now is informed by his two decades of experience and his business school studies.
“Traditional thinking is that people think about what product you’re in, but this is actually wrong. If you look at Apple, Steve Jobs never thought of himself as being in the computer business. He was not bound by the computer business,” Zhu says. “It’s really about what my customer wants, but my consumer probably doesn’t even understand what he needs. That’s the area I’m going [into],” he says. “I don’t want to position us as a processed food company. If we were just a processed food company, I think we’d be dead already.”
Canning fruit for Del Monte and Yum Brands, the parent of fried chicken chain KFC, is still an essential part of CHIC’s business. But Zhu is also shifting the company into its own branded products, sold directly to consumers. CHIC makes a coconut water drink under the Invo label, sold in the US. For the first time, he is also trying to sell directly to the Chinese market, producing a freshly-squeezed fruit juice.
At his Google-esque Shanghai campus, he is investing heavily in research and development, hoping to make hardier, safer, better-tasting and more profitable food.
And with the Chinese government pushing an ambitious urbanisation agenda, Zhu has also got CHIC involved in a pilot project in the southwestern city of Chongqing to transform small plots of farm land into a zone of intensive, large-scale agriculture.
Politically, it is without question a good thing for CHIC to be backing. But Zhu is unreserved in saying he sees money – big money – in it. “There is huge, huge potential return on investment in this. I have never seen a better business opportunity.” High praise from a man who, starting with cans of oranges, has seen his fair share of business opportunities over the years.
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