Chapter 261: Financial Summary of 1961
"That's actually not a bad business," Yang Wendong said approvingly. "Go all in on it—demand for glue is massive, and the market potential is huge."
Adhesives were one of those products that would always be in demand. Society simply couldn't function without them. In industrial and construction sectors especially, a wide range of specialized glues were constantly needed.
Given that they already had factories, R&D teams, and a stable customer base, it made sense to further expand into this field. In fact, many of Yang Wendong's other ventures might require glue as well in the future.
"Understood. A lot of Asian countries still don't produce their own glue. That's our opportunity," Wei Zetao said with a smile, then continued, "In the plastics division, last year we produced 2.6 million rolling suitcases. Most of that was still handled by our original Tsim Sha Tsui factory.
But with the Kwun Tong industrial park now fully online, we've reached a daily capacity of over 10,000 units. By year-end, that should exceed 20,000 per day. Combined with Tsim Sha Tsui, our target production for the year is about 7 million units."
"How's the piracy situation?" Yang Wendong asked.
"Not too bad for rolling suitcases," Wei Zetao explained. "Manufacturing them requires large blow molding machines. Even once produced, the transportation costs are high, and the retail display requirements mean they can't just be sold out of back alleys. So it's a difficult business to copy on a large scale.
That said, there are a number of companies who've managed to bypass our patents by creating structurally different products that offer similar functionality. That's made the market very competitive, and it'll likely get even worse in the future."
"So, we're back to a distribution problem again," Yang Wendong noted.
Wei Zetao nodded. "Yes. Fortunately, demand is still on the rise. For the next couple of years, we should be okay. But we'll need to lower our prices strategically and invest in advertising to maintain our market share."
"That's part of doing business," Yang Wendong said, nodding. "If all our core products need marketing anyway, let's consolidate and push the 'Deli' brand."
Not every inventive product could be monopolized forever. Otherwise, the company that first invented the rolling suitcase would've become a global giant.
The more complex the product, the easier it was for competitors to design around patents. Some countries even refused to recognize certain types of essential patents and forced licensing at dirt-cheap prices in the name of public interest.
In essence, patents were tools created by "rogue" nations to protect their own interests. And to avoid being "rogue'd" themselves, they always left legal loopholes.
Still, the first to act always got the biggest piece of the pie.
"Got it," Wei Zetao replied. "As for the spin mop line, all production for the Asian market is based in Hong Kong. We ship everything by sea to other countries.
Last year we produced 3.6 million sets of spin mops, for a total revenue of around HK$20 million."
"I imagine piracy is even worse for that product?" Yang Wendong asked.
"Absolutely," Wei Zetao said, nodding.
There was no need to explain. It was obvious.
Yang Wendong nodded. "Piracy is going to be a permanent problem. It'll never fully go away—not even in our lifetime. But that doesn't mean we stop. We keep doing what we do, and let the pirates do what they do."
Even a trillion-dollar company like Apple couldn't stop the iPad clones in Shenzhen's Huaqiangbei market. All CEO Tim Cook could do was shake his head and laugh.
Some industries just couldn't be tightly controlled. The only real way to fight back was through brand value, quality, and innovation. Changxing Industrial focused on creative products with relatively low tech content, so their only defense was to build brand loyalty.
Once people were familiar with a brand, they'd naturally choose it—even if it cost a little more. This was especially true in wealthier markets, where a small price difference wasn't a deterrent, but brand trust meant everything.
In the early years of entrepreneurship, their production couldn't keep up with demand. There was no need to advertise. Promoting the brand would've just created even more supply issues. But now that production capacity was catching up, it was time to enter the next phase.
"Right. Once the brand is established, things get much easier," Wei Zetao agreed.
"Hmm... So the plastics division's total sales exceeded adhesives last year?" Yang Wendong asked.
"Yes, just barely. But it hasn't surpassed Post-it notes in profits," Wei Zetao replied. "With Kwun Tong's capacity boost, I expect plastics to become our core business this year."
"Don't underestimate Post-its. We haven't done a full-scale push yet. There's still huge potential," Yang Wendong said with a smile.
In his previous life, Post-its were one of 3M's five core product lines, with over US$1 billion in annual revenue.
Of course, that was in the 1980s. Right now they were 20 years ahead of that, so it wasn't a direct comparison. Besides, their current global distribution still relied on channel partners—nothing like the vertically integrated empire that 3M had built.
Still, even without significant marketing, their sales had already neared HK$100 million. Clearly, many consumers around the world still didn't know about the product. There was plenty of room for growth.
Wei Zetao laughed. "You're right, Mr. Yang Wendong. Post-its still have a long way to go. But the plastics division covers so many product categories, I'm confident it won't let us down either."
"The bigger, the better," Yang Wendong nodded.
Based on current figures, the combined revenue from their two core divisions last year was around HK$200 million.
The exact profit figures weren't finalized yet, but preliminary estimates suggested a net profit of around HK$55 million.
That alone would place them just behind long-established giants like Jardine Matheson, Swire, and Wheelock in terms of net income.
Of course, their overall asset base and operational scale still lagged far behind those old British firms.
After a short pause, Wei Zetao added, "We also have a few smaller lines at Changxing Industrial—things we invented in-house and tried to take to market. Those added about HK$1.5 million to the top line."
He looked a bit awkward saying it. The company's core products all came from the boss. The R&D team's original work still made up less than 1% of total revenue.
Even with Changxing Industrial's built-in distribution and production advantages, those products weren't bringing in much money. As independent ventures, they'd probably barely survive.
But Yang Wendong just smiled. "That's not bad. Progress is good. Just keep innovating."
Most big companies—and even scientists—succeeded only after dozens of failed projects. Many major inventions were discovered accidentally or emerged from unrelated research.
For a team still learning how to find direction on their own, creating a viable product at all was a huge step forward.
"Thank you, Mr. Yang Wendong," said Wei Zetao. "That's all from Changxing Industrial."
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