Monday, 22 May 2017

A fizzy memory: How COSMOS satisfied Filipinos (and HongKongers) with soda

A fizzy memory: 
How COSMOS satisfied Filipinos (and HongKongers) with soda

(Or how COSMOS's rise and fall also created a lesson
 for successful yet so struggling entrepreneurs)


Pop Cola, Sarsi, Cheers, Sunta. Upon hearing those familiar names, then when was the time everyone afforded to drink all these? These may be the one of the few questions when everyone recalled these recognizable softdrinks that was once sold in sari-sari stores such as in the metro.

And with all these drinks carrying familiar names happen all because of its once-known manufacturer: Cosmos Bottling Corporation.

Few people may have heard about its corporate story all despite getting familiared with their known brands with all their nostalgia. And because of it somehow made this person thinks about making a story about the company's rise and fall, all based from its existing articles unearthed and researched.


Its humbly yet fizzy beginnings


It all started in 1918 when Wong Ning (黃海山), a native of Guangdong Province, migrated to the Philippines and established the Manila Aerated Water Factory along Misericordia St. in Manila. It used to create cheap sodas Filipinos and even Americans love to enjoy, especially when Coca Cola was imported until 1927 (when San Miguel gained rights to bottle Coke outside the United States).

Like Beer, Filipinos before do love softdrinks especially those of Sarsaparilla as westerners enjoy much their root beer, especially when elders remember mixing Sarsaparilla with raw egg to "improve their constitution" or mixed with "Gawgaw" starch for diarrhea. Sounds disgusting to drink a softdrink mixed with egg if not smacks of Folk medicine with all its "wonders" isn't it? After all, that sarsaparilla was known at first: from a medicinal plant made for a medicinal drink. 

Left: Cosmos soda bottled in the Philippines 
Right: Cosmos soda bottled in Hong Kong

However, when World War II broke out, the Imperial Japanese Army imprisoned Wong Ning because of his affiliation with the Kuomintang government and later he died in prison. His seven children, led by the eldest son Dr. Henry Gao-Hong Wong (黃如熊) took over the family business after the War and Manila Aerated Water was renamed Manila-Cosmos Aerated Water Factory in 1945 followed by Cosmos Bottling Company (later Corporation).


Enter Henry (and how he made Cosmos

Henry Gao-Hong Wong
(Son of Wong Ming and second generation owner
of Cosmos Bottling Corporation)
As the head of group, Henry spent most of his time in the Philippines but visited Hong Kong at least once a year as old newspapers clippings show. Trained as an economist with master and doctoral degrees in economics from the Dominican-owned University of Santo Tomas (UST), Henry also worked part time as an economics lecturer at his alma mater and associate professor in economics at University of the East (UE) that was then under the known Francisco Dalupan.

Known for his administrative skill and experience, as well as honest and fair that gained respect and obedience from his siblings, Cosmos rose up from a state of stagnation to becoming a major player right after WWII, and remained the only local brand left to fight the global giants as it became the number two player in the Filipino market with its popular Macos Softdrinks (the old advertisement feat. an orange soda above), which was then paved way to its much-known names like Sarsi root beer, Sunta orange soda, Cheers, and finally: Pop Cola.

An earlier version of Pop Cola in the 1970s-1980s
Bottles of Pop Cola (circa 2000s)
Pop Cola, which was originally known as "Cosmos soda", was remembered for its tagline "So full of Cola Goodness from the USA" yet it was "reasonably priced", as well as being "Proudly Filipino" for as it competed against well-known, foreign-based giants like Coca Cola and Pepsi. There were other sodas which been produced locally however it didn't thrive compared to these three known names.


Another well known brand, "Sarsi", was originally called as Cosmos Sarsaparilla until the 70s, until it was replaced by its modern name, which is a shortened name for sarsaparilla. As in the past, Sarsi was also known as a "folk medicine", mixing it with raw egg to "improve their constitution" or with "Gawgaw" starch for their stomach problems like diarrhea.


Expansion into HongKong
(and how HongKongers enjoyed it)

1955 Cosmos Beverage advertisement from Hong Kong:
each 12 oz bottle only cost 15 cents
Whilst being familiared by many Filipinos for its affordability and taste, Cosmos was also enjoyed by HongKongers (both Chinese and Britishers alike) that in 1947, Henry Wong expanded into the Hong Kong market with the creation of Cosmos Aerated Water Co Ltd. However, it seemed to be unclear what prompted the Wong family to expand into the Hong Kong market but since they are Cantonese (which is a minority group in the Filipino Chinese community that was and still is dominated by Fukienese), they have no language barrier in operating in the colony where Cantonese is one of the major language besides Mandarin and of course, English.

With the bottle shown earlier (besides the Filipino version), Cosmos tends to offer a cheap alternative not just to Coca Cola and Pepsi, but also other HK-based brands like Birley's and Watson's. From its first plant in Hong Kong, located at 350-352 Castle Peak Road (青山道) in Kowloon it produced 4,000 dozens (48,000 bottles) daily.
And by the mid-1950s, Cosmos became a popular soft drink brand and due to the rising demand in beverages, they relocated to a 10000 sq feet new plant in To Kwa Wan (土瓜灣) in October 1954. The factory was located at 9 Mok Cheong Street (木廠街) where other softdrink/aerated water companies such as Bireley’s and Watsons also had their bottling facility.

The firm spent HK$ 300,000 to buy state of art machines from the United States for this new plant, such as soft drink injection machines, bottle washing machines, ultraviolet sterilizing machines and steam pressure cookers and the new plant was capable of producing 3,000 bottles per hour.

And just like the Philippines, Cosmos offered them varieties of soft drink: which included Sarsaparilla, Orange, Lime, and Lemon; however, in HongKong it offered other flavours like Cream Soda, Mulberry, Grape and Pineapple.


A Patriarch's death,
An intelligent son willing to take place,
Enter William Ma Padua (to lead for a moment)

Cosmos somehow thrived better under the Wongs both in the Philippines and in Hong Kong. However, things turned different as Henry Wong suffered a stroke caused by a brain tumor and died at the age of 53 in 1970. According to his eldest son, Danny Wong Barrenchea, he detailed the events prior to his death: 

“The day before Papa died, he could barely breathe. His second brother Hubert visited him in the hospital. Papa with a frail voice just told him, ‘Bahala na kayo’ (Please take care of things). The next morning, he was dead."

The stockholders, composed of Henry’s three brothers, a cousin, a nephew and his eldest son Danny, met after the burial to decide who will succeed the late patriarch as president. And Following Chinese tradition, the members of the immediate family would always have the preferential status over the secondary families.
And Danny was next in line to lead the corporation.

However, Danny was an inexperienced one. He was barely a year in business despite having his Masters on Business Management in the United States. he was requested by his father to return home to learn the intricacies of running the operations of the enterprise. Danny had the right qualifications except the experience like his predecessors, so expectedly, an outsider was chosen to lead the business.
But, that outsider wasn't really an outsider as others may think of, but rather his father's cousin who also served as one of the company's executives: William Ma Padua.

William Ma Padua
Danny understood and respected the decision of his uncles, knowing that due to his inadequate experience in handling the bottling business, and even his young age, he had no choice but to have an experienced person like Padua to take over as president, least temporarily.
And given the experience, education, and devotion to the business, William Ma Padua made Cosmos somehow stable. There he empowered the younger executives including Danny to make the decisions and learn from their mistakes. He set the guidelines and we worked within the guidelines. The business grew and we continued with our expansion.

But despite the so-called "stability, growth and expansion", still, another unexpected crisis happened. For after ten years of continued growth, William, in one of his visits to the United States, suffered a mild heart attack and immediately decided to “call it quits”.


Padua resigned,
An heir still bypassed
(And seeing a company mismanaged)

With the vacuum created by the untimely resignation of William Ma Padua and to avoid choosing one nephew over the other, the siblings of Danny’s father decided to let the number two brother, Hubert Wong, who was the chairman at the time, assumed the direct operations of the company as President and Chief Executive Officer. Danny was again bypassed and referred to the decision of his uncles (and the family council) not only “unfair but clearly an emotional one.”

However, unlike his uncle William, Danny also knew that his uncle Hubert was so incompetent compared to himself who is willing to provide solutions for the struggling company. In one of his frustrations, he said:

”Can a person without a college degree, did not succeed in business, lacked human relations skills, stubborn, and who believed that he was always right but afraid to make important business decisions, run a family business made up of people from different families? My uncle was all of the above!”

And that straightforward kind of description was based on having a demoralised management, especially from the family members working at at the company. And instead of solving relationship problems and rectify errors altogether, Hubert Wong rather challenge family members who did not like the way he run things to quit, or sell out the company altogether if they can find a buyer.
And that latter was what the other family members did (with some for sure initially hesitated). For with all the squabbles happening almost regularly in the offices, the disputes continued with increasing acrimony amongst administrators/relatives, coupled with shouting accusations during board meetings, and even strikes from the factory workers calling for wage hikes, these almost-bloodied situation reached a boiling point that prompted family members to entertain the idea of selling the company to outside parties.


Then along came Concepcion's RFM
(and sold for wrong reasons
and for a wrong price!- Barranechea)

A once-Cosmos soda factory at Malabon
In 1989, all after the internal disagreements, arguments within meetings, and workers strikes, the Wong family eventually sold Cosmos Bottling to RFM Corporation and the firm was listed on the Philippines Stock Exchange in 1994. It was realised  few years after Jose Concepcion's appointment as RFM head in 1987, in his early days as an executive he  pushed for and clinched the purchase of Cosmos from the Wong family all for P500 million. And in the next 13 years, he pumped in another P1 billion to P1.5 billion into the soft drink business.

However, for the ejected Wongs, their actions seemed to be wrongful, for as according to Danny Wong Barranechea’s own words regarding the sell off:

“Cosmos was sold for the wrong reasons and for the wrong price!” 

For the eventual transfer of ownership to the Concepcion family hath concluded the end of the Wong family’s ownership of the Cosmos Bottling Company after only three generations. The death of Henry Wong did also showed the unpreparedness of the family to handle the death of the patriarch, the dynamics of having family members and different branches working in the family business, and its failure in managing the transition/succession process to the third generation. In other words: leaving the company mismanaged by its own internal problems, and died under the failed leadership of its administrators, mainly second and third generation family members.

On the other hand, Concepcion, being the new owner of Cosmos, pumped money for the improvement, ranging from equipment to those of marketing campaigns showing a "renewed Cosmos" that continues to compete against Coca Cola and Pepsi. One example is an ad promoting Sarsi:


However, many years after, with debts looming and less income coming, they decided Cosmos was not as profitable as they expected it to be. RFM declared that it has approved in principle the sale of its 83.2% stake in Cosmos Bottling Corporation to its rival, San Miguel Corporation and the Coca-Cola Company. for an undisclosed amount. Eventually, after seventy-one years under the Wongs, twelve years under Concepcion, and eight years under San Miguel, it finally sold it to the Coca-Cola Company, owner of Coca-Cola Bottlers Philippines Inc. (CCBPI), for $590 million. Cosmos, which was part of CCBPI, was included in the sale. Coca-Cola the international brand bottler did not know that two years after the acquisition, Cosmos would not be allowed to raise money from the public.

Currently,  Pop Cola and Sarsi is now bottled under the Coca-Cola Company. However, most of the soda crates carrying these bottles are still carrying the old "COSMOS" name, showing a still-continuing legacy of what it once was.


Looking back with lessons learned: A Conclusion

Admittingly speaking, this "rise and fall scenarios" coming from Cosmos hath showed a challenging example on how family owned enterprises (FOEs) groping in the dark especially on how best to start the governance process. For most of these FOEs are facing challenges in working through their ownership and management transition.

And to think that the company, despite being known and gained some stability (and perhaps even growth), end mismanaged for it failed to define the roles and responsibilities of owners, directors, board chairs, the executive team and even the family council that serves as behind the scenes in running the enterprise. This particular task introduces corporate governance amongst family members working in the business.

The Wongs, just like the Gokongweis, Sys, and even the illustrious ones like the Cojuangcos and the Hispanic Sorianos and Zobel de Ayalas, tried much to consolidate all for the sake of the company's stability, although they end up rather failed all due to internal arguments coming from each other, especially coming from relatives/family members whose interests held high than those of the company.
It may sound as traditional as any other clans equating their established companies into a fiefdom under their control (sometimes it even required marriages to consolidate even further). But without a clear succession plan, many businesses fail after the original owner passes away.

"The key is to plan well ahead. Succession is a long-term complex process, not a one-time event."


***

Most of the information are coming from:
Industrial History Hong Kong
Enrique Soriano
Asian Wall Street Journal
Manila Times

With Pictures coming from:
Danny Wong Barranechea
Industrial History Hong Kong
EBay
Printerest
Jun Sanchez