Tag Archives: Eu Yan Sang Group

Family Businesses Must Aspire to Reach 100 years (Part 1)

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Ayala Corporation

Ayala Corporation is the holding company of one of the oldest and largest business groups in the Philippines. Ayala has leadership positions in real estate, financial services, telecommunications, water infrastructure, electronics manufacturing, automotive distributorship and dealership, and business process outsourcing, and new investments in power generation, transport infrastructure, and education.

Year started: 1834

Number of Employees: 35,073

Annual Sales: $4,194.97M (2016)

Net Income: $547.74M (2016)

In a disclosure to the Philippine Stock Exchange (PSE) on Friday, August 11, AC reported a net income of P15.1 billion for January to June this year, compared to the P13.8 billion in the same period in 2016.

“A journey of a thousand li starts beneath one’s feet” is a common saying that originated from a famous Chinese proverb. The “starts beneath one’s feet” in family business parlance is governance. And governance is all about rules, policies, systems and accountability. In short governance is all about institutionalizing control and decision making.  As the 8th Generation successor, Jaime Augusto Zobel de Ayala, Chair of Ayala Corporation puts it…

“It is important to teach each new generation, early on, the difference between ownership and stewardship. Ownership is a right of possession. Stewardship is a fiduciary role. It is holding the institution in ‘trust for’ the next generation. We feel, as a family, that this institution has been passed on to us for our care and not for us to dissipate or do what we will with it for our personal gain.”

Ayala Corporation (AC) was founded in 1834 and is the oldest family business in the Philippines. That makes AC 183 years old.

Governance is uppermost in everybody’s mind today. But governance can be a difficult and extremely challenging act for family business owners.

According to a PWC report, “no matter what their size, the unique—and often volatile—mix of personal family dynamics, business strategy and ownership criteria can create an emotionally charged environment that makes decision-making, not to mention day-to-day management, challenging. And as the founding generation ages, succession and power issues across an expanding family can create cascading concerns.”

In my previous articles, I narrated a number of highly successful Family enterprises in Asia and researched on their history as well as their transformation as Asia’s gold standard in governance and succession. Without any doubt, these companies exhibited remarkable parallelism worth sharing over and over again.

What made these businesses tick? What were the qualities of the leaders that made them endure family tension, betrayal, adversity and conflict? Was it pure luck that they overcame a bitter feud? What was their secret to longevity?

It is a fact that all family businesses struggle with governance and succession with some even facing untold hardship and survival. Take the case of the Eu Yan Sang Family Business that was established in the late 1870’s.

Before the fourth-generation Eu family members engineered a buyout what was originally their family business, the family had to endure a tumultuous period starting with the murder of the wife of the successor by her in laws in the second-generation, an escalating conflict in the third generation with 13 uncles fighting for the spoils of the businesses and a volatile fourth generation involving 72 cousins.

If not for the daring move of the fourth-generation cousins led by investment banker Richard Eu, who engineered a buyout, Eu Yan Sang would have ended in their generation. With rules in place, Eu Yan Sang is now managed by a combination of fourth-generation descendants and professional managers and the growth has been phenomenal.

It is also noteworthy to consider some high-profile families in Asia that got embroiled in senseless and unnecessary conflict. For many, they ended in failure. For some, they were able to overcome the bitter rivalry and went on to strengthen their organizations.  I have compiled a handful of cases involving conflicts so owners, who are currently feeling the tension pervading within the family and the business, will realize the need to seek immediate intervention from family experts.

a. Mayfull Foods Corporation of Taiwan by far is the most violent and tragic family conflict recorded in Taiwan and probably in Asia. Gunshots rang out after a regular corporate meeting where the topic of inheritance was being discussed. Six brothers of the late tycoon Huang Jung-tu were present. The shooting resulted in the death of the two brothers. When the police arrived, the gunman ended up killing himself before falling from the 7th floor of their company’s headquarters. In one fell swoop, three brothers ended up dead in what police investigators called a pre meditated murder-suicide.

To be continued…

(esoriano@wongadvisory.com)

 

Rise, Fall and Rise of the EYS Family Business

Asian giant Eu Yan Sang (EYS) International is a traditional Chinese medicine (TCM) provider. The company was established in the late 1870s and has been in operation for 138 years. It is managed by a combination of fourth-generation descendants and professional managers.

This article highlights the complex nature of family businesses and the even more complex and often unwieldy interplay of preserving family values, managing sibling rivalries, personality differences, and reviving a century old business using modern management techniques.

Adding to the 100 year old drama that almost imperiled the business was the murder of Eu Tong Sen’s wife by his brothers, the sellout to an outside investor and the repurchase by the fourth generation members giving back control of the business to family.

Growing the Family Business

In an interview by NUS adjunct Prof Alison Eyring, she asked Richard Eu, the great grandson who led the buyout for his advice to leaders who want to grow a family business…

“Every generation, you’ve got to think what you want to do with the family business. Is your business the right business for the future? Is it more important to preserve the family or more important to preserve the business? That’s a discussion that you’ve got to have within the family and there’s many different parts to this. The family must have ongoing conversations about its future. This isn’t just about the patriarch or the founder – it’s got to include everybody.”

The entry of the fourth generation was a period of ups and downs but would end up as Eu San Sang’s defining moment.

Sell out due to 10 Uncles and 72 Cousins

In one newspaper account, Richard persuaded the board to make him general manager in 1989. But he ended up running  into a brick wall when the clan, comprising of mostly extended family members that included 10 uncles and aunts and 72 cousins, did not support him.

Instead, they sold their shares to the construction company Lum Chang. For the latter, it was a just an opportunistic investment in taking over the company.

Despite losing control, Richard navigated the company to steady growth, with the launch of a breakthrough product, American Ginseng Tea in 1991. The year after, the company listed in the Hong Kong Stock Exchange.

Four years later, Richard Eu and two of his cousins engineered a buy out of Lum Chang’s shares in EYS Holdings – making the firm a family business once again.

Back to Being a Family Business

Expansion went full-blast in Hong Kong, with its facility receiving ISO certification. In the coming years, the company achieved one milestone after another. The company would also end up becoming the majority stockholder of Australian health giant Healthzone.

With the company pursuing online automation for quality control, it aggressively expanded to more than 300 stores and clinics across four continents with $230 million in sales.

Growth and Expansion

Richard acknowledges that professionals are necessary in a huge enterprise, but he once told Asia Society that non-family managers tend to think short-term rather than long-term. For him, family is still paramount.

Since it was publicly listed in 2000, Eu Yan Sang has delivered double digit growth. In its core markets of Singapore, Malaysia and Hong Kong – the business enjoys the largest market share in its sector.

Many thanks to the participants of my Family Constitution seminar (Manila Series) last Saturday at the Tower Club in Makati as well as the participants who attended my talk in Jakarta the week before. These talks are extremely important for business owners in their quest to create a lasting legacy for their enterprises.

(esoriano@wongadvisory.com)

138 years of murder, sellout, buyout, growth

THE Eu Yan Sang Group is one inspiring family enterprise and undoubtedly deserves to be in the top spot of my Family Business Longevity Series because of the resiliency and resolve of the fourth generation members to regain control, where they ended up owning the majority shares after engineering a buyout from an outsider/investor.

It is a classic “stalls to stars to almost stalls and back to stars” turnaround story!

According to an account by Rachel Cheung in the South China Post, “despite years of family strife, the murder of the founder’s wife by her brothers-in-law and a takeover by a Singapore investment group, traditional Chinese medicine maker Eu Yan Sang has survived and flourished as a Hong Kong icon.”

Founded in 1879, Eu Yan Sang is Asia’s leading brand in the healthcare industry, with a core focus on traditional Chinese medicine (TCM). They market quality Chinese herbs, Chinese Proprietary Medicines, as well as health foods and supplements, offering more than 900 products under the Eu Yan Sang brand and sub-brands plus over 1,000 different types of Chinese herbs and other medicinal products.

The company’s ability to control the total supply chain enabled it to expand across Singapore with more than 50 retail outlets in major shopping malls and residential estates.

Overcoming years of strife and betrayal, the Eu Yan Sang Group is celebrating its 138th anniversary this year. It is now being run by the fourth-generation family members headed by the savvy and daring Richard Eu, two cousins together with institutional shareholder Temasek Holdings & Tower Capital.

In the 1870s, founder Eu Kong Pai, better known as Eu Kong, left the village of Foshan in Guangdong, China and settled down in the small mining town of Gopeng, Perak (now Malaysia). After failed ventures in a bakery and a textile dyeing business, Eu joined thousands of Chinese miners on a tin rush and noticed that his fellow mine workers were heavily dependent on opium as the easiest method for immediate relief for their medical needs.

He decided to start selling traditional Chinese herbal medicine using the ancient recipes that had been passed down through Chinese culture. Eu Kong opened his first Chinese medicine shop in 1879 in Gopeng.

In a 2009 biography by Ilsa Sharp about his son, Eu Tong Sen, the father was pictured as a savvy entrepreneur, acquiring land that was rich in tin deposits. Eu Kong eventually became a prominent businessman, supported by his second wife Mun Woon Chang, a well-connected Nyonya (female Malacca Strait-born Chinese).

The book also recounted that Eu’s success was short-lived. A disease suspected as smallpox, claimed his life at the age of 37. All his possessions went to Mun, triggering the envy of his two gambling addict brothers, who murdered her by lacing the family dinner with poison during a visit to China.

Sixteen-year-old Eu Tong Sen, who inherited his father’s business, narrowly escaped death himself. Toughened by the traumas of his early life, he went on to become one of the richest men in Southeast Asia in the early 20th century, owning tin mines, rubber plantations, properties and even a bank.

To be continued…

(esoriano@wongadvisory.com)