Carlos Chan: Mr. Oishi

EMOTIONAL WEATHER REPORT - Jessica Zafra () - March 18, 2012 - 12:00am

In 1989 Carlos Chan, the eldest son of immigrants from Fujian province, found himself alone on a flight to Shanghai. After the events at Tiananmen Square no one wanted to come to China. Except for Mr. Chan, whose company Liwayway Marketing manufactures the popular Oishi snack foods. He had had his eye on the China market for a long time, and Shanghai in particular.

“It’s the economic center of China,” Mr. Chan explains. “May kasabihan sa Chinese: If you can penetrate the Shanghai market, you can succeed in China.

“The big population meant a huge market. Starting in the mid-‘80s I was coming to China to learn their system. It’s very different from ours,” says the businessman and Philippine Special Envoy to China, who is well known for declining interviews. He keeps a low profile and sometimes introduces himself as “the brother of Ben Chan (the popular founder of Bench).” The occasion for this talk is a dinner at one of Mr. Chan’s favorite restaurants in the fashionable Xintiandi area of Shanghai. The Philippine STAR was invited to meet the unassuming taipan and tour the vast Oishi plant, the company’s first in China.

This rare occasion comes shortly after Oishi launched the first brand-centered ads in its 38-year history. “Through the years the Oishi product line has grown and evolved,” explains Sheraleen Tiu — “Shera” — Liwayway vice president for marketing. “Within Liwayway Marketing Corp., Oishi has come to mean creativity and meaningful product innovation — although it was just understood but not written down on any official document. An Oishi product has to be special; it has to have that ‘wow’ factor.

“For the past years, our marketing has been focused on our products ergo the success of Prawn Crackers, Pillows, Bread Pan, Marty’s, etc.,” Shera continues. “Now is as good a time as any to tie it all together and share the Oishi brand story on top of sharing the Oishi experience through the products people enjoy. An attitude of being open — to new ideas, to inspiration, to the consumers — is what makes creativity and product innovation possible. That same attitude in our consumers enables them to appreciate “everyday surprises” like Oishi products. Oishi has a positive message that we’re excited to share.”

Present at the dinner are four of Mr. Chan’s six children: Carlson, the eldest, who heads and oversees the new businesses; Archie, who heads product development and is chairman of Liwayway International; Larry, who heads operations in China and chairs Liwayway China; and Shera, Mr. Chan’s youngest child, who is in charge of marketing. (Not present: Rinby Lao, who heads the design team and focuses on packaging, and Oszen, president of Liwayway Marketing in Manila, who also heads operations in Vietnam, Myanmar, Thailand and Indonesia.)

In conversation Mr. Chan constantly deflects attention from himself by serving the guests more food. “I had friends in China whom I would ask about the latest developments, the procedures for applying for a business permit,” he recalls. “They weren’t businessmen; at the time every company was state-owned. Then in 1992 Deng Xiao Ping came to Shanghai. The market opened. I had been waiting for that door to open.”

Carlson explains that until Deng instituted the open market policy, private manufacturers could do business in China provided they exported the same amount of product they sold in China. This rule was lifted in 1992. “If you look at the products in groceries, they were all made in China starting in 1993,” Carlson points out.

“According to the Chinese people Mao solved the problem of oppression while Deng solved the problem of poverty. Deng was a pragmatist,” Mr. Chan says admiringly.

Liwayway China launched its operations in Pudong, leasing two plants with a staff of 400 workers from a state-owned company. A small contingent of Filipino expats including Mr. Chan’s sons Carlson and Archie moved to Shanghai to set up the new company. Shanghai in the early ‘90s bore little resemblance to the gleaming, sprawling megalopolis of today.

“Twenty years ago, would you believe, I would not take evening flights to China,” Mr. Chan laughs. “Ang dilim-dilim, baka hindi makita ang runway.”

Liwayway Marketing was started in 1946 by Carlos’ parents Chan Lib and See Ying, two immigrants from a small village in Fujian province. The name of their company, which is Tagalog for “dawn,” expressed their optimism in the postwar Philippine economy.

“Only Nanjing Road was brightly-lit — with fluorescent bulbs,” Carlson adds.

“It was not as beautiful as it is today,” says Mr. Chan. The first Oishi team in China found themselves leading a monastic existence in the dorms within the factory complex. There was no indoor plumbing and no heating in the factory; winters were especially punishing. They were pioneers, literally. Carlson remembers how during trips to Manila he would tape (this was the era before DVDs) comedies like Ace Ventura, Pet Detective to help the Pinoy expats ward off the winter blues.

Adjusting to the weather and the primitive living conditions was the minor hurdle. The main difficulty, compounded by cultural differences and the language barrier, was acclimating to the Communist Chinese workers’ mindset and overcoming their prejudices towards capital.

“You have to understand that under Mao Tse Tung the workers were used to certain privileges,” Carlson explains. “The state had to provide for everyone, so a company could have 8,000 employees but only 2,000 would be working at a time. Driving motor vehicles was a specialized skill, so drivers were held in higher regard than managers.”

Gestures such as installing heating in the factory kitchen helped soften the workers’ attitudes towards their Filipino employers. Larry sums up the difference in Filipino and Chinese work styles thus: “Filipinos are more conciliatory and sympathetic. The Chinese are more by-the-book, disciplined.”

Larry was in fourth year high school when he was told that he was going to work in China. He learned the language on the job, and according to his father is the most fluent Mandarin speaker in the family. (Like 95 percent of Filipino-Chinese families, the Chans speak Fookien.) Mr. Chan describes his own Mandarin proficiency as “Okay lang.”

During our tour of the Oishi Shanghai factory complex, pioneer Carmela Dujalig, production planning manager, recalled keeping a notebook in which she wrote down everything the locals said phonetically so she could build a Chinese vocabulary.

In nine months the Oishi plant in Shanghai was up and running, producing five product lines including their classic snacks, Oishi Prawn Crackers and Kirei Yummy Flakes. “At the time the Chinese had no notion of snack foods,” Carlson notes.

“Between meals they munched on watermelon seeds, sunflower seeds, champoy. We had to introduce the concept of snacking.”

Clearly they did something right, because Oishi (“Oishi Shanggaojia” in China) now has 100 product lines with an estimated US$250 million in annual sales in China. It is one of the top-selling snack brands in that huge market; the Chinese have such affection for Oishi, they assume it is a Hong Kong or Shanghai brand.

In addition to the four Oishi plants in the Philippines, there are 14 factories in 10 Chinese provinces, serving 550 distributors and 150 direct retail customers. The Oishi plant in Imus, Cavite, which sits on a 40-hectare lot, remains their largest manufacturing facility.

In a presentation before President Benigno Aquino III and his official delegation during the presidential visit to the Liwayway factory in Shanghai, Larry explained that although their first factories in China were established in big cities, Oishi has started setting up plants in smaller cities. Apart from being able to provide the necessary infrastructure, the local governments of these smaller cities are more aggressive in attracting well-known brands that could enhance their reputations. To compete with the bigger cities, they offer free land and interest-free financing for the cost of building the factory. Some even offer to build the factory to the investor’s specifications so the investor only has to move their equipment in. Offers continue to arrive from Chinese cities hoping to share in Oishi’s success.

Mr. Chan has a simple explanation for this success: “We’re lucky. We arrived early.” China’s economy took off like a rocket, and as a pioneer in the new economy Liwayway was perfectly situated to reap the benefits.

“It helped that we were bringing our open market experience to China, which had just opened its market to the world,” Larry adds.

“When we arrived in 1994 from Manila, Shanghai was very backward,” Carlson recalls. “By 1998 the gap had closed and in 1999, pantay na! By 2000, lampas na!

Of course it takes a lot of work to get that kind of luck, and the Chan clan put in the hours. “When we started in China 18 years ago it was tough and very lonely. They had to be patient,” Mr. Chan says. The Chan work ethic was instilled in the children from birth, practically — they grew up in a household where both parents worked.

“For as long as I can remember our mother has always worked, taking care of the accounts,” says Shera. This is her first trip to Shanghai in three years; the demands of motherhood caused her to miss the annual Chan clan gatherings in different provinces of China. Shera is married to Jasper Tiu, whose family owns Champion, the eco-friendly detergent brand; they have two kids. “We had known each other for years before we realized that my parents knew his parents,” she laughs.

A family with a remarkable work ethic: Carlos Chan (second from right) with children Carlson Chan, Larry Chan, Archie Chan, and Shera Tiu

“They could not avoid being exposed to the business,” Carlos points out. How did he train his children to run the family company? “Give them responsibilities.”

“We were given enough room to gain experience,” says Larry. “When I started working I was assigned to take charge of Chan C. Brothers, which is a 200-employee operation.” The six Chan children were allowed space to find the management styles that worked for them.

“Our father is very generous to us, not only in terms of pay but in time,” declares Archie, who in January took over as chairman of Liwayway.

As chairman emeritus Mr. Chan remains actively involved in the family business; the day after this conversation he flew to Vietnam to meet a delegation from Cavite. His new projects include a partnership with the Jin Jiang Hotel group, whose properties include the Waldorf-Astoria as well as mid-range and budget hotels. Initially Jin Jiang will build budget hotels in Ortigas and on Pasay Road, Makati.

“Studies show that the Philippines needs hotels in the budget category,” Carlson points out. “Hotel occupancy in Manila right now is 80 percent. Hopefully the Jin Jiang Hotels can bring in the Chinese community.”

The Liwayway group is also bringing the Indonesian doughnut brand J Co to Manila. Mr. Chan had encountered the brand on his trips to Jakarta, and believes the concept would click in the Philippines. When his talent for spotting market potential is remarked upon, Mr. Chan simply says, “I’m adventurous.”

Liwayway Marketing was started in 1946 by Chan Lib and See Ying, two immigrants from a small village in Fujian province. The name of their company, which is Tagalog for “dawn,” expressed their optimism in the postwar Philippine economy. Initially they bought coffee and starch from wholesalers and repackaged them into consumer-friendly sizes (the ubiquitous Liwayway Gawgaw). Their children incorporated and expanded the family business. In 1963 they put up Chan C. Bros, the manufacturer of lighting solutions, kitchen and bathroom fixtures and acrylic novelties.

“In the early ‘70s my third brother, Manuel, proposed that we swap shares in the family companies,” Mr. Chan recalls. “I got his shares in Chan C. Brothers, he got my shares in Liwayway. In 1975 he started the prawn cracker business.” The prawn crackers were made with Japanese technology, hence their Japanese brand name, Oishi. “In the early ‘80s he thought of migrating to the US so he sold Liwayway to me.”

Family is the cornerstone of the Chan business, and the six Chan children manage the ever-expanding business empire. Whenever an Oishi factory opens overseas, one of the Chans moves to that country to launch operations. You can’t run a business by remote control, Mr. Chan says; you have to be physically there. “It makes a difference that the owner is present in China.”

The children picked up the precepts of the trade by watching their parents. They learned to be considerate towards the people they work with. “In the early days of the business, my father was his own collector,” Shera says. “He had to travel around the country, collecting payments. To this day he doesn’t like to keep collectors waiting, because he knows how they feel. He was that guy.”

Like their father, the Chans are exceedingly modest and unassuming. Getting them to talk about themselves is a challenge.

Having established their business in China, the Chans looked to Southeast Asia. Liwayway entered the Vietnam market in 1997 and now has four factories there. They have also embarked on manufacturing in Myanmar, Thailand and Indonesia.

“Our advantage is that we build on experience and continually invest on improving our production facilities,” Larry says. They certainly know their plants inside out — Archie gave us a tour of the very clean and efficient Oishi factory in Shanghai, describing every aspect of the production process. That kind of enthusiasm can’t be faked: the man loves his work. He’s literally lived in that factory, in the workers’ villas at the back of the compound.

The Oishi brand is recognized as the leading innovator in snacks and beverages. These innovations include their wide range of snacks with zero trans-fat, the first vegetarian chicharon, gourmet chips in kimchi and wasabi flavors, and Smart C+, the vitamin drink.

“Our Baked Porky Pops chicharon is made of lean skin and its fat content is 20 percent lower than other chicharon,” Archie points out. “It is air-popped rather than fried in oil.” Natural ingredients are used as much as possible.

“For the prawn crackers we buy fresh shrimp and process it into shrimp powder so there’s no need for much flavoring,” Larry adds. “We develop new products depending on the possibilities offered by new technology,” Shera notes. It takes about one year for a product to go from concept to store — “It helps if the product has a champion,” she smiles.

Oishi has developed a range of products that suit the specific tastes of its overseas markets. Many of its products sold in China, such as the excellent soft candies, are not even available in the Philippines. “When we started selling in China the locals assumed it was a local brand,” Larry recalls. “During the Shanghai Expo in 2008 they were surprised to find that these are Filipino products.”

Larry adds that the Philippines remains a mystery to most Chinese. Awareness of the Philippines has been heightened with the rise in the number of Chinese tourists to Boracay and other attractions. Four years ago Oishi produced a series of TV ads with tourism and culture themes to introduce the Philippines to that market. At Mr. Chan’s prompting, these commercials featured Chinese of different ethnic backgrounds coming together to enjoy Oishi snacks.

Apart from promoting Philippine tourism, Liwayway supports cultural projects such as the Loboc Children’s Choir from Bohol, which has gone on tour in China, and the Shanghai Oriental Little Companion Art Troupe. After a big earthquake in China in 2009, Liwayway extended an invitation for 100 children affected by the disaster to visit the Philippines. Among the highlights of their tour were a courtesy call at Malacañang Palace, and a trip to the beach. “The children came from a landlocked province in China and they’d never seen the ocean before,” Shera recalls. “In their excitement they just walked into the water wearing their shoes.”

What is next for Carlos Chan, the Filipino visionary who foresaw the China economic boom? Fresh ventures such as Jin Jiang Hotels and J Co doughnuts, for one, and more investments in the Philippines — Mr. Chan expressed optimism for our country’s economic prospects during President Noynoy Aquino’s administration. He guides his children in navigating the challenges of running a Filipino multinational company with a growing presence in Asia.

“Would you believe that with a population of 1.3 billion there is a labor shortage in China?” he asks. Apparently the current generation prefers to take white-collar jobs. Also, with rural areas developing rapidly, there are fewer migrants in need of work. The labor shortage is compounded by the rising cost of labor in China. Vietnam has a similar situation.

Liwayway’s chairman emeritus faces challenges with good cheer; at 71 Mr. Chan is in fine health, playing a round of golf every morning in Manila. Before we forget: How does he feel about snacks like Oishi being referred to as junk food?

Sagutin mo yan,” he tells Carlson.

“We’ve come to terms with that,” says Carlson, who sees the junk food label as a marketing issue — snack foods are not taken seriously.

“We’re changing the way people view snack foods,” Shera adds later. “For instance, our Pea Snack is 75-percent peas, which has a higher protein content than wheat.” Mr. Chan’s favorite Oishi snacks? “Lahat,” he replies, but especially Oishi marshmallows, popcorn, and multigrain chips.

“By the way, everything we talked about is off the record,” Carlos Chan says as our dinner comes to an end.

Everyone laughs. I hope he’s kidding.

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