Home Facts china

Doctor Jiao's big brew leaves others behind

Doctor Jiao's big brew leaves others behind

Write: Rudd [2011-05-20]

LongRun aims to increase its chain stores and franchises to more than 200 by March

Dr Jasper Jiao's life story is a classic tale of rags to riches, hard work, determination, eventual success and, indeed, enlightenment.

The chairman of LongRun Tea Group Co Ltd is the eldest of five children born to impoverished, illiterate farmers in Yunnan province and raised in a two-story house they built themselves with grass. His parents' annual earnings 30 years ago were just 200 yuan.

Today, the dapper 45-year-old has a fleet of Audis, lives in a luxurious home in the provincial capital, Kunming, and has built 29 schools in poor areas so that others from less fortunate backgrounds can have the opportunity to emulate his achievements.

He is, as he says in his quiet, earnest voice, proud of what he has accomplished and, in return, both his parents and the people of his home village, Shilin, are immensely proud of him.

Jiao's parents and relatives scrimped and scraped to afford a place for him at medical college and after graduating he entered the civil service. Although this offered him a degree of security it did not satisfy his entrepreneurial zeal and in 1994, at the age of 30, he quit and opened a restaurant concentrating on Yunnan food called Three Trees. It was, however, not a great success.

The budding businessman licked his wounds and retreated into the relatively safer waters of the pharmaceutical industry, concentrating on traditional Chinese medicine.

He wasn't to know it but his timing was auspicious. The mid-90s was a boom time for the sector and Dr Jiao was entering it at ground zero. He expanded the number of his outlets rapidly and eventually considered his company, Long Far Pharmaceuticals Holdings Ltd, was ripe for an initial public offering. He duly listed it on the Hong Kong stock exchange. This furnished him with the capital to proceed with more acquisitions.

Last May, Long Far offered HK$160 million to acquire LongRun Tea Wealth Creation Co Ltd and renamed it LongRun Tea Group Co Ltd. It has a market capitalization of around HK$1.3 billion and is busily engaged in increasing the number of franchise and chain stores in its fold to more than 200 from 120 by March. It is also acquiring companies in tea producing provinces such as Fujian, Zhejiang, Hunan and Yunnan. Jiao owns 66 percent of the group's shares.

In addition, Long Far also signed an agreement with Rocket Capital Holdings Ltd (Rocket Capital) to forge a strategic partnership in July, under which Rocket Capital would subscribe to 100 million new shares of Long Far at HK$0.25 per share and also purchase HK$30 million in convertible bonds at the preliminary conversion price of HK$0.3 per share.

As the major shareholder of LongRun Tea, Jasper Jiao, former chairman of Long Far, owns 66 percent of its shares, while Rocket Capital owns 13.76 percent.

LongRun's aim is to be the brand management company for 70,000 Chinese tea enterprises. It permits tea manufacturers to maintain their previous brand names and products after acquisition and focuses mainly on accelerating business development.

It has an annual production capacity of more than 10,000 tons of tea. In 2008 its sales touched 110 million yuan with about 35 million yuan after-tax profits.

The group's operations encompass pharmaceuticals, wine, insurance, education, real estate, mining and hospitals as well as tea. Its headquarters are in Kunming, its marketing center is in Shanghai while its marketing research is located in Beijing. In total it has more than 260,000 retail terminals all over China. There is also a sales front in Hong Kong to tackle South East Asian markets and similar operations directed at Europe and the US. Dr Jiao says his ambition is to "care for the health of human kind".

Doctor Jiao's big brew leaves others behindJasper Jiao

Planning chain stores in US

Ten percent of LongRun's tea is supplied to overseas markets including Europe, Southeast Asia and the US.

The company is preparing for the opening of its first chain store in Los Angeles and hopes to open another one in Times Square in New York City.

LongRun weathered the financial woes of the past 18 months. Indeed, its pharmacy business last year witnessed its most profitable year in nine years. Jiao's investments in property and copper mining also survived the storm.

Jiao said he would devote all his wealth and energy to develop China's tea industry.

To Jiao, a fan of China's literature and other traditions, tea is part of China's culture and he sees it as his responsibility to carry that on.

An avowed Buddhist, Jiao puts his money where his mouth is philanthropically. In addition to the schools he funded, he paid for his siblings' further education. The name of his company reveals his ideals. The character "Long" (the dragon) is the totem and symbol of the Chinese nation, and "Run" implies a long-awaited rainfall in Chinese, which, as a word, means serving humans wholeheartedly. In English, "LongRun" is a long run that suggests the enterprise's persistent confidence while making continuously brilliant successes. He has plowed 100 million yuan into products that help wean addicts off illegal substances. He has also written well-known books including The Channel Theory, which expounds his business strategy, The Reputation Marketing, The Cross Selling and The Tao of Pu-erh Tea. He was honored as one of China's top 10 most popular entrepreneurs in 2004. Among his visitors he lists Tony Wu, former Singapore Prime Minister, Cambodian Prime Minister Hun Sen, Moldova President Vladimir Voronin, Laos Prime Minister Poson Bapawan and Rita Fan, president of the Legislative Council of Hong Kong SAR.

This compulsive tea-drinker, whose perhaps only outward sign of vanity is a single monogrammed shirt cuff, enjoys reading, golf, table tennis, politics and economics away from his office. He is extremely proud of his son Ran, who, at the age of 20, is listed as one of the top 50 tennis players in Los Angeles. Together, the two ran with the Olympic torch in Yunnan ahead of the 2008 games.

So what special qualities does Jiao possess to make him shine out from the crowd? According to Kenneth Huang, Rocket's principal shareholder, he is a visionary and extremely consistent.

"He always keeps his promise and delivers what he promises and is very creative," he said. "He always has a lot of great ideas to achieve his goals. He sets many targets. He is very smart and energetic and never gives up. He was caught up in the growing pains of the market economy in China. In China you have to take risks because there is no winning formula. He was brave enough to get into herbal medicine."

This year promises to be yet another extraordinary one for the farmer's boy from Yunnan.