Zong, well-regarded as a titan in China’s beverage industry and Wahaha’s founder, passed away last February at the age of 79. More than a year later, family secrets and an inheritance dispute are now drawing public attention.
Kelly, 43, currently leads the beverage giant and, up until now, had been publicly known as the only child of Zong and his wife Shi Youzhen. However, she has recently been hit with two lawsuits jointly filed by three plaintiffs who claim to be her half-siblings and are seeking to block her from managing assets worth around US$2 billion.
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Kelly Zong (Fuli Zong) delivers a speech while attending a forum event in Hangzhou, Zhejiang Province, China, Nov. 24, 2020. Photo by CFOTO/Sipa USA via Reuters |
According to Hong Kong media reports on Tuesday, the three plaintiffs — Jacky, Jessie, and Jerry Zong — filed a lawsuit in a Hong Kong court last December, requesting an injunction to prevent Kelly from withdrawing money from the late Zong’s account at HSBC, as reported by HKCD.
The lawsuit alleges that the account is a trust fund, through which Zong had promised to give $700 million to each of the trio. They have also filed another lawsuit in a court in Hangzhou, the capital of eastern China’s Zhejiang province, to “protect their rights.”
The three plaintiffs are allegedly the children of Zong and his trusted assistant, Du Jianying, according to Sina.
When Kelly went to study in the U.S. at age 14, Zong sent Du along with her to act as her guardian and take care of her.
Du was born in 1966 in Hangzhou, graduated from Zhejiang University in 1984, and joined Wahaha in 1991. Zong personally interviewed her and was impressed by both her professional capabilities and her assertive personality.
She began her career at the firm as secretary for the CEO’s office and rose through the ranks to become one of Zong’s most trusted subordinates.
Du moved to the U.S. with Kelly in 1996 and reportedly gave birth to her older son Jacky in Los Angeles the same year, followed by her daughter Jessie in 2007 and younger son Jerry in 2017.
During her time there, Du managed Wahaha’s overseas operations and frequently traveled between China and the U.S.
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Jane Du (Du Jianying) at a Westlake University event in September, 2020. Photo courtesy of Wahaha Bilingual School Hangzhou |
After Zong’s passing, Kelly took control of the group and shut down the production lines at 18 Wahaha branch factories located in several cities, including Shenyang, Chongqing, and Shenzhen, citing the need for “adjustment and optimization.”
Du held a 40% stake in these factories, meaning the closures effectively cut off her dividend income.
Following the shutdowns, Wahaha outsourced its production to external companies, with all contracts routed through a network of companies under Hongsheng Group, a drink and packaging-service firm controlled by Kelly.
She also required distributors to sign new contracts with Hongsheng, transferring control of Wahaha’s 1.6 million retail outlets, including grocery stores and supermarkets, from the old system to the new one managed by Hongsheng.
Some senior management within the company was also overhauled. The team that had worked under Zong was dismissed and replaced with Kelly’s loyalists from Hongsheng. Kelly reportedly explained that the old staff only listened to her father and she needs people who follow her.
According to the alleged “illegitimate children,” the trust fund Zong established was supposed to be allocated $2.1 billion, but it only had a balance of around $1.8 billion as of early 2024, according to Bloomberg.
They claim that Kelly withdrew $1.1 million from the account through Wahaha, prompting them to file a lawsuit out of concern that she could potentially withdraw the rest.
Whether they will receive any money from the trust depends on the validity of Zong’s will. A Hong Kong court has issued an injunction blocking Kelly from accessing the HSBC account until additional documents are submitted.
According to the will disclosed by Kelly, all of Zong’s shares and overseas assets belong to her and there was no trust fund. She asserts that the $1.8 billion in the account was Wahaha’s capital for overseas business held in her father’s name.
However, the three plaintiffs argue that the will is legally invalid because it was never notarized. They are asking the court to nullify the will and divide Zong’s shares equally among all four children, as per inheritance laws, and establish a new trust fund with the full $2.1 billion just as Zong had promised them.
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Zong Qinghou, China’s richest man in 2010 and chairman of beverage giant Wahaha, and his daughter Kelly Zong are pictured at a banquet in Hangzhou, east China’s Zhejiang province, Jan. 12, 2012. Photo by Oriental Image via Reuters |
Founded in 1987, Wahaha, which means “laughing baby,” has three main shareholder groups. An investment company under the government of Hangzhou’s Shangcheng District holds a 46% stake, the family of Zhong Qinghou owns 29.4% and a group representing Wahaha employees has the remaining 24.6%.
Wahaha said on Monday that the lawsuits are unrelated to the company’s operations. However, the ongoing feud is starting to affect its public image.
“Wahaha is not only the country’s soft drink king, but also a symbol of the prospering privately owned businesses,” Eric Han, a senior manager at Shanghai advisory firm Suolei, as quoted by the South China Morning Post.
He added that the dispute has “raised eyebrows” among Chinese entrepreneurs and consumers.
“Zong [Qinghou] has long been a respected tycoon, but the stories about his other children made me suspect his honesty and succession plans,” commented Zhang Mingjun, an entrepreneur in the field of electrical engineering in Shanghai.
Wang Feng, chairman of Ye Lang Capital, a financial services group based in Shanghai, said: “Family feuds and power battles in boardrooms may hurt employee morale and brand image, particularly at a time when companies are undergoing succession from first-generation entrepreneurs to their offspring.”
