Workers at Pak Fah Yeow
Gan thought he treated his staff in a nice way, but he wouldn’t describe it as a family culture. The staff was stable, most with long employment. He believed there was no dissatisfaction among the staff. For example, Gan’s personal manager had worked as his personal assistant since 1974 when she was 18. The Company’s Chief Operating Officer had been working here for nearly 20 years. One of the company’s directors, now retired, had worked for the company since he was 18 until he reached the retirement age of 70. Now he had become one of Gan’s best friends. Most of the staff has been working for the company for over 3-4 years, and many of the factory workers have been serving for more than 10-15 years. Since the old workers were more familiar with the machines (although they did not have strong educational background), sometimes they were more helpful than the newly recruited educated technical staff. Currently, there were about 120 employees in the company: about 100 factory workers and 20 office employees. About 80% of the workers were women. The few men workers mainly carried out heavy duties such as loading and unloading.
Introducing sound pharmaceutical manufacturing practices and training workers to meet production requirements
Gan Fock Wai took pride in introducing GMP into Hoe Hin. Studying food engineering in the UK in the 1980s, he learned that food factories there had to achieve minimum GMP standards. Returning to Hong Kong after graduation, he began to work as a technical salesman with Edward Keller, noticing that many pharmaceutical or food factories in Hong Kong did not meet the GMP minimum. After joining Hoe Hin, Gan Fock Wai did his utmost to introduce the concept of GMP into the company. When Hoe Hin subsequently implemented Australian GMP in 1996, it was at a time when Hong Kong people knew very little about the standards.
At the beginning, Gan Fock Wai introduced GMP standards Hoe Hin step by step. It was only when the company sought to export its products to Australia and the Australian authority inspected its factory that it applied in full the GMP standard to its production management. The company hired an American engineer and moved to a new factory premise. The hardware facilities were completed upgraded to meet the GMPrequirement. In addition to upgrading its hardware, the company also attended to its software requirements. Specific examples included documentation system, testing of raw materials, production process and products as well as recycling measures should problems arise in product quality.
Gan Fock Wai believed that factories using fully manual operations could also satisfy the requirements of GMP and create no pollutants. When a factory applies machinery in production, it should clean the machinery parts thoroughtly and frequently. Otherwise the residues of raw materials left in the machines would combine with each other and produce unexpected pollutants. As Hoe Hin’s products use natural raw materials such as strong antibacterial materials like eucalyptus and lavender oil and its products are comparatively simple, production processes and quality are easy to control. Even the company adopted purely manual production processes, it seldom had the problem of producing unexpected pollutants..
To meet GMP’s requirements, Hoe Hin had to provide training for all of its workers at every level. It was the responsibility of factory manager and quality assurance manager to provide training and to remind the workers of what they had to pay attention to. For example, workers should wear sanitary caps to keep their hair from exposing in the air; after using the washroom workers had to clean their hands and apply sterilizing agents before going back to the workshops; packets had to be discarded if they had fallen onto the floor and workers had to wash their hands again.
After obtaining GMP certification in 1996, Hoe Hin became a role model in Hong Kong, with many local schools asked for organizing visits to Hoe Hin’s factory for their students. When the Department of Health arranged visits to local pharmaceutical companies for foreign organisations and company representatives, they frequently picked the Hoe Hin plant as a point of visit. Dr. Margaret Chan, the then Director of Health had invited Gan Fock Wai to join the Chinese Medicine Council of Hong Kong after she visited Hoe Hin’s factory.
Why Hoe Hin products have enjoyed sustained success
Gan Fock Wai has always believed that Hoe Hin’s long history has been one of its greatest strengths. Simplicity is another reason why the company’s products have a long life and sales remain good. Hoe Hin’s best-sellers include Hoe Hin White Flower Ointment, Hoe Hin Strain Relief, Fook Zai 239 and – most profitably of all – traditional Hoe Hin Pak Fah Yeow White Flower Embrocation (Pak Fah Yeow). Fewer product types ensure simpler, more streamlined management and operational procedures that offer Hoe Hin many benefits. In terms of production, the company’s warehouse does not need to maintain a vast inventory and there is no need to store different types of packaging and raw materials. When procuring raw materials, it is also easy to understand price movements. The process of buying packaging materials is equally straightforward. As production processes are also simple, manpower control is easy. In marketing, focusing on developing a product whose characteristics are well known and widely accepted greatly simplifies marketing strategy. It is also much easier to grasp market pricing. Gan Fock Wai has always been a firm believer that the many meritorious deeds Hoe Hin has done in the past helped to ensure its products enjoyed a long life. When his father Gan Geok Eng was managing Hoe Hin, the company had already actively participated in charitable activities that made many positive contributions to the community. Having learned from his father, Gan Fock Wai also took a keen interest in public welfare activities. To this day, Hoe Hin has sponsored deserving local welfare organisations with company products for many years.
Gan Fock Wai stressed that to achieve sustainable development, it was essential that Hoe Hin not only contributed to society, but also happily shouldered its social responsibility. As a result, he insisted that staff adopted eco-friendly practices in key operational areas such as production and sales. To this end, Hoe Hin did not participate in Hong Kong Product Expo for many years, considering that the booths there were made from materials which could not be recycled, resulting in creating a lot of garbage and waste. That said, Hoe Hin continued to participate in the Lunar New Year Fair since the design of its booths there was both simple and recyclable. Charity sales were also conducted from these Lunar New Year Fair, with all funds raised being donated to voluntary organisations such as the Senior Citizen Home Safety Association and the Society for Abandoned Animals. To achieve the goal of environmental protection, Hoe Hin needed to find consensus within the company. For example, Gan Fock Wai once proposed simplifying Hoe Hin’s product packaging in order to reduce waste. In doing so, he was faced with concerns that this might not be welcomed by consumers. When it came to marketing, Gan Fock Wai opposed the marketing department’s idea of running advertisements on paper pads in fast food restaurants considering such pads a waste of precious limited resources. He also suggested turning off Hoe Hin’s branded neon signs earlier in the evening to save energy. Here again, the company’s marketing department had different views from his.
How Hoe Hin leveraged product quality, sales channels and brand image strategies to make Pak Fah Yeow timeless
Keeping products looking and feeling young remains Gan Fock Wai’s core principle in developing Hoe Hin’s products to this day. In his early days, Gan Fock Wai had developed some new products, but none was very successful. As a result, he thought that prolonging the life of existing products was a far more solid foundation for the future than investing a lot of resources in developing new and therefore untried products. In addition to promoting the image of Hoe Hin’s brands and establishing stable sales channels, Gan Fock Wai set out to raise the standard of the company’s entire production process. His aim was to ensure a good product quality that would prolong the life of both the company and its products.
When it came to sales channels, Hoe Hin used to have eight wholesalers who directly distributed its products in the local market. As a result, the company earned more profits because it did not have to pay intermediaries. Each of these wholesalers was a large pharmacy. Many of them had ceased operation when the proprietors grew old. Today, only a few like Chung Ching Dispensary are still operating. Hoe Hin now uses DKSH Hong Kong Limited (DKSH) as its sole distributor locally. Gan Fock Wai felt that DKSH worked well and had developed a successful, comprehensive marketing strategy for Hoe Hin products. With the markets changing over the time, there are now a variety of outlets selling medicines in Hong Kong. Apart from drug stores, people could buy medicines from supermarkets, convenience stores and personal care shops. It is difficult for Hoe Hin to manage different types of sales outlets and not efficient to rely on a number of distributors. It has now become much simpler and easier to let a single distributor to manage the entire sales operation. As a result, although DKSH’s distribution charged higher costs for marketing, it remains more cost-effective for Hoe Hin to use them to handle the local distribution of its products.
Hoe Hin’s sales network in Hong Kong has always been comprehensive and its distribution strategy continues to be based on the interests of both large and smaller-sized chain stores, pharmacies and herbal shops. In doing so, the company has been careful to avoid letting a few merchants monopolise the sales ofPak Fah Yeow products. Gan Fock Wai says that the company wants shops and pharmacies of whatever size could survive and sell Hoe Hin products. Aside from large chain stores, Hoe Hin’s distributor must also take care of pharmacies of every size. Hoe Hin carefully controls the sales ratio at specific sales outlets and has in place different strategies to balance them out in cases some larger stores exceed the set percentage.
With regard to the brand image, Hoe Hin has long used different promotion methods such as aromatherapy, celebrity endorsers, music and medicinal functions. The company recently launched a trailblazing series of “Go! Go! Go!”-themed ads that show its products’ wide range of applications among users of different nationalities. Hoe Hin also continues to use various products to sponsor different functions such as Cantonese operas, operas, young people's concerts, sports, online games, product expos and charity events. The use of a variety of promotional media ensures that each type of Hoe Hin products image can reach every level of society. Music is often used to make brands look and feel more appealing to younger consumers. Gan Fock Wai himself was a keen singer and contributed vocals to songs such as “Go Fly” and “Love 80 Years More” that won Hoe Hin’s image a place in the hearts of a younger target audience. His efforts proved so successful that even primary school students knew how to sing “Love 80 Years More”! When he recently gave a series of talks at local universities, Gan Fock Wai was delighted to find that university students still loved Hoe Hin products. In addition to Pak Fah Yeow, the students’ top favourites included “Fuzai 239”. At the other end of the age scale, Hoe Hin is tackling the many problems old folks face with their joints by launching the targeted Hoe Hin Strain Relief product.
In the past, Hoe Hin’s overseas marketing was done by the local agents there. As each agent promotes Hoe Hin in different ways, Hoe Hin products had different images in different markets. Hoe Hin now requires that local agents had to adopt the Hong Kong approach with a few local features in designing the promotion and advertising plans. When marketing overseas, Hoe Hin has always stressed that its products are manufactured here in Hong Kong, to gain users’ confidence of the source of ingredients. In addition, Hoe Hin is also concerned about brand image. While Hoe Hin products in more mature markets such as the US and Canada are not considered expensive, they are viewed as being pricy, high-end goods in developing countries such as China and other Southeast Asian countries. Gan Fock Wai has always believed that a brand represents the value of a product. A product with a history has higher value. This is especially true to Chinese pharmaceutical products because a long history means the brands are effective and safe and the company who makes them is trustworthy and reliable. Besides drug resistance seldom happens to products made from well established formulas. For Chinese pharmaceutical products with a long history like Pak Fah Yeow, they were sold at a higher price than newer brands.
Product development considerations including the benefits of scientific verification, possible contradictio...
In 2000, there were no Chinese medical hospitals in Hong Kong. As a result, once he had completed his Chinese medicine studies here, Gan Fock Wai sent Hoe Hin’s products to the Beijing Hospital of Traditional Chinese Medicine for clinical examination. The aim was to obtain verification from an authoritative independent institution of the effectiveness of the products. The preliminary results of these clinical tests indicated that Pak Fah Yeow had a highly efficacious curative effect on wind-heat, headaches and nasal congestions. Sending Hoe Hin’s products to scientific tests not only helped the product to gain recognition, but also showing to the younger generations that Chinese medicines are susceptible to scientific tests. This helps users to understand the curative effect of Hoe Hin Pak Fah Yeow from a new perspective. It also enables Hoe Hin to promote and develop its products based scientific evidence.
When it came to developing new products, Gan Fock Wai admits that he and the company had different philosophies. Before launching a new product, Hoe Hin first carried out extensive toxicological tests, usually on animals. Hoe Hin had conducted such tests when it launched its Hoe Hin Strain Relief product and also in the year it began exporting Pak Fah Yeow to Canada. At the beginning, Gan Fock Wai had no objections to animal tests, but over the years he had learned that animals also had a right to life. Knowing that any animals used for skin tests would be killed after the tests , he began opposing these tests. At one point, he stopped developing new products and even refused to read company documents relating to animal tests. In the system of Registration of Proprietary Chinese Medicines in Hong Kong, traditional medicines only required temporary registration and did not need to pass toxic examination. Because of this, Gan Fock Wai focused on developing Hoe Hin products that had a long history and did not have to go through any toxic tests, so that he would not have to do any tests that might hurt small animals.
Hoe Hin had particular designs in product packaging to attract different groups of customer. For products which used to have a good sale record, Hoe Hin kept the original packaging design that loyal consumers were well familiar with. Pak Fah Yeow’s floral scented variants were rebranded and repackaged into the “Fuzai 239” to attract the younger consumers. As the company’s floral scented series only had a history of 10 to 20 years, its change in packaging had little adverse effect on sales.
Hoe Hin’s evolution from a family business to a listed company. Hoe Hin’s corporate policy
In the past, Hoe Hin was a family business. When Gan Fock Wai’s father, Gan Geok Eng, founded the company, the board of directors was formed by many family members including Gan Fock Wai’s mother and sister. Gan Fock Wai remembers that as no family member was ever involved in Hoe Hin’s daily operation, some family members got paid without doing any actual work. After the company became a listed company in 1991, Gan Fock Wai and Gan Wee Sean were the only Gan family members left on Hoe Hin’s board of directors. Now that the company is no longer a family business, the shareholders are the bosses of the company while Gan Fock Wai is the executive director managing the day-to-day operation of the company. Gan Fock Wai sees himself as just another employee of the company whose job is to make money for the shareholders.
Gan Fock Wai believes that there is no need to retain the family culture in Hoe Hin’s present development. Pak Fah Yeow, for example, had already been registered as a proprietary Chinese medicine so its formula was made public and was no longer a secret. For this reason, its blending no longer needed to be carried out by a Gan family member for it to be accurately done. As long as there are no errors in the blending procedures and production systems, and the employees are adequately rewarded, the company can run well by mutual monitoring based on common sense .
Gan Fock Wai still holds a management position in Hoe Hin, insisting that environmental protection and social responsibility are the company’s corporate goals. He feels that as Hoe Hin is very stable in respect of operation, sales and property rental income, it is unlikely that there will be any sudden, major expansion in the future. Gan Fock Wai is staying with Hoe Hin to ensure that the company continues to adhere to the corporate values of environmental protection and social responsibility. If Hoe Hin employs another chief executive officer to manage Hoe Hin and changes its corporate policy just to increase profits, Gan Fock Wai thinks he will withdraw from the company.
Gan Fock Wai is responsible for several major investment projects of Hoe Hin, and feels stressful about this job . Gan Fock Wai believes that in trying to earn more profits for Hoe Hin, he may become too agreesive and made bad investment decisions. Today, he often reminds himself that Hoe Hin’s investment strategy need not be too aggressive, as security and stability are the most important factors in wealth accumulation step by step.
How Gan Wee Sean integrated himself into the company
Gan started from the bottom and learnt almost every aspect of the business. Gan went to the factory to formulate the oil. From around 1978 onwards, Gan’s grandfather fell ill and Gan gradually took over the business. The factory delivered the orders via a transportation company whenever the distributors placed orders. The products were also exported to Thailand (since the 1960s), the U.S. (since the 1980s), Australia (since the 1990s), and other parts in the South East Asia, but the Hong Kong market was always the biggest share. The company also received orders from the Philippines where they set up a packaging plug doing bottling and packaging. In the Philippines, the company could enjoy lower import duty If only semi-finished products were imported.
An advertisement of Hoe Hin White Flower Embrocation
An advertisement of Hoe Hin Pak Fah Yeow Manufactory Limited. The content included the photo of the company founder, the product shot of White Flower Embrocation, the slogan, the drawing of the company’s factory and contact information.
An advertisement of Hoe Hin White Flower Embrocation
An advertisement of Hoe Hin Pak Fah Yeow Manufactory Limited. The content included the slogan of Hoe Hin White Flower Embrocation, its applications, the product shot of White Flower Embrocation, and the company's contact details in Penang and Hong Kong.
