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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.
Interviewee Gan Fock Wai Company Pak Fah Yeow International Limited Date 1980s-2000s Subject Industry Duration 13m34s Language Cantonese Material Type Audio Collection Post-war Industries Source Hong Kong Memory Project Oral History Interview Repository Hong Kong Memory Project Note to Copyright Copyright owned by Hong Kong Memory Project Accession No. AY-GFW-SEG-008 
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The founder of The China Paint Manufacturing Company, Lam Kwan, native of Taishan, had good academic performance in his early age. He had studied in the United States. While Lam was studying in the U.S., he not only worked in farms picking up fruits but also taught Chinese classes for Chinese-American. He graduated from Brooklyn Institute, New York, while the U.S. was hit by the Great Depression. He recommended himself to a paint manufacturing company and got accepted. Another founder of The China Paint Manufacturing Company, Lam On, the father of Paul Lam and the brother of Lam Kwan, had studied in Guangzhou Lingnan Secondary School and Pui Ching Middle School.
After Lam Kwan returned to Hong Kong from the United States, he founded a small paint factory (The China Paint Manufacturing Company) with his brother, Lam On. Since Lam Kwan had received education on chemical engineering, he brought related skills and knowledge to the factory. At the beginning, the factory produced metal paint and wood paint. The National Lacquer and Paint Products Company were separately founded in the same year (1931).
The China Paint Manufacturing Company had a limited capital to start with; the founders collected the capital from their family while there were only 6 employees. During the Japanese Occupation, the production of The China Manufacturing Company stopped. Lam Kwan turned to produce and sell peanut candy in Liuzhou, Guangxi to sustain his living. In 1946, The China Paint Manufacturing Company was re-registered and the founders raised more fund by selling shares. However, the company scale remained relatively small.
The paint production technology was not advanced in the past. The government did not have strict safety requirements on either paint factories or paint products. The workshop of China Paint had limited facilities, it used cooking pot to boil oil and rarely maintained the machinery. The China Paint Manufacturing Company built a 3 level factory at Arran Street, Mong Kok. The ground level was the production shopfloor, the second level was office and store room for raw materials and solvents, the third floor was the living place for the Lam’s family. Paul Lam had lived in the third floor after Lam Kwan had moved out. Since the paint production process required boiling oil, which is a relatively dangerous procedure, the company rented an open area at Tai Kok Tsui to conduct the process. There were a public playground and a men’s dormitory near the factory at Arran Street. The China Paint Manufacturing Company had established the workshop at Arran Street at the time when Paul Lam was in kindergarten. Male workers were responsible for production processes while female workers were responsible for packaging. Accommodation was provided for male workers only.
Other than Paul Lam, Lam Mo Bill (The son of Lam Kwan), was also the second-generation successor of The China Paint Manufacturing Company. Paul Lam graduated from the University of California, Berlekey with Chemistry major. Lam Mo Bill graduated from Stanford University with Chemistry major too. Since there was no specialized discipline on paint technology in the universities, the only way for people to learn about paint was to study chemistry and to take courses that had contents of paint, such as polymer chemistry. Usually, paint companies would obtain knowledge of paint technology by setting up licensing arrangements with foreign companies. In 1965, The China Paint Manufacturing Company employed the first chemist.
After Paul Lam graduated from university, he had worked oversea for seven years. During that period of time, The China Paint Manufacturing Company had planned to take over a joint venture in Singapore, to improve the unsatisfactory performance of the company. Lam Kwan and Lam On invited Paul Lam to manage the company in Singapore. In arriving at Singapore, he found that the business was not a good investment, he decided to forgo the take-over and returned to Hong Kong. Although paint industry is one kind of chemical industry, Paul Lam considered himself know little about paint. Initially he had no intention to stay and work for the company. Not long afterwards, Lam Kwan died of heart disease. Paul Lam had worked in Hong Kong for less than a year and then returned to his previous employer in the United States. Under the urge of the family, he eventually returned to Hong Kong to help with the family business.
The Lam’s family used to respect the individual interests and initiatives of the younger generation and seldom imposed pressure to the descendants to inherit the family business. For example, all the children of Paul Lam did not major in science specialties and he didn’t plan to arrange his children to be successors.
Paul Lam had studied in La Salle College and then changed to Diocesan Boys' School at Form 2, where he studied until graduation. Since his parents had little knowledge about studying abroad, Paul Lam himself gathered information from his teacher and sent out an application to The University of California, Berkeley. He was admitted and left for Berkeley in early 1962. There were a good number of graduates from Diocesan Boys’ School to study abroad.
Paul Lam did not have particular expectation about his future after graduation. He had a lot of interests and activities and work was only one of his concerns. At that time it was not difficult for one to find a living in the United States. Therefore, Paul Lam did not worry about his career future. Upon graduation, he joined the Specialty Gas industry, which was a challenging industry that provided him with great satisfaction. He witnessed the rapid growth of the electronics industry in the 1970s. At that time, electronic companies like Pioneer and Dupin applied a special poisonous gas rather than atomic particles to produce chips for the brands’ circuit boards.
The company he worked for was a material supplier for electronic companies. In 1969, his company supplied the disinfection gas to the American astronaut Armstrong when he returned to the Earth after landing on the Moon. It was common for the American hospitals to use the same disinfection gas. In 1970s, he was relocated to Los Angeles, a city which was faced with serious air pollution. His company provided gas for General Motor to detect the gas exhaustion level. His company also produced heavy water, a material for producing atomic bomb. The production of atomic bomb was a dangerous industry as carbon monoxide was emitted as a by-product. When he was the Chemist of the company, Paul Lam had witnessed explosion in the company. Therefore Paul Lam was experienced in managing accidents and hazards in the paint industry. Back in the U.S., Pau Lam was promoted to branch manager since he showed good performance in handling an accident caused by hydrogen chloride in the Intel Corporation. He was then the youngest and the only expatriate branch manager of the company.
The Lam’s family had urged Paul Lam to return to Hong Kong several times. He made such move after he had obtained the resident identity (literally called Green Card) after marriage. To maintain his resident status in the U.S., he returned to the U.S. after he had worked in Hong Kong for around one year. To make good use of his mobility, the Lam’s family arranged Paul Lam to for Sherwin Williams, which engaged in a partnership of technology transfer with China Paint. Sherwin Williams was the largest paint company in the United States. Paul Lam was employed as a salaried technician for 9 months. He was there to learn the skills necessary for producing the brand name products under China Paint. The two companies signed a 10-year partnership agreement for technology transfer. China Paint was allowed to use the technology and the brand name of Sherwin Williams to produce paints in Hong Kong. Because of this partnership, the production technology of China Paint was improved. Paint companies needed chemists to produce paint and made adjustment according to client’s request. However, Paul Lam believed the company could not rely on the paint manufacturing formula only. Fulfilling the need of customers and providing quality customer service would also be important. The marketability of paint products relied on proper chemical formula, sale network, adequate combination of materials and the skill knowledge of technicians. Therefore, instead of focusing on chemical formulas, China Paint employed consultants to teach its staff with the chemical knowledge and properties of paint materials.
After Paul Lam left Sherwin William, he returned to China Paint and worked at the Kwun Tong factory. At first, he engaged in the administrative section to improve the company’s work environment, efficiency, labour structure and promotion system. Then, he worked on market research, doing analysis on the market shares and profit margin of the company and its competitors.
The development of The China Paint Manufacturing Company (Part I): Plant, products variety and industrial paint expansion
In the 1970s, there were six major paint factories, Kin Kwok Lacquer Manufacturing Company and several small factories in Hong Kong. The market competition was intense. China Paint had two plants in Kwun Tong, one of which was built by the company. It was a 6-level building of 40,000 square ft. The factory moved to Sai Kung later, which had a total area of 160,000 square ft. Nowadays the company had a factory in Shenzhen with a total area of 58,000 square meters, which was still not sufficient for operation. At the time when Paul Lam started to work for the company, the sales figures were only of 8 digits. In terms of market share, the company was the smallest among the major paint factories, with National Lacquer and Paint Products Company being the largest among all. Nowadays the China market contributed 90% of the company’s sales.
The company’s products used to be exported to overseas markets. In the 1970s, as many of these import countries imposed various kinds of import restriction, China Paint began to develop local market. At that time, Hong Kong’s industries was growing rapidly. With the help of foreign companies, Paul Lam and his cousins switched to produce industrial paints. In the early stage of China’s economic reform, the company started to relocate its production to China, which led to an increase of orders from the industrial sector. The company’s industrial paint could be used for producing rattan, electronic fans and toys. Types of toy included metal toy cars, both soft and hard plastic toys and PVC dolls. Different types of toy required different kinds of paint. The paints for toy were mostly classified into the followings: paint for metal, paint for hard plastic such as Acrylonitrile Butadiene Styrene (ABS) paint, paint for soft plastic such as Polypropylene (PP) paint, Polyethylene (PE) paint and Polyvinyl Chloride (PVC) paint.
During the production of the company’s industrial paint, the chemists had to try different combinations of chemical materials in order to fit with the receptivity of different material surface. Once the chemists successfully fit a type of paint with the kind of material, they would focus on cost reduction. 30% to 40% of the company’s revenue came from toy paint, which representing 70% of the Hong Kong market demand. Paint for architectural construction composed the major part of the company’s revenue. Brand name “Flower” was specialized for architectural construction while “GIRAFFE” was specialized for paint for wood.
