Daisy Poon, President of Ajisen China: ‘Teamwork Is Fundamental’

Daisy Poon, founder, majority shareholder, president and CEO of Ajisen China, the company behind the Ajisen Noodle restaurant chain, cut her managerial teeth in the hurly burly of China’s food and beverage industry. In March 2007, she led her company to a listing on the Hong Kong Stock Exchange.

Even in the current economic downturn, Ajisen China has accelerated its expansion plans, opening more than 150 restaurants in 2008 to reach a total of 340 outlets throughout China.

China Knowledge at Wharton recently spoke with Poon about her experience in the Chinese noodle business and the challenges of managing a fast-growing company. According to Poon, teamwork is the most important aspect of management, and to be successful, a team must combine people with very different — but complementary — skills.

What follows is an edited transcript of the conversation.

China Knowledge at Wharton: Why did you enter the noodle restaurant business?

Daisy Poon: My personal background is bound up with our company’s experience. Before 1994 or 1995, I was mainly doing food exports. We purchased goods in China, including specialties like farm produce, vegetables, garlic, shallots, ginger, lotus roots and even fresh fruit. Almost every day we shipped several containers bound for America, Canada and Britain. Back then, my home was in Hong Kong. After purchasing [the food items], we processed them in Shenzhen, transported them to Hong Kong and then exported them.

China Knowledge at Wharton: So, what made you decide to get out of the food export business?

Poon: Back then, in the eighties or early nineties, it was not like it is now, when everything can be done through the bank by letter of credit. We did business based on personal trust, on relationships, and on reputation. I send you the goods, and you pay me the money 40 or 50 days later. So, you really had to trust the buyer and know him well.

But the food export business was gradually turning into a vicious circle of competition revolving around who could survive a long time [waiting for payment of] accounts receivable. It could turn out, for instance, that you used 10 million [yuan] in cash to buy goods in China, and it took you 60 days to put them through processing and packaging and then transport them to Hong Kong, and then to the U.S. or Canada. And it would take another 90 days for the buyers to pay you after taking delivery of the goods. In the end, you would get your money after [waiting] half a year.

So after more than a dozen years in the business, I realized that I had to do something else. In 1994 or 1995, I joined trade groups to visit Europe, Singapore, Britain, Taiwan and Japan, trying to find out if there were any business opportunities.

China Knowledge at Wharton: Why Ajisen Noodle?

Poon: When we visited Japan, I went to an Ajisen Noodle restaurant for lunch. I have always loved noodles because of my unique identity: The child of a Northern mother and a father from Guangdong, I grew up in Shanxi Province, where people eat noodles but don’t drink broth from boiled bones. So when we were kids, our mother always brought home bones, which were thrown out by pork shops, to boil them into soup overnight, and then she added noodles, vegetables, tomatoes, and meat to the soup — a very delicious and lovely memory for me. When I ate noodles in the Ajisen noodle shop in Japan, that childhood taste and memory came back.

Of course, I am a business woman, and on top of my personal feelings I had to think about the business model. So afterwards I visited their factories to observe how they made the noodles and the soup. That was really impressive.

China Knowledge at Wharton: What impressed you so much?

Poon: Before visiting the factories, I honestly wondered if I should be running a small restaurant business after years of shipping out big containers? I visited their facilities for making the soup, noodles and flavorings, and got to understand the whole process of how they separate the bones from the meat, and how to process, preserve and manufacture [the products]. Their factory takes up thousands of arces of land, so behind such a small bowl of soup there is a very big investment…. Even if the restaurant itself only contains 16 chairs, there is a huge amount of support behind the scenes. So I realized that it’s anything but a small business.

China Knowledge at Wharton: Was Ajisen a mature brand in Japan in the mid-nineties?

Poon: Yes, they had 200 to 300 restaurants in Japan. So that was the process: I travelled around the world and started to hone in on Ajisen, and then gained a better understanding of the brand. And then negotiations began and concluded in 1995. I received the right to use the brand in the PRC, Hong Kong and Macau. But what I kicked off with first was not the noodle restaurants, it was the factory.

China Knowledge at Wharton: Why the factory first?

Poon: The most technical part was actually behind the scenes. And for me, getting into that part of the business was quick: I have experience processing garlic and shallots; my factories boast cheap labor and cheap raw materials. So I had a competitive [advantage] for selling Ajisen [in China]….

But that was just an idea which I did not mention during negotiations. When I started talks with the Japanese company, I suggested that I should start a factory first, so that the support operations would be up and running, and then open the front-line restaurants. They agreed. So I started investing in factories to manufacture noodles and flavorings — which I later managed to sell to them.

In July 1996, I started the first [Ajisen] noodle restaurant in Hong Kong…. And then we opened restaurants in Shenzhen, and then elsewhere in the domestic market.

China Knowledge at Wharton: KFC, which is renowned for its sharp management and marketing skills, launched a Chinese fast food chain, East Downing, several years ago that hasn’t won too much market recognition yet. In your view, what makes a fast food restaurant chain successful?

Poon: McDonald’s has been here for 25 years. I have only been here for 12 years. But we are in the same league now. My view is that a successful product is more important than successful management…. The customers see the food, taste the food — not the management.

China Knowledge at Wharton: So what makes a good product?

Poon: It has to do with sensitivity to the market. What really sells like hot cakes? Things that keep your customers coming back. Our noodles make that happen.

Honestly, we didn’t even have a marketing department before [now], because we don’t have many advertisements; we’ve run no TV ads in the past. My view is that we have so many chain restaurants, which are already a big advertisement. Word-of-mouth is also a good advertisement: If you think something’s good, you will recommend it to your parents or friends. I place more emphasis on that. On the other hand, I care a lot about launching new products — innovation.

China Knowledge at Wharton: Do you have to get approval from Ajisen in Japan before you launch new products?

Poon: I can make the decision myself. We have an R&D group with Japanese and Chinese staff in it. I am one of them.

China Knowledge at Wharton: How big are your headquarters and the R&D team?

Poon: We have 101 people at our headquarters office, with four or five people on our R&D team.

China Knowledge at Wharton: Don’t you have to follow the Japanese product line, or at least follow some of the same guidelines?

Poon: In essence, we are a Japanese food company. That’s why I hire Japanese staff to do R&D. And we also apply Japanese flavoring [sensibilities] to the development of new products. Flavoring is very important in making the food taste Japanese.

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