Chapter 32: Crisis

Inside the research and development center of the Kwun Tong food factory, the air was thick with the rich, sweet fragrance of coconut cream and the heady aroma of mango.

Professor Zhou was leading his team through the thirteenth stability test for their Yangzhi Ganlu (mango pomelo sago). Meanwhile, Chen Bingwen, Zhong Qiang, and Gao Zhenhai were huddled around the latest batch of coconut sago, carefully inspecting its color, viscosity, and flavor retention.

"Brother Wen, does this batch of coconut cream seem more aromatic than the last?" Zhong Qiang scooped up a spoonful of the snowy-white coconut sago and sniffed it intently.

Chen Bingwen nodded. "It’s a new sample from our Thai supplier. They claim it’s from the new harvest just after the rainy season, so the quality is superior. If the taste remains consistent, we can consider signing a long-term contract to secure a high-quality supply."

He took a taste. It was dense, smooth, and rich with a mellow coconut flavor, carrying a natural, subtle sweetness. It was indeed top-tier.

Just then, the door to the R&D center was pushed open urgently. Ah Chang, the procurement manager, rushed in, his face pale. "Boss! We’ve got trouble!"

"What’s the panic?" Chen Bingwen put down his spoon and asked sternly, "What’s happened? Speak slowly."

"Thailand... a fax came from Thailand!" Ah Chang gasped for air. "Our main coconut cream supplier, Golden Elephant, just sent an official notice! Starting next month, the price of coconut cream... will go up by 30%!"

"What?" Gao Zhenhai exclaimed. "30%? Have they lost their minds?"

Zhong Qiang was also stunned. "This... how is this possible? We haven't even finished half of our current quarterly contract!"

Even Professor Zhou, usually the picture of composure, set down his test tube, his eyes turning grave as he looked toward Chen Bingwen.

A 30% price hike on coconut cream was like a heavy hammer blow to everyone present.

Chen Bingwen’s expression chilled instantly. He forced himself to remain calm. "The reason? What reason did they give?"

"They say... they say the main growing regions in southern Thailand have been hit by consecutive typhoons. The coconut trees have suffered severe damage, and yields have plummeted. Coupled with soaring international shipping costs, they say they have no choice but to adjust their prices."

Ah Chang handed over the fax, his voice trembling. "They also said... they said this is a general industry trend, and they’ve only raised it by 30% out of consideration for us being long-term clients..."

Chen Bingwen took the fax, his eyes sweeping quickly over the cold English clauses and the glaring "30%." A chill crept up his spine.

Coconut sago and Yangzhi Ganlu—these two flagship products, which had just cracked the high-end market and become the new profit engines for Chen’s—relied on high-quality coconut cream as their core soul. The cost of coconut cream already accounted for over 40% of the raw material costs for these two items.

A 30% increase meant that the gross profit margin for these products, currently around 68%, would be slashed to below 40% in an instant. This didn't even account for the risk of supplementary ingredients like mangoes and grapefruits rising in price to follow suit.

"Brother Wen, what... what should we do?" Gao Zhenhai wrung his hands in anxiety. "Our coconut sago and Yangzhi Ganlu are already priced high, and customers are sensitive to price changes. If costs rise this much, we either raise our prices or... keep them the same. But if we keep the prices the same, all our hard work will have essentially been for the benefit of the raw material suppliers; the profits will all be swallowed up upstream. Maybe we should supply them in limited quantities and look for other suppliers?"

Limited supply?

Chen Bingwen’s mind raced. Currently, the combined daily sales of coconut sago and Yangzhi Ganlu across their five standard stores were nearly four thousand bowls. They were key to attracting high-end foot traffic and building the brand’s image. If he raised prices significantly due to cost issues, the "value for money" reputation he had fought so hard to build would collapse overnight.

Thinking this, he didn't immediately respond to Gao Zhenhai’s anxious questioning but instead turned his gaze to Zhong Qiang. "Brother Qiang, how long will our current coconut cream stock last?"

Zhong Qiang performed a quick mental calculation. "Boss, we have four tons in stock. Daily demand comes primarily from the coconut sago and Yangzhi Ganlu. Other products like red bean soup and sesame paste use very little, if any, coconut cream. If we stop promoting new products, halt in-store tastings, and strictly limit the supply of coconut sago and Yangzhi Ganlu—say, to 70% of current daily volume—our four tons of stock should last about 45 days."

His tone was clearly reluctant when he mentioned limiting supply, as it meant voluntarily shrinking a pie they had worked so hard to grow.

Currently, these items were only sold at five standard stores. Once they succeeded in bottling them, the monthly consumption would be several times, if not dozens of times, higher. If they accepted Golden Elephant’s price hike, the loss in gross margin might be manageable in the short term, but in the long run, it would mean losing tens or even hundreds of thousands every month. A slow death is still a death; this was no long-term solution.

"Forty-five days..." Chen Bingwen muttered.

These forty-five days were a precious buffer—a final deadline to find a way out. Raising prices was like drinking poison to quench thirst; as he had said, it would destroy the brand perception of "authentic ingredients, exceptional value" that customers associated with Chen’s.

"We cannot raise prices!" Chen Bingwen set the tone decisively. "At least not now! Our brand image has just established a foothold in the mid-to-high-end market. Raising prices now would be self-sabotage. And we cannot simply limit supply for 45 days only to run out or be forced into a desperate price hike later. We must solve this at the root!"

"Then... limited supply?" Zhong Qiang asked tentatively. "Only supply a certain amount each day, and stop when we sell out?"

Chen Bingwen shook his head. "Limited supply is just a stopgap measure; it treats the symptoms, not the disease. Moreover, limiting supply will trigger customer dissatisfaction and speculation, which also damages the brand. We must resolve this fundamentally."

He walked to the window, watching the busy workers and the logistics vehicles moving in and out of the factory grounds.

The Kwun Tong factory had just gotten on track, the bottling R&D was at a critical stage, and the training for the newly recruited franchisees was about to begin... At this crucial moment of expansion, their supply chain had been seized by the throat!

"Ah Chang, contact Golden Elephant’s Hong Kong office immediately. Arrange a meeting with their person in charge. I want to see them this afternoon!"

Chen Bingwen turned around, his tone brook no argument. "Also, find out if the reports of disaster in Thailand are true. What are the quotes from other suppliers right now? Is there any possibility of finding alternative sources? Ask for quotes! Immediately! Use our maximum procurement volume to leverage them, and at the same time, find out the real market situation in Thailand. Verify if Golden Elephant’s 'general industry trend' is actually true! Are other suppliers taking advantage of this to gouge prices or kick us while we're down?"

"Yes, Boss!" Ah Chang responded immediately and ran out.

Gao Zhenhai was filled with worry. "Brother Wen, Golden Elephant is one of the largest coconut cream exporters in Thailand. If they are determined to raise prices, I’m afraid the smaller suppliers will follow suit..."

"I know." Chen Bingwen’s eyes were deep and thoughtful. "That’s why we must have this negotiation! But not here—we need to go to the source!"

He had already made up his mind. The room for negotiation in Hong Kong was too small; the other party was too confident. To break the deadlock, he had to go deep into the origin to understand the actual situation, find new possibilities, or apply enough pressure on Golden Elephant!

The regions surrounding Hong Kong that produced coconuts included Thailand, the Philippines, Malaysia, and Hainan in the mainland. Hainan, originally the first choice, had limited production and cumbersome procedures since it had not yet achieved large-scale commercial export, so it had to be ruled out. The Philippines and Malaysia also produced coconuts, but exports were subject to a 20% tariff. Thailand had no export taxes and relatively lower shipping costs; overall, it remained the most cost-effective option.