Packaging Bag Sharing: From "King of Tobacco" to "King of Oranges", Chu Shijian Lived with Dignity

On March 5th, Mr. Chu Shijian, former chairman of Yunnan Hongta Group Co., Ltd. and Yuxi Hongta Tobacco (Group) Co., Ltd., and founder of Chu Oranges, passed away in Yuxi, Yunnan due to illness at the age of 91.

 

China's Tobacco King, China's Orange King

 

Chu Shijian (January 23, 1928 – March 5, 2019), former chairman of Yunnan Hongta Group Co., Ltd. and Yuxi Hongta Tobacco (Group) Co., Ltd., and founder of Chu Oranges, experienced two successful entrepreneurial lives and was known as China's Tobacco King and China's Orange King.

From 1979 to 1994, Chu Shijian successfully developed Hongta Mountain into a famous Chinese cigarette brand, making Yuxi Cigarette Factory the leading modern large-scale tobacco enterprise in Asia and the world.

In 1994, Chu Shijian was selected as one of the "Top Ten Reform Influential Figures" nationwide, becoming the "China Tobacco King."

In November 2012, 85-year-old Chu Shijian's "Chu Oranges" began selling through e-commerce. The high quality of Chu Oranges often resulted in them being sold out, making him the "China Orange King."

In 2012, Chu Shijian was elected honorary chairman of the Yunnan Provincial Ethnic Business Association.

On December 18, 2014, he received the Special Tribute Award at the 9th People's Enterprise Social Responsibility Award, hosted by People's Daily Online.

The meticulous management of Manbeng Sugar Factory

 

At the age of 35, Chu Shijian came to Manbeng Sugar Factory in Xinping County, Yunnan Province, as the deputy factory director. At that time, the sugar factory was operating at a loss; two to three hundred people working for a year still resulted in a loss of 200,000 yuan. After investigation, he discovered excessive fuel consumption and decided to reduce costs from fuel. First, he used alternative materials, replacing wood with coal, reducing consumption from the original 1:36 kg of firewood to 1:5.4 kg of coal. He then replaced the earthen stoves and large pots with boilers, using steam pipes for sugar production and replacing firewood with coal, reducing consumption to 1:3.3 kg. While the entire factory praised the newly arrived deputy factory director, he was still focusing on fuel energy consumption. He fermented the production waste from sugarcane refining—bagasse—into biofuel and used it mixed with coal, reducing consumption to 1:0.8 kg.

At the end of the year, the sugar factory made a profit of 280,000 yuan.

Chu Shijian said plainly: "What is saved is what is earned. Enterprises must focus on efficiency and be meticulous in production."

Reform of Yuxi Cigarette Factory

 

In 1979, under the background of the national promotion of state-owned enterprise reform and enterprise autonomy, Chu Shijian embarked on the path of reform.

Initial Reform Efforts

Based on the principle of "enterprises can appropriately reward and punish," he established a simple reward and punishment system. Evaluations were subjective, made by workshop directors, without detailed evaluation standards, and annual bonuses could not exceed three months' salary, making it not very attractive. This reform did not cause much of a stir. However, it showed that employees were not as resistant to "reform" as imagined; some even responded positively.

This is similar to the implementation of improvements in our production sites.

Chu Shijian paid great attention to the workshop environment and even established a separate department called the "Greening Department," which is essentially the current "5S department."

From employee attire to hair length (bell-bottom pants were popular at the time; one pair was cut for each employee; long hair was later no longer required after his wife persuaded him); there could be no loose tobacco or cigarette butts on the workshop floor; cartons had to be neatly arranged; and the workshop had to be clean and orderly.

Deepening Reforms

Chu Shijian adhered to one principle in managing the factory: the primary duty of an enterprise is to make a profit. He once said, "Enterprises are meant to make money; only with profits can enterprises achieve their social significance." He also said, "I believe that in any type of enterprise, it is necessary to improve productivity, strive for profits, and contribute to national finances."

Starting in 1982, he reformed the salary system. At that time, the entire country still followed the practice of "big pot rice" and did not implement distribution according to work. He decisively changed the time-based system to a piece-rate system, implementing a "per-carton cigarette wage content package" system, along with other management systems (quality, savings). The initial reform faced considerable resistance, but as production efficiency and employee income increased, the piece-rate system became widely accepted. Output increased from 1,000 cartons to 1,140 and then to 1,700, the number of employees decreased from 85 to 65, quality remained at 100%, and profits reached 11.03 million yuan.

At the same time, he changed the three-shift system to a two-shift system, further improving production efficiency and completing the annual task three months ahead of schedule.

Although it is often said that piece-rate wages affect product quality, this was not the case at Chu Shijian's cigarette factory. This is because his three production principles were:

Quality is the first principle, the second principle is also quality, and the third principle is still quality.

Quality First

Efficiency improved, but the market did not recognize Chu Shijian's cigarettes. Confidently taking his factory's cigarettes to Guangzhou, he was met with harsh reality. He was not discouraged and in 1981, he began benchmarking against cigarette factories in Shanghai and Kunming.

He concluded that the equipment was inadequate and decided to purchase imported equipment.

However, imported equipment was very expensive—2.61 million yuan per unit, enough to buy dozens of domestic units. Factory employees disagreed, so he asked the workshop deputy director, Qiao Fake, to do some calculations.

Output increased to 5,000, four times the previous level; tobacco consumption was 45 kg, compared to 60 kg previously, saving 75 yuan at a price of 5 yuan/kg. Producing 50 cartons per day resulted in monthly savings of 85,000 yuan; plus labor savings and price increases due to improved product quality, the loan could be repaid in 3 to 4 months.

Finally, the factory employees agreed. However, new problems arose after the equipment was purchased.

The equipment's production capacity did not reach 5,000, not even half. After working day and night, it was discovered that the quality of tobacco leaves at the Yuxi Cigarette Factory was substandard, leading to improvements upstream. In this environment, the original equipment masters began to adapt the imported equipment, modifying the machine board to save 400 kg of tobacco per day, or 480,000 yuan per year; they created a humidification and tobacco recovery device, increasing the recovery rate by 10%, or 40 kg per day, resulting in another 50,000 yuan in savings. Dozens of small and large improvements were made.

Chu Shijian once said, "Who would spend money on inferior goods?" This shows his pursuit of quality. In 1980s China, he began establishing production standards (what we now call Standard Operating Procedures or SOPs) and supporting regulations; he prioritized raw material selection (IQC); and he increased the frequency and quantity of random inspections.

Standardized Chu Oranges

 

In the Ailao Mountains, Chu Shijian once lamented to Wang Shi: "In my life, what I hate most is waste. In my business, I aim to increase productivity by eliminating waste." This is very similar to a quote by Taiichi Ohno: "The fundamental idea of the Toyota Production System is to completely eliminate all ineffective labor and consumption."

In 2002, Chu Shijian began managing the Chu orange orchard.

He managed orange cultivation like he managed production. For 16 years, he went to the orchard every day to observe the growth of the orange trees firsthand, from large-scale water system renovations to small details like how many centimeters pruning should be from the trunk. We can consider Chu Shijian a thorough practitioner of genba management.

Similarly, he created standardized operating manuals, instructing gardeners to cultivate Chu oranges according to specifications, detailing aspects such as how many times each tree should be pruned annually, the precise distance from the trunk for each pruning, pruning techniques to increase yield, pruning for pest and disease control, and pruning to promote tree growth...

Chu Shijian said that the operating manual was based on his past cultivation experience and data from laboratory sampling experiments, summarizing the optimal operating procedures to avoid operational errors and reduce trial-and-error costs. During implementation, Chu Shijian continuously optimized the operating manual and promptly disseminated updates.

"I am a fan of Chu Shijian." - Wang Shi

 

I have many fans, but I am a fan of Chu Shijian. He is not only the pride of Yunnan people, but also the pride of entrepreneurs like us. Therefore, every time I come, I cannot simply say that I am visiting him; every time, I come with a feeling of reverence to learn from him.

When he generated 30 billion yuan in tax revenue in a year, Vanke's operating scale was only 3 billion yuan, a huge difference. We only paid 30 billion yuan in taxes last year, but 20 years ago, Factory Manager Chu had already reached that figure—30 billion yuan 20 years ago.

So, in front of Factory Manager Chu, I am here to learn. He has always deeply moved me.

Ten years ago, when I first went to Ailao Mountain, I saw him wearing a worn straw hat and a worn round-neck shirt, even older than what he wears now, haggling with someone. That person was helping him repair a water pump, asking for 80 yuan, and Factory Manager Chu said, "I'll give you at most 60 yuan." They haggled over 80 or 60 yuan. Think about it, he was once such a powerful figure!

Then we started chatting, and I curiously asked him, "What you've done before and now is so different. I believe you can do it, but I don't understand one thing: since you're growing oranges, why didn't you introduce excellent international orange seedlings, but instead introduced seedlings from Hunan?"

He explained, talking about the soil and climate of Ailao Mountain, saying, "I can definitely grow them better." Then he talked about what would happen after fruiting and how good these oranges would be. I asked him how long it would take for the trees to bear fruit, and he said six years. But I calculated: six years later, he would be over 80 years old. A man in his 70s starting a business, talking about the scene six years later when he's over 80—what kind of spirit is that!

My plans for my later years are completely different from his realm. Therefore, I admire him from the bottom of my heart. Through contact with Factory Manager Chu, I understand why he was able to make his business so successful back then—it was definitely not because of policy, franchise operations, or chance.

After that, we often talked on the phone. Ten years later, everyone saw that Chu oranges had become very famous.

Generally speaking, Factory Manager Chu and I are considered to be entrepreneurs of the same generation. We have both started businesses. I went to Shenzhen in 1983 and founded Vanke in 1984. I remember clearly that when I started my business, I wrote two lines on the floor of the Vanke office. One was a quote from Kennedy's inaugural address, "Ask not what your country can do for you—ask what you can do for your country." The second was a quote from General Patton, "A man's success is not measured by how high he climbs, but how high he bounces when he hits bottom."

General Patton is a hero in my mind, and I admire this quote very much. After I went to Shenzhen, I experienced lows, rebounds, and many twists and turns, but no matter how many twists and turns, it was not as tortuous as Factory Manager Chu's. So, I was very moved that time. Factory Manager Chu was already in his 70s, and he was still looking forward to the mountains covered with oranges six years later. So, using General Patton's words to measure Factory Manager Chu is most appropriate.

At that time, I specifically wrote an article, "Rock Candy Oranges on Ailao Mountain." But that article was not written for others; it was about my feelings. After that, many entrepreneurs learned about Factory Manager Chu's situation through this article and came to visit, including Mr. Liu Chuanzhi, who specifically visited Factory Manager Chu last year. It can be said that Factory Manager Chu embodies the spirit of Chinese entrepreneurs—how to overcome difficulties in the process of progress and rise again from difficulties.

Because Factory Manager Chu accomplished something that seemed impossible, and this success is demonstrable, referential, and learnable. He is here, he is doing it, and he is doing it brilliantly. He can provide a mirror for the world.

At the end, please allow me to pay tribute to Mr. Chu Shijian!

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