Cover Story: Good old-fashioned tea and values

This article first appeared in Enterprise, The Edge Malaysia Weekly, on February 11, 2019 - February 17, 2019.
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Kong Wooi Fong Tea Merchants Sdn Bhd (KWF) was established in 1928. Founder Liew Da Zhi, who hailed from China’s Guangdong province, set up shop near Batu Caves in Gombak, Selangor, before eventually moving to Jalan Sultan, Kuala Lumpur.

The patriarch had no grand dreams of posterity. He was simply trying to feed his family. Little did he know that the business would still be around 90 years and four generations later and that it would be one of the leading tea traders in the country.

“Honestly, we do not have the exact industry figures, but I do believe we are one of the key players in the local tea industry,” Liew Choon Kong, the founder’s great-grandson, laughs.

Liew, a director of the company, says it started out by trading in Chinese tea. In 1953, the company registered its own brand — Qing Shan Cha (Green Mountain Tea) — and sourced the tea leaves from Cameron Highlands. Today, most of its business comes from the sale of black tea to mamak stalls and bah kut teh shops.

“A lot of the tea sold in mamak stalls is sourced from us directly or indirectly. Some merchants may buy it from us, slap on their own labels and sell it to their customers,” says Liew.

Most of the company’s black tea comes from Indonesia. But it also buys tea from Argentina, China, Ecuador, India, Papua New Guinea, Sri Lanka, Vietnam and several African countries. Only a small portion of its supply comes from Cameron Highlands. Its tea is distributed throughout Malaysia.

Business may be good and the coverage wide, but Liew points out that the margins of the tea business are pretty thin.

 

Overcoming challenges

One effect of the company’s longevity is that its stories have been lost in the mists of time — people have forgotten the details as they were not recorded. However, the 62-year-old Liew does have some vague memories of the challenges it has faced over the past 30 years. This includes succession issues (as is typical in a family-run business) in 1988, when Malaysia was still recovering from a recession.

That was the year his father was ready to groom one of his children to take over the company. But none of them were willing to take the baton.

“At the time, the overall economy, not to mention our business, was languishing. All of my siblings had migrated and were not interested in running the business,” says Liew.

Neither was he. Armed with a degree from the University of Dundee in Scotland, he was working at IJM Corp Bhd as an engineering consultant. He enjoyed his job but as the eldest son, it fell to him to answer his father’s call. “I had no choice. And honestly, it was only a matter of time,” says Liew.

But it was not entirely unwelcome. After all, the tea business was in his blood. “I grew up with tea and I would have felt bad if my family had to give up the business because there was no one to take over,” he says.

Liew points to a drawing on the wall of his shop. It is of a lady pan-frying tea leaves, which is part of the process to make green tea. The tea is pan-fried to get rid of the parasites while retaining the flavour of the leaves.

“You see the frying pan? The diameter was about 2m. Our family used that to pan-fry the tea leaves and I grew up in that kind of environment,” he says.

About 10 years later, when Liew officially took over the business from his father, the country was hit by the Asian Financial Crisis (AFC). He recalls how Kuala Lumpur was full of tower cranes and factories before the crisis as there were many construction projects. KWF thrived as the canteens of these factories were selling its Chinese tea to the construction workers.

Then, the construction projects came to a halt and Kuala Lumpur became a dead town. Not only did the sales of Chinese tea fall significantly, the cost of doing business shot through the roof as the ringgit weakened substantially against the US dollar. “That was very bad for us,” Liew recalls.

What he did not expect was that the mamak stalls would come to the rescue. “All of a sudden, many mamak stalls opened and people flocked to them for cheap food and drinks. They would order a glass of teh tarik and sit there talking all day. Many of them had lost their jobs and had nothing to do anyway,” he says.

Liew started receiving more orders for black tea, which prompted him to seize the opportunity to fill the gap quickly. That is why he started importing black tea, which is something the company had not done before. He also started attending seminars and courses on how to source good quality tea at relatively lower prices.

This proved to be the right direction for the company. Over the next 20 years, black tea has continued to be its main money-spinner.

Liew, who is president of the Tea Trade Association of Malaysia, says the Chinese tea traders have established a good relationship with the Indian mamak stall owners. “Our association works closely with Persatuan Pengusaha Restoran Muslim Malaysia, which has about 10,000 members. Many of them own a mamak business. I have been trying to forge a stronger relationship between the two communities,” he adds.

This has produced several results, including the Battle of Teh Tarik competition, where individuals and restaurant owners were given a platform to compete and see who was better at “pulling” tea and coming up with the best tasting brew. The competition, which aims to promote the “teh tarik culture”, was held for the third time last year. “We are in talks with the Selangor government to run the fourth one this year,” says Liew.

 

Establishing a sustainable business

Most family businesses adhere to the famous adage: “Shirtsleeves to shirtsleeves in three generations”, meaning that a business usually flounders and fails by the third generation. But not KWF. Although Liew is a member of the fourth generation, the business has grown slowly and steadily under his leadership.

“It [the adage] is not always true. It depends on whether the leader can adapt to the ever-changing business environment,” he says.

In Liew’s case, it was a matter of adapting to the almost overnight change in circumstances during the AFC and choosing to trade in black tea and supply it to mamak stalls. If he had focused only on Chinese tea, the company may not be around today.

Liew says another factor that helps the longevity of a business is for the leaders to maintain their integrity and not be greedy. It was this quality that saved him from being burnt during the pu’er tea frenzy in 2005.

The tea, a fermented brew invented by traders during the Tang Dynasty, is supposed to reduce cholesterol and cure hangovers. It saw a tenfold price increase from 1999 to 2007 before tumbling far below pre-boom levels. The popularity of the tea was spurred by Deng Shi Hai’s book, Pu’er Tea, which gained much traction among the Chinese community.

The market was driven by speculators, who started to buy loads of the black bricks of compacted pu’er to drive up prices. The pu’er tea market collapsed in 2008. Some tea-related businesses and investors were badly burnt, but not Liew.

“Several reporters interviewed me back then about the soaring prices. I told them that we would not speculate on this trend as we were in the trading business. We earn money when customers buy and drink our tea rather than collect it for speculative purposes. So, when the bubble burst, it did not impact me at all,” he says.

Liew says integrity is the best way to attract and retain customers. “It is important to keep your promises when doing business with others. We have always kept our word. For instance, when the ringgit weakened against the US dollar from about RM3.80 to RM4.20 this year, it increased our cost of doing business as we buy tea in US dollars. However, we stuck to our promise and sold our tea based on the price we had previously agreed upon. We did not make any adjustments based on the new exchange rate.”

He also stresses the importance of selling good quality tea at fair prices. “We always adhere to these principles. So, customers naturally come to us. We do not go out to sell our products aggressively. We are also not bothered by what our customers do [in terms of speculation] after they purchase our tea,” he says.

 

Testing the market

Liew says the company will continue to observe the changes in the market and adapt to the new business environment. It launched its own Chinese tea brand, Montéa, under KWF Food Industries Sdn Bhd in 2005.

While Montéa, which is sold at department stores and retail outlets, has not generated as much business as the black tea, it is one of the notable local Chinese tea brands in the market, says Liew. The company also launched a series of cold brew and herbal infusion teas recently to meet market demand.

“This seems to be the trend, especially in developed markets such as the UK and Canada. We have also introduced stevia tea, which is sweeter, to suit the taste buds of today’s consumers,” he says.

When asked whether he has plans to ride the bubble milk tea trend that has propelled companies such as Loob Holding Sdn Bhd (the company behind Tealive) into successful business entities, Liew simply shakes his head. As far as he is concerned, bubble milk tea is not tea so much as it is milk and sugar. “We will stick to black and Chinese tea, which are healthier,” he says.

Liew points out that tea consumption in Malaysia is one of the highest globally and it continues to grow. “The country is in the top 15 globally. Based on the numbers we get, Malaysians consumed 29,000 tonnes of tea in 2017 — about 52% more than in 2007. The local black tea market will continue to grow,” he says.

“At the same time, we think Chinese tea has huge potential going forward as people are getting more health conscious. Some of them will move away from sweet drinks and start to look for healthier options such as Chinese tea.”

Liew has no plans to open cafés with modern interior design to appeal to the younger generation. The company will stick to its black tea trading business. KWF will remain a family business, he adds. “Perhaps our more conservative approach has helped us remain in business for 90 years. The tea industry is also a more stable and slow moving one.”