HONG KONG, October 16, 2009 - From its humble beginnings over a century ago peddling alternative healthcare to opium-addicted tin miners in Malaysia to becoming a household name across Asia, Eu Yan Sang, the subject of the latest Asian Families Series, which showcases successful family businesses, has a classic rags-to-riches story.
Eu Yan Sang was started by Eu Kong in 1879, who passed the business on to his son, Eu Tong Sen, who went on to expand the family firm, with operations in tin mining, rubber estates, and finance, amassing more than 1,000 properties in Hong Kong, Malaysia and Singapore.
Eu divided the business into shares for each of his 13 sons (he also had 11 daughters, but as tradition dictated, they were excluded), and the split proved to be quite a stumbling block. “He divided the businesses pretty equally among the 13 sons," said Richard Eu, Eu Tong Sen's grandson and now the company's Group Chief Executive Officer. "This meant no one had a majority vote. This resulted in deadlock in making decisions and the best course was to sell everything. By the mid-'80s, most of the business was sold.”
More than a century after the company was founded, Eu took the helm as the fourth-generation manager of what was left of the family business. He recalls his father advising him against entering the family firm. “Eu Yan Sang was the only business that was left," said Eu. "By the mid- to late-‘80s, it was considered pretty much a sunset industry. There was no platform for my generation to get involved in the business, and my father in fact discouraged me from thinking I could enter the family business.”
Despite his father’s wishes, Eu joined the family firm. With his business acumen he set out to re-assess the company from top to bottom and under his stewardship, Eu Yan Sang grew to become leading company, providing consumer healthcare products and services based on traditional Chinese medicine. He overhauled and modernized the company, adopting a scientific approach to quality control, developing an extensive distribution network for its products as well as re-branding and marketing its products. Currently, the group, which is listed on the Singapore Exchange, has more than 150 shops in the region and offers more than 300 products under the Eu Yan Sang brand and over 1,000 different types of Chinese herbs and other medicinal products. Today, Eu Yan Sang has expanded from just eight shops in Malaysia, Hong Kong and Singapore to manufacturing, retail, wholesale and clinical services.
The Eus still maintain more than 60 percent of the company, although there is no one single majority shareholder. A family business is, according to Eu, “one owned and managed by a family.” He has been invited by the board to stay on in his current position, despite reaching retirement age this month, and Eu is confronted with the difficult choice of whether to anoint a successor from within the family or to choose a professional manager. He hinted that the person to lead the firm is likely to be an outsider.
"The problem with professional managers is there is always pressure to perform in the short term," said Eu. "With family management, you can take a longer-term view as it’s not so easy to be kicked out.”
Richard explained that the ongoing financial crisis had, to him, confirmed that professional managers were very much geared towards working for their own benefit and not for the company. “I think a family business has to be one where the family has a strong influence," he said. "If professional managers can share the same values, then it can become a very strong business. It’s important to have a guardian of these values.”
The program was held at the Island Club, owned by the Tung family. Following the talk, guests enjoyed a meal created by award-winning chef Justin Quek. The meal was paired with wine provided by Jebsen and Company.