K. S. Lo and Vitasoy in Hong Kong and North America: Work with Soyfoods

by William Shurtleff and Akiko Aoyagi

A Chapter from the Unpublished Manuscript, History of Soybeans and
Soyfoods, 1100 B.C. to the 1980s


ęCopyright 2004 Soyinfo Center, Lafayette, California

Starting in the late 1950s a renaissance of interest in soymilk began in East Asia, eventually spreading from its center in Hong Kong to all countries in the area, and from there to other parts of the world. The company that inspired this development was K.S. Lo's Hong Kong Soya Bean Products Co., Ltd. (HKSBP), makers of the world-famous soymilk, Vitasoy. As of 1984, no person alive had done more to further the world's interest in soymilk (or in soyfoods) than K.S. Lo.

Early Years (1910-1944). Lo Kwee Seong was born on 2 February 1910 in Kwangtung, China. At age 10 he went to Malaya with his mother and at age 20 he went to Hong Kong. In 1935 he graduated from the University of Hong Kong with a BA degree in commerce and business. After graduation he joined the company where his father worked and was soon appointed Hong Kong manager of the firm's real estate branch.

The story of Vitasoy begins in the winter of 1937, when K.S. Lo, then 27 years old, happened to be in Shanghai on other business. There he attended a talk entitled "Soya Bean: The Cow of China," presented by the American Julean Arnold, then the commercial attache' to the American Embassy in Nanking, and actively involved in relief work using soymilk. Lo later wrote (1964), "Arnold called the soybean the "Cow of China" and practically attributed to it the preservation of the Chinese race. He said the fact that the Chinese as a race were able to maintain their physical fitness for over 5,000 years in a land where meat was so rare was entirely due to the people's inclusion of soybeans in their diet. I was impressed by his talk and came away with soybeans stuck in my mind." Even after Lo returned to Hong Kong, Arnold's message kept returning to him.

Several years later, in 1939, following the Japanese invasion of China, the first wave of Chinese refugees arrived in Hong Kong. A refugee camp was set up in Argyle Street, Kowloon. A small group of volunteers, including Lo, went to see what could be done to help. Most of the refugees were sick or suffering from malnutrition, including beri-beri and pellagra. Seeing this, Lo again recalled Julean Arnold's message of the promise of the soybean. With the group of friends he raised some money and purchased some soybeans and brown sugar, a stone mill, a kettle, and some cheese cloth. The group set up a small soymilk shop right in the camp and taught the refugees how to make soymilk for themselves. Each refugee received one bowlful every morning. Lo later wrote: "The results were quite startling, as many of them showed significant improvement in their health after the first month. This little experiment gave me full confidence in the nutritional value of soy bean milk and I decided to make it available to the masses of people in Hong Kong who could not afford to buy cow's milk" (Lo, personal communication, March 1981).

In 1939 Lo and four of his friends got together and formed The Hong Kong Soya Bean Products Company (HKSBP), with paid-up capital of HK$15,000. (The company name was expanded to The Hong Kong Soya Bean Products Company, Ltd. in March 1940). The original plant and processing equipment, designed by the founders and located at Causeway Bay (on the site where the Plaza Hotel now stands), officially began operations on 7 March 1940. In his inaugural speech, Lo stated that the company's aim was to provide nutritious soymilk for the masses at the lowest possible price--an aim that has not changed over the years. In those days, when nutritional deficiency diseases such as beri-beri and pellagra were still widely prevalent in Hong Kong, this aim was doubly urgent and important. Yet the day after the plant opened, exactly nine bottles of the product, called VITAMILK, were sold. A dozen delivery boys delivered Vitamilk door-to-door each morning. The strongest supporter of the fledgling operation was a Britisher, Dr. Selwyn-Clarke, then director of Medical and Health Services. The only government official aware of the nutritional value of soymilk, he gave orders that all government hospitals should use the new product instead of cow's milk for all third-class patients.

The first few years were filled with problems. Lo wrote in 1964: "We soon found that, even among us Chinese to whom the soybean was by no means new, there was a strong prejudice against soy milk. They not only did not believe its nutritional values, but they also thought it could cause diarrhea, indigestion, and stomach ache. At that stage the taste of our product, too, left much to be desired. Many customers found it hard to take, because of the strong beany flavor and the slightly bitter taste. Another problem we had to face was the keeping quality of the soy milk. We followed the dairy industry by packing it in standard half-pint milk bottles and sealing them with a paper cap and hood. They spoiled even quicker than milk unless they were kept under refrigeration all the time. As they were packed like dairy milk, we had no choice but to market them as a milk substitute. It was not until years later that we found it was a mistake to adopt such a marketing approach. For among the Chinese community, giving milk to children was considered to be a Western luxury, which only the very rich could afford. And of course to the rich, cost was no problem."

Sales continued to be slow, only 300-400 bottles a day. During the summer, sometimes as many bottles spoiled as were sold. Something had to be done. Lo began working with Dr. Y.T. Chiu, who had a written his PhD thesis at Cornell University in 1927 on methods for improving soymilk and its production, and in 1929 had published an article on the subject in China. Their goal was to get locals schools to start using Vitamilk. Speeches on soymilk and nutrition by Chiu were followed by tasting sessions conducted by Lo at the schools. The idea worked. In fact it was a major breakthrough, and today schools remain the company's single most important customer. After the first year, distribution was extended from Hong Kong Island onto the Kowloon peninsula on the mainland. There a combination soymilk cafe and distribution depot was set up. The spot proved popular with students and young people.

In the spring of 1941, Howard Hoover, who had started and run a small Seventh-day Adventist soy dairy in Canton (Guangzhou), had left that city after it fell to the Japanese. While waiting to return to the US he worked with Lo for 6 months. He taught Lo how to homogenize coconut oil into the soymilk to give it a richer flavor then helped to install the company's first Cherry Burrell homogenizer.

By mid-1941 sales of Vitamilk had risen to 1,000 bottles a day. But that was far below the break-even point, and by December 1941, when World War II broke out, the company went broke. Lo, abandoned by his partners, had sunk HK$30,000 of his own money into the venture.

Sixteen days later Hong Kong surrendered to the Japanese. Four months after the occupation Lo left for Free China (the part of China not occupied by Japanese), taking with him his family of four children. They finally settled down as refugees in a small town called Linshan on the border between Kwantung and Kwansi, west of Canton. Here again the soybean provided Lo with a livelihood and probably saved the family's life. Lo put up a makeshift building and called it The Cafe. After buying a stone mill, he started to make soymilk and home-made cakes, and thus made a living until World War II was over. Their fifth child, Irene, was born during this hard time. Lo's wife had no breast milk to feed her since she had not nursed the other children. Irene was thus raised on soymilk which, the family felt, saved her life.

Starting Over (1944-1959). The British Navy returned to Hong Kong on 31 August 1944, after the Japanese surrender. Lo returned 2 weeks later and quickly got back his plant from the Custodian of Enemy Properties. He was glad to find that the Japanese had left most of his equipment intact. He borrowed HK$50,000 from a friend and by November 1945 Vitamilk was back on the market. At this time, everything was scarce in Hong Kong and only one company had resumed production of soft drinks. Lo seized the opportunity to sell his soymilk, still in milk-type bottles with paper cap and hood, through soft drink outlets instead of delivering it to households. Now he presented it to the typical man on the street as a noncarbonated beverage rather than as a morning milk substitute. In the "small people in the street," Lo wrote in 1964, "I found my best friends and customers, who have remained the backbone of my business even to this day. Our sales increased so rapidly thereafter that our only problems were how to step up production and enlarge the areas of distribution."

In about 1948 Lo first started adding vitamins to his soymilk. He was probably the first person in the world to do this. Although it was sold somewhat like a soft drink, Vitamilk aimed at replacing the empty calories of conventional soft drinks with protein and essential nutrients.

In 1949, having paid off his loan in less than a year, Lo bought a piece of land in Aberdeen, Hong Kong, and started to build a new plant. However before it was finished Lo had been chosen to be the Hong Kong franchise for Greenspot, a large California-based manufacturer of orange concentrate. When the Aberdeen factory opened in 1950 it was Greenspot orangeade that was made there. Vitamilk stayed in the old factory at Causeway Bay, because Lo could not afford to move it.

For years Lo had dreamed of being able to sell his soymilk in soft-drink type bottles, sterilized to give a shelf life of 6 months without refrigeration . . . just like the Greenspot they were now bottling. But there were extra problems involved in bottling soymilk this way. Experts with whom Lo consulted said that it probably could not be done without the use of a preservative, but that if anyone figured out how to do it without preservatives, they would become rich. Lo decided to accept the challenge. He hired a man with a US degree in dairy science and asked him to try to sterilize soymilk in Greenspot capped glass bottles. After repeated failures, explosions, and injuries, the project was a success. The two men were overjoyed, for they realized that now, at last, soymilk could be marketed exactly like soft drinks without the handicaps of the milk bottle and short shelf life.

In about 1953 Vitamilk first came on the market in soft-drink bottles, sealed with a metal crown cap and sterilized to allow it to keep for months. Now the soymilk operation was moved into the new plant at Aberdeen and the soymilk was distributed on the same truck as Greenspot. Retailers who previously could order only a dozen bottles at a time for lack of refrigeration space, could now take up to a dozen cases. A major marketing barrier had been broken. Vitasoy had been remade, and was the first beverage of its kind in the world. With this new approach, Lo discovered a new market that has continued to remain the backbone of his business. The change of product concept and distribution channel brought immediate success, and sales began to increase dramatically. For many years thereafter Lo's biggest problem was how to produce enough soymilk to keep up with the growing demand, as sales would sometimes double or triple in one year. By 1958 a million cases (24 million bottles) a year were being sold.

This fast expansion attracted the attention of many, both in and outside of Hong Kong. In Hong Kong the success of Vitamilk aroused the envy and jealousy of companies making competing beverages. They formed a lobby to get the Urban Council to forbid Lo from using the word "milk" in his product name. In 1953, after some wrangling, a compromise was reached whereby Lo was allowed to retain the Chinese characters in his registered trademark if he changed the English name of his product from VITAMILK to VITASOY. The characters were Wai-ta Nai; Wai-ta means "vitality" in Chinese, and also forms a part of the Chinese word for "vitamin," wai-ta ming. Nai means "milk," such as cow's milk. Lo was not the first person in the world to use the term Vitasoy. It had been used as early as 1936 in the USA as the name for a "soybean milk powder" by Soya Health Products in New York, and as early as 1948 as the name for "vitamin and enriched infant and vegetarian food" made with soy flour by Soya Foods Ltd. in England.

Soon after Vitasoy caught on in Hong Kong, other companies began to jump on the bandwagon, following Lo's basic marketing concepts. In about 1948 in Manila, Soya Lac, launched as a milk substitute in 1941, was reintroduced as a healthful soft drink. In 1954 Yeo Hiap Seng, a big Chinese food manufacturer in Singapore, launched its first soymilk. Called BEANVIT (later renamed Yeo's Soybean Drink) it was sold as a soft drink in sterilized bottles, the first product of its type in Singapore and Malaysia. (In 1967 Yeo Hiap Seng's soymilk became the first in the world to be sold in Tetra Pak, the new tetrahedronal aseptic and disposable cartons, requiring no refrigeration.) In 1958 Green Spot in Thailand started making soymilk, followed in 1959 by Saniku Foods in Tokyo. The pioneers of what would eventually become East Asia's soymilk boom were starting to grow, drawing their inspiration from Vitasoy in Hong Kong.

Outside of Hong Kong, Vitasoy had begun to catch the attention of people in the United Nations, especially those in UNICEF and FAO. Representatives of these organizations, when passing through Hong Kong, often wanted to visit Lo's plant. Thus, in the late 1950s, when UNICEF decided to assist Indonesia in setting up a soymilk plant, four Indonesian technicians were sent for 3 months work and training at Lo's factory.

In 1957 HKSBP was granted the Pepsi-Cola bottling franchise for Hong Kong, which they kept until 1976. Although they did not make any profit on the franchise during all those years, they did manage to learn from the Pepsi people a good deal about marketing, which they employed to advantage in marketing their own products.

In about 1959 Lo set out to find a way to make Vitasoy popular year-round. In Hong Kong 80% of all soft drinks were sold during the 6 warm months, and only 20% from November to April. That year Lo developed a heater that would heat up to four cases (96 bottles) of Vitasoy at a time, and keep them hot (145*F) during the chilly weather. The idea caught on and retail store owners loved it, for it helped their beverage sales during the typically slack cold months. Customers loved it too, for Vitasoy was the only soft drink available that one could enjoy piping hot to take away the winter's chill. With the help of the winter heaters and the introduction of chocolate-flavored Vitasoy (also in 1959), sales again shot upwards. And throughout the 6 cold months they now stayed at 50% of peak summer sales.

The 1960s, Continuing Growth. During the period from 1955 to 1960 sales of Vitasoy grew 5-fold, from 8.4 million bottles in 1955 to 42 million in 1960. This represented a remarkable compound rate of 38% a year, the highest rate in the company's history up to the present. The time had come to launch a new phase of the business: mass promotion.

In the early 1960s, with sales skyrocketing, Lo set out to take full marketing advantage of the breakthroughs he had made in packaging, distribution, and market domination. He launched a major, modern advertising campaign. The slogan (used until 1975), emphasizing health and nutrition, introduced a much wider public to Vitasoy and its new name. It proclaimed: "Vitasoy makes you taller, stronger, and more attractive."

During the 1960s, sales increased 2.4-fold, climbing to 60 million bottles a year in 1962, then to 67 million in 1965 and 100.8 million in 1970, for a very healthy compound growth rate of 9.2% a year during the decade. By 1962 Vitasoy had become Hong Kong's best-selling soft drink, ahead of such internationally known brands as Coca-Cola, Pepsi-Cola, and Seven-Up (Lo 1964). In 1964 Vitasoy retailed for less than one-third the price of cow's milk in Hong Kong. In the mid-1960s Malt Vitasoy was introduced and soon became very popular. By 1968 Vitasoy had captured an impressive 24% of the highly competitive Hong Kong soft drink market. Here, indeed, was a soybean Cinderella success story.

In 1961 Vitasoy, which had met no competition from brand-named soymilks since its origin, suddenly had its first real rival. Fung Lik Nai, meaning "milk filled with energy and power," was launched that year, only to disappear after one season. Again Vitasoy shared the market only with tiny streetside makers of traditional soymilk.

In 1962-63 HKSBP built a new plant in Kowloon, doubling the production capacity of the old plant in Hong Kong. By the first year it was operating at 90% of capacity. The plant had the most modern, mechanized equipment, including a continuous automatic sterilizer for the sealed bottles.

In 1964 Lo was invited to present a paper on his experience in promoting Vitasoy at the International Symposium on Oilseed Protein Foods organized by UNICEF in Tokyo. The paper was hailed for its description of the commercial marketing of a protein-rich soft drink. It was published in the May 1964 issue of Soybean Digest. Because of Vitasoy's proven success, the United States was now willing to grant outright financial aid to any American company willing to introduce protein-enriched soft drinks in any Latin American country. UNICEF was also willing to give financial and technical aid to companies interested in starting similar projects in developing countries in Asia or Africa. Right after the Tokyo conference Lo was approached by more than half a dozen multinational companies, who wanted to franchise Lo's Vitasoy process on a worldwide basis. Lo finally chose to go with Monsanto, a chemical company based in St. Louis, Missouri. Monsanto wanted to diversify into food processing, using Vitasoy as the key catalyst for its new department. Most of the other companies were already heavily into food processing and Vitasoy would be just another item for them. Monsanto and Lo set up a Hong Kong subsidiary, Lomond Ltd., of which Lo owned one-fifth of the stock and got royalties on sales.

The choice of Monsanto, however, proved to be a serious mistake, for they had no experience in developing and marketing a new food. Instead of going out and finding interested bottlers, they spent 3 years on fruitless research, hoping to develop a concentrate (based on soy protein isolates and containing more than 100 flavor ingredients, including vanilla, orange, and cinnamon) with an improved flavor that they could sell to prospective bottlers like Coca-Cola's secret formula. In August 1968 Monsanto announced that it planned to bottle and market a soymilk soft drink in Guyana, South America, with plans for eventual expansion to other Latin American and Asian markets (Soybean Digest, Aug. 1968; TIME 1968). The new isolate-based drink, called Puma, containing about 2.5% protein, was launched in 1969. It had a strong banana flavor. In the early years about 29 million bottles were sold annually, all through retail outlets. Yet from Lo's point of view, the Puma project had only limited success. In 1969, when the heavy chemical industry turned sour, Monsanto, itself in larger trouble, stopped putting new money and energy into the project, and they soon sold the entire operation to the local bottler (who was still making Puma in 1976; Aguilera and Lusas 1981). This whole debacle was Lo's biggest setback to date. He had had a world market at his fingertips and lost it. After this apparent failure he was never able to renegotiate with other multinationals. Once again, he would be forced to start all over using an entirely new approach . . . but that would have to wait until the late 1970s (Lo 1982).

One of Lo's greatest admirers was Dr. Harry Miller, who had pioneered soymilk production in Shanghai in 1936. He and Lo had first met in Hong Kong after World War II. Miller visited the Vitasoy plant. Lo remembers him as "quite business minded and interesting in getting people to use his soymilk manufacturing process, on which he would collect a small royalty." Miller wrote two articles about Vitasoy in the Soybean Digest in June 1948 and May 1965. Miller, who was one of the first to see the great potential of soymilk for China, was apparently delighted that Lo had been able to so successfully manifest this potential. In the 1965 article he spoke of Lo's "genius and leadership" and how some 40 large delivery trucks distributed Vitasoy to hospitals and schools. It retailed from street vendors for slightly more than 3 cents (US) per 7-ounce bottle.

By the late 1960s the international media began to take notice of Vitasoy's meteoric rise to popularity. In 1968 Time magazine ran an article stating that "Vitasoy has become the new soft-drink craze of the British Crown Colony. A 6.5 oz. bottle costs 3.5 cents, compared with 4.8 cents for the same sized bottle of Coca-Cola. Vitasoy has captured 25% of the Hong Kong soft-drink market. This year an estimated 78 million bottles, second only to Coca-Cola's 100 million, will be sold from sidewalk stands, sampans and grocery stores for a total of $2,600,000." In about 1974 a major East Asian business magazine did a long story on Lo, his company, and Vitasoy.

As soon as Lo had proved the potential of soymilk, the giant Coca-Cola Company got interested. In 1966 they started a Protein Beverage Project within the company and in 1968 introduced their first soymilk, Saci, in Brazil. Coke was smart enough to join the trend rather than fight it. Eventually other huge multinational corporations, including Mitsubishi in Japan and Nestle in Europe (in the late 1970s) followed Vitasoy's lead, further sparking the soymilk renaissance.

The 1970s, Diversification and Internationalization. The early 1970s were filled with problems for Hong Kong Soya Bean Products Co., Ltd. During the 1960s Lo had sent his three sons abroad for higher education in fields where the company business needed more professional expertise. Eugene got a degree in biochemistry, Frank in dairy science, and Winston in food technology. A number of patents were granted to the company during the 1970s (Lo 1971; Lundstedt and Lo 1973). As each son returned, he was assigned a project to work on. Eugene developed a soy-based infant weaning food, Frank a soymilk-based blue cheese, and Winston a process for packaging precooked Chinese TV dinners. Each of the three sons was successful in developing his product and the company launched them in the early 1970s, in what was thought would be a great leap forward in diversification. Unfortunately, the marketing plans for each product failed and the entire venture ended up as a great flop. Lo later wrote, "The expensive lesson learned is never to leap before you learn to run." HKSBP returned to its specialty, beverages and Vitasoy.

One positive outcome of research at this period was that in the early 1970s Vitasoy started to be made by the "dry process," rather than the former "wet grind" process. Additional research found ways to recover in the milk 90% of the protein originally in the soybeans. The whole soybeans were subject to optimum conditions of dry heat and pressure, then dehulled and milled to a flour. The flour was soaked in hot water then boiled in a continuous cooker. The milk was extracted in a continuous centrifuge, then formulated, and bottled. The final product contained 2% protein (Shurtleff and Aoyagi 1979).

From 1973 on a series of crises struck. The combination of skyrocketing prices for energy (after the OPEC price hike), soybeans (after the US soybean embargo), and sugar essentially tripled Vitasoy production costs. The price of a bottle of Vitasoy, which had stayed at 20 cents (HK) during the 1950s and 1960s had to be increased sharply in 1974. A recession hit at the same time and sales plunged from 100.8 million bottles in 1970 to a low of 80.4 million in 1975. Something had to be done. During 1975-77 Lo made four major decisions: to give Vitasoy a new image that would allow it to compete head to head with soft drinks, to package Vitasoy in Tetra Brik cartons, to introduce a a new line of products based on fruit juices and Chinese teas in Tetra Brik cartons, and to drop the franchise agreement with Pepsi-Cola.

To revive slumping sales and reflect the spirit of the mid-1970s, Vitasoy needed a new image, which would let it compete with soft drinks. The new slogan, replacing the long-popular nutritional one, proclaimed: "Vitasoy is more than just a simple soft drink."

Vitasoy's first UHT (ultra high temperature) Tetra Brik packaging line began operation in 1976 and the new concept proved to be a great success. Thereafter Vitasoy was sold in both Tetra Brik cartons and glass bottles in sweetened plain and malt flavors. The advantages of the Tetra Brik containers were that they required no refrigeration, they were disposable (unlike bottles which had to be recycled and washed before use), they had a modern fashionable image, they allowed more colorful and vivid package design, they were lighter and more compact to ship, and they were safer, being unable to break or to harbor the potentially dangerous substances sometimes found in returned bottles. Their one big disadvantage was their high cost, which at one time was calculated to be 45% of total production costs of a unit of Vitasoy. Hence the company was forced to sell a package of Tetra Brik Vitasoy for 20-25% more than a bottle of the same volume. (Actually bottling would be more expensive if two new systems were compared.)

Later in 1976, on seeing the popularity of the new Tetra Brik carton, the company decided to diversify by marketing a new line of juice drinks, containing at least 50% natural fruit juices plus water and flavors. An initial line of four flavors was selected: orange, mango, guava, and kalamansi. Sold in 250-ml Tetra Brik cartons and brand-named Vita, these captured 30% of the Hong Kong juice market within 2 years. Then three more items were added to the line: Chrysanthemum Tea, Sugar Cane Juice, and Lemon Tea. A black currant juice and lemon and herbal teas were added later. All the new juice drinks and teas became extremely popular from the moment of introduction.

The decision to terminate the Pepsi-Cola franchise in 1977 marked the close of an era. HKSBP had made almost no money on the franchise, but had learned a great deal about marketing beverages. They were now in a position to take full advantage of this valuable knowledge.

The result of these four bold decisions (combined with some larger market factors) was dramatic. Sales of Vitasoy rebounded sharply after 1975, reaching 129.6 million bottles and packs in 1980, for a respectable compound annual growth rate of 10% during those last 5 years. Despite the discontinuance of the Pepsi franchise, sales of the juices and teas added further to the rapid increase in the company's total sales.

In 1978 a new plant in Aberdeen (41 Heung Yip Rd.) was completed and equipped with the most modern soft drink equipment. The company's head offices were also located there. In the summer of 1978 Vita carbonated soft drinks were added to HKSBP's product line. The four flavors were Cola, Orange, Cream Soda, and Root Beer. The company that had started out to provide an alternative to the empty calories of soft drinks was now selling them under the new philosophy that customers should be given what they wanted, even if these beverages were (as the company acknowledged) "harmful to health."

Also in 1978 the company's founder, K.S. Lo, retired from the post of Managing Director, while retaining the position of Chairman of the Board of Directors. In addition to his pioneering business work, he also had a long and distinguished career of public service in Hong Kong and was a respected collector and student of Chinese ceramics. He handed the leadership of HKSBP over to his two sons, Frank and Winston. K.S. Lo had founded his business on a basic faith in the soybean and confidence in his efforts to make it a success. For 38 years he had been the leading pioneer of soymilk in East Asia, and had played a key role in giving the soybean and soymilk a new, very positive, and modern image in the land of their birth.

Following the end of the Vietnam war in 1975 and the subsequent conflicts and famines in Cambodia and other nearby countries, refugees streamed into Hong Kong. Once again Vitasoy returned to play its original role. Working with the Red Cross, the United Nations, and Church groups, the company provided multi-vitamin fortified Vitasoy at half the regular price to refugees in Hong Kong and Cambodia. Letters from refugee workers testified that Vitasoy helped cure nutritional deficiency diseases and was especially important in improving the health of children under the age of 5, old people over 65, and pregnant women.

In 1979 the company decided to diversify again, this time into dairy farming. They entered into a joint venture with the People's Republic of China via the provincial government of Guangdong (Kwantung) to expand and modernize the Kwong Ming Dairy Farm in Shum Chun, 60 km across the border from Hong Kong. They helped to enlarge the herd of dairy cows and took full responsibility for marketing all of the dairy's products, initially in Hong Kong. By 1981 they were selling 15 tons of fresh cow's milk daily in Hong Kong under the Vita brand, using Vitasoy distribution channels. Higher living standards in Hong Kong had stimulated demand for cow's milk. The company saw Vitasoy and cow's milk as complementing one another rather than competing, allowing the business to cater to all economic sectors of the population. Yet the venture had significance far beyond the area of marketing milk. It was a first step into a potentially huge new market, China, where Vitasoy might once again be called on to play its original role as a stylish source of high-quality, low-cost protein for the masses--1,000 million strong!

In 1979 a major new phase in the history of HKSBP began, as it started to export products, packed in Tetra Brik, to countries throughout the world. The ambition of making Vitasoy an international drink was being rekindled almost 15 years after the joint venture with Monsanto had fizzled. This time HKSBP, much larger and wiser than before, would take on the task itself. The key factor that now made exports viable was the use of Tetra Brik packaging. Exporting a bottled soymilk, then having to either recycle the bottles back to Hong Kong or discard them overseas, was simply too costly. Moreover there was a rapid rise of interest in soymilk in Western countries, primarily from Asian immigrants, but increasingly from those interested in natural foods or alternatives to dairy products. By the early 1980s exports were going to over 20 countries, both developed and developing. By 1983 exports of all HKSBP products (including Vitasoy) were growing at 35-40% a year, with a large portion going to the newly opened Singapore and Malaysia markets, and to North America, as described below.

HKSBP continued to explore the possibilities of making and/or marketing soymilk overseas with multinational corporations. For example, it had lengthy negotiations in 1980 with the Coca-Cola Co. concerning a joint venture for test marketing various flavors of soymilk in Thailand. Interestingly, the deal fell through over failure to reach an agreement regarding nondisclosure of HKSBP's technical know-how.

An overview of HKSBP's market position in the early 1980s showed the following. By 1980 sales (by number of cartons or bottles) of the many and varied non-soy Vita products had passed sales of Vitasoy. Sales of Vitasoy were growing steadily, from 130 million Tetra Brik cartons and bottles (converted to 250-ml equivalents) in 1980 to 150 million in 1983, for a 5% compound annual growth rate in a mature market. In 1983 all products made by HKSBP's accounted for 35% of the Hong Kong Beverage market, second only to the Swire/Coca-Cola Company's products with 42%. Vitasoy, which had had no competition from brand-named soymilks since 1961, suddenly had to worry about competitors again. Nestle's Bonus (launched in 1978), President's soymilk (launched in 1980), and Coca-Cola's Hi-C soymilk (launched June 1982) took away some of Vitasoy's market monopoly. Yet in 1983, according to Hong Kong Beverage Association statistics, Vitasoy had a commanding 96% of the fast-paced Hong Kong soymilk market, versus only 4% for Hi-C. Bonus and President had insignificant shares. Hong Kong had the world's second highest per capita consumption of soymilk (after Taiwan), about 8.2 liters a year. In 1983 Vitasoy was given a new slogan which proclaimed: "Taste the Feeling."

In 1980-81 Vitasoy prices in Hong Kong dollars were as follows: Bottles, 60 cents for 7 oz. and 80 cents for 10 oz. of plain Vitasoy and 80 cents for 8 oz. of malted Vitasoy; Tetra Brik (250 ml or 8.45 oz.), 90 cents for plain and $1.00 for malted. Ingredients in the plain (sweetened) Vitasoy sold in Hong Kong were water, soybean solids, soy oil, cane sugar (5.5%), and salt, plus vitamins A, B-1, B-2, and niacinimide. The exported Vitasoy contained no added vitamins. A typical 250-ml carton of Vitasoy for export contained 100 calories, 16 grams (6.1%) carbohydrates, 5 grams (2.0%) protein, and 3 grams (1.1%) soy oil. In 1981 the company had sold more Vitasoy in bottles than in Tetra Pack, but sales of the latter had increased by 50% a year since 1978. In 1983 sales in Tetra Pak led bottles 6 to 4.

For HKSBP China represented the great untapped market of the future, but also the great unknown. In 1983 HKSBP made two small but important new moves into China, building on experience from the Kwong Ming Dairy Farm. First, the company began to export Vitasoy to China's new Special Economic Zones. And second, they worked with the Chinese on a venture in Shanghai called Jing Jiang United Food Processing Co. Ltd. Initially HKSBP worked as a technical consultant on the project, but negotiations were underway for a joint venture. In August 1983 the plant's first product, Vita orange drink, was produced for a national sports meet. It is hoped that soymilk, perhaps called Vitasoy, will be the company's next product.

Vitasoy in North America. Vitasoy was the first Asian soymilk to be imported to North America. This venture was pioneered by K.S. Lo's two entrepreneurial daughters, Yvonne and Irene. Yvonne, who actually ran the operation, had graduated from a Canadian university then worked for 6 years as a city planner in Toronto, before realizing that her heart was really in business and marketing. In January 1979 Yvonne and Irene incorporated The Soya Bean Products Co., N.A. Inc. (SBPC) as a marketing company for HKSBP's products in North America. They opened headquarters that month on Bush Street in San Francisco, then began immediately to market and distribute plain and malted Vitasoy in Canada, in 8.4-oz. (250-ml) Tetra Brik cartons. In February 1981 they introduced the same products to the USA, immediately after the FDA lifted its ban on Tetra Pak (because of a disproven concern over hydrogen peroxide residues from sterilization). By 1982 some 3.2 million cartons of Vitasoy a year were being sold in the US and Canada.

The venture was so successful that in April 1982, to raise capital and facilitate long-term operations with Hong Kong, Yvonne and Irene sold their company to HKSBP, which renamed the US affiliate Vitasoy USA, Inc. The parent company now took a serious interest in the US market. In 1983 sales of Vitasoy increased to 5 million cartons, up a whopping 60% from the previous year. The 1983 figure equalled 328,125 gallons or 1.24 million liters. An estimated 90% of this soymilk was sold to the Oriental market; of this, 80% was sold to Chinese, and the rest to Vietnamese, Filipinos, and other ethnic groups. Roughly 45% of all Vitasoy was sold in the three western coastal states. Vitasoy distributed its own products in the San Francisco Bay Area (the single area of greatest sales), northern California, Oregon, and Washington. Other companies, appointed by Vitasoy, sold the product in southern California, and elsewhere in the US and Canada, in 10 market areas designated as having a high concentration of Oriental Americans.

In 1983 Vitasoy was by far America's leading imported soymilk, accounting for just under 50% of total soymilk imports. Heady with success, Vitasoy USA announced in late 1983 that it would launch two American-style products in March 1984 at the big natural foods trade show in Annaheim, California. These would be called Vitasoy Original and Vitasoy Coconut. Each would bear the subtitle: "Natural Soy Drink, Sweetened with Maple Syrup." They would be marketed to the natural and health food trades as a healthful and nutritious beverage, under the slogan "Taste the Goodness." Marketing to mainstream consumers was also planned. Prices in the two markets were expected to be $0.65 and $0.55 respectively (maple syrup was a major part of the product cost), as compared with $0.35 for Vitasoy with a higher water content, sweetened with sugar, sold in the Asian-American market.

In developing these products Vitasoy USA did extensive and thorough, original research on American attitudes to and taste preferences for soymilk. Working with American marketing and product development professionals, they ran "focus group" and "intercept" studies. In September 1982 Yvonne Lo and Hilton Tsui issued a 59-page in-house report titled Market Study of Soymilk Beverage, packed with original information, plus an overview of the US beverage industry and a marketing plan.

Most important, the company announced in late 1983 (after an unsuccessful attempt to acquire majority ownership of the New England Soy Dairy) that it had purchased land in Brisbane, California (just south of San Francisco) and had signed a contract to build a large soymilk plant there. This plant, scheduled to open in 1985, would clearly introduce a new stage in the history of soymilk in America, for HKSBP would be the first major Asian soymilk manufacturer to start a plant in the West.

The Present and Future. The year 1984 saw the Hong Kong Soya Bean Products Co., Ltd. as the world's third largest manufacturer of soymilk (after Kibun in Japan and Chung's Food in Korea), and one of the largest exporters. The tiny size of the Hong Kong market (only 5.2 million people, compared with 120 million in Japan and 42 million in Korea) had been a major factor limiting the company's growth. But now HKSBP was poised on the edge of an era of great potential growth in a world market. The challenges of internationalization, diversification, public versus family ownership, exports versus local manufacture, marketing Asian products in the West, company name changes with diversification, etc. all bear striking resemblance to those faced by Kikkoman, as discussed in Chapter 79 of our book History of Soybeans and Soyfoods. We expect that HKSBP, though much smaller than Kikkoman, will follow many of the same patterns; hopefully it will be as successful as Kikkoman has been.

The relatively small Hong Kong market will play a smaller and smaller role in the company's future. The greatest potential for growth may well lie in China. Efforts to introduce Vitasoy into school lunch programs in Third World countries and to help such countries make better use of domestic soybeans for human nutrition could bear great fruit in countries such as Mexico, India, Argentina, Brazil, Paraguay, and Indonesia. In these areas, domestic joint-venture plants probably hold greater promise than imports, since they help rather than hurt foreign exchange balances.

 

HONG KONG SOYA BEAN PRODUCTS CO. GROWTH PATTERN FROM 1941-1983

 

Date Paid up Capital Sales in Bottles/Packs Sales in Dollars

1941 HK$ 25,000 Not available HK$ 87,000
1955 $ 1,600,000 8,400,000 $ 3,300,000
1960 $ 2,650,000 42,000,000 $ 5,800,000
1965 $ 2,650,000 67,000,000 $ 12,500,000
1970 $ 5,300,000 100,800,000 $ 25,000,000
1975 $ 5,300,000 80,400,000 $ 40,200,000
1980 $26,500,000 129,600,000 (Vitasoy) $210,000,000
136,800,000 (Other Vita Products)

SALES OF VITASOY: MILLIONS OF BOTTLES OR PACKS (250 ML EQUIVALENTS)

Year Millions Sold

1970 100.8
1971 86.4
1972 112.8
1973 105.6
1974 84.0
1975 60.0 57
1976 62.4
1977 73.4
1978 93.6
1979 100.8
1980 105.6 or 109
1981 138
1982 143
1983 150

Note: Column 1 of sales from K.S. Lo, letter of 26 May 1982. Column 2 of sales from Hilton Tsui, marketing Director, Vitasoy USA, 27 January 1984. Discrepancies may have to do with conversion factors.