Adrian Cheng: updating a Hong Kong family empire for a changing China
HONG KONG (Reuters) - He has trained on Broadway and been a Wall Street banker.
Now, Adrian Cheng, 33-year-old scion of the world's largest jewellery retailer and one of Asia's leading property developers is gearing up for his latest challenge - modernizing his family's $25 billion empire for what he calls a "new era".
The grandson of Hong Kong billionaire Cheng Yu-tung, who built up jeweller Chow Tai Fook (1929.HK) and real estate titan New World Development (0017.HK), Cheng is one of a new generation of business leaders in Asia who are taking over the corporate reins from their ageing rags-to-riches forebears.
He and contemporaries including Martin Lee, vice-chairman of Henderson Land (0012.HK), Victor Li, deputy chairman of Cheung Kong (Holdings) (0001.HK), and Melco Crown Entertainment (6883.HK) boss Lawrence Ho bring an international education and a digital savvy to family-owned empires that have been run along traditional lines for decades.
A former Goldman Sachs and UBS banker, Cheng says he is trying to change the corporate culture by removing boundaries and hierarchy within the group. "Change is a big word that everyone is using. (United States President Barack) Obama uses it, but you have to actually feel it," he says, laughing.
Ranked by Fortune as one of the world's youngest billionaires, Cheng's business challenges are a far cry from those of his grandfather, who began as a trainee at Chow Tai Fook after the Second World War, when the retailer sold others' products on consignment.
The young tycoon, who studied at boarding school in the United States, Harvard University and then took an arts and culture programme in Japan, says his mission is to equip the family business to cater to diverging retail trends in a rapidly changing Chinese market.
"Back then the demographics were very different. It was more simple minded. These days China is so big, it has become a really melting pot market," says Cheng, dressed fashionably in a charcoal grey jumper and black jacket.
With his father, Henry, as chairman of Chow Tai Fook and New World, Adrian is becoming more involved in the group's overall strategy. He was appointed joint general manager of the property arm last year in line with his grandfather's succession plans, and is an executive director of the group's jewellery arm.
Chow Tai Fook, which listed in Hong Kong in 2011 and is now valued at $14 billion, has more than 1,800 outlets throughout China. The jeweller focuses on three areas: the VIP segment, entry-price buyers and e-commerce, which is growing at a rapid pace. Sales were HK$25 billion in May-September last year.
New World Development, valued at $11 billion, has a property network that extends from first-tier cities such as Beijing and Hong Kong, where it operates the Renaissance Harbour View and Grand Hyatt hotels, to fast-developing industrial cities such as Anshan in Liaoning province.
Cheng says his business approach is more entrepreneurial than that of large corporates. An advocate of developing arts and culture, he is expanding his own K11 brand, developing 'art malls' across China. Hong Kong's K11, located in a busy shopping district in Kowloon, has playful ceiling installations and prominent statues, including a winged neon-pink pig, to interact with visitors.
A key priority is to position brands internationally, says Cheng, who sits on the Tate Modern's Asia-Pacific Acquisitions Committee in London. Parties and exhibitions in European cities like Paris are regular events, while annual auction dinners in Hong Kong aim to grow the base of high net worth VIP customers.
"They (VIP customers) have been abroad and seen the most expensive stuff. Now it's not about how big the jewellery is. They care more about the design, the subtle sophistication and they want more craftsmanship," Cheng told Reuters in his understated office 32 storeys above Hong Kong's central district. His family owns the entire building, known as New World Tower, one of Hong Kong's larger skyscrapers.
Chow Tai Fook's products range from gold bars and diamond rings for China's burgeoning mass market to million dollar custom-made pieces such as the Carmine Flight, a pink flamingo neckpiece with fuchsia sapphires.
The group has more than 1 million VIP customers in mainland China and 100,000 in Hong Kong - so many that it has had to sub-categorize them into the "really high-end honorable VIPs, mid-range VIPs and lower-tier VIPs."
"Younger generation management revamping family businesses has been quite prevalent in Hong Kong and China recently," said Aaron Fischer, head of Asia consumer and gaming research at CLSA. "Adrian Cheng is one of the prime examples, revolutionizing the corporate culture at the family business with fresh ideas and introducing international best practices."
The move to target specific types of customers across China is reshaping the company internally to help it deal with what Cheng calls a tipping point.
"Changing corporate culture, changing people's mindsets and motivating them to follow your vision is the hardest because that needs a lot of granular commitment," said Cheng, who was trained in classical singing, opera and Broadway music from the age of 12.
Sophisticated e-commerce platforms are being rolled out, with a 24-hour support team to react swiftly to any complaints seen on mini-blog sites. Some new collections are only sold online. "It's getting more competitive because everyone's going in (e-commerce)," said Cheng, adding the group expects to triple online sales each year for the next five years.
Amid all the change in a fast-growth China and online, Cheng holds on to some of his grandfather's basic business tenets - such as understanding what the customer wants, having confidence and liking what you do, and, most importantly, creating a stable ship, he says.
"You need to make sure everything is very stable and is going towards the right direction. Sometimes you need to go back," he adds, noting some firms dive into China too quickly.
Straddling the family's two main business pillars, Cheng sees potential cross-benefits between the jewellery and property arms for Chinese VIP customers. A regular jewellery buyer, for instance, could be offered a small discount on real estate.
"Things are changing so intricately and suddenly it (demand) will just explode and grow exponentially," says Cheng.
"If you don't see the wave underneath that is growing and catch the trend, you will miss the boat."
(Additional reporting by Anne Marie Roantree; Graphic by Catherine Trevethan; Editing by Ian Geoghegan)
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