Wahaha Says Profit May Rise More Than 40%, Seeks Overseas Milk

Hangzhou Wahaha Group Co., the beverage maker owned by China’s second-richest man, is targeting a more than 40 percent increase in profit this year as it develops higher-margin products such as health drinks.

Chairman Zong Qinghou, 66, who is also a member of the Chinese legislature, said in an interview in Beijing today that profit may rise to 10 billion yuan ($1.6 billion) from last year’s 7 billion yuan as sales gain 24 percent to 85 billion yuan.

“Compared with traditional beverages, health drinks offer fatter margins,” said Zong, whose $10.7 billion of wealth trails only the $11 billion of Sany Heavy Industry Co. Chairman Liang Wengen, the Hurun Report estimates.

Wahaha, which means “laughing children” in Chinese, sells products from water and iced tea to children’s clothing and plans to invest 4 billion yuan expanding beverage output capacity in 2012 to reap profit in the next several years, said Zong, a delegate to China’s National People’s Congress which opens its annual session in Beijing on March 5.

Wahaha, which already sources its “Edison” baby formula from the Netherlands, is also looking overseas for better quality milk sources that China lacks, Zong said, adding he has been examining dairy farms in the U.S.

Zong’s wealth shrank 12 percent last year from $12 billion in 2010, Shanghai-based Hurun Research Institute said in September. Liang, whose Sany Heavy is China’s biggest machinery maker by market value, was the country’s richest man in 2011 with an estimated $11 billion fortune, according to Hurun.

Forbes Asia dropped Zong to fifth place with a net worth of $6.5 billion in its 2011 China rich list, from the top position and $8 billion in 2010, Forbes said in September.

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