This article is an abstract of Patrick Chiu’s forthcoming book “Transformation from Colonial Chemist to Global Health and Beauty Retailer: A S Watson” due to release at the end of May 2022. Pre-ordering at the Amazon Books is available or World Scientific with the discount code WSASOC20, valid until September 30, 2022.
The Birth of the Hong Kong Dispensary
The Hong Kong Dispensary (the Dispensary) could trace its early beginnings to Dr James H. Bradford of Philadelphia, the Port Physician of Canton (now Guangzhou), who set up a free medical clinic to serve the local poor in 1828.
A soda water business was introduced to finance the highly successful clinic then called Canton Dispensary in 1832. After the First Opium War (1839-1942), the Dispensary was relocated by Bradford’s successors, Drs Alexander Anderson, and Peter Young, to the Possession Point, Hong Kong with a new name as the Hong Kong Dispensary, in 1841. In 1856, Dr Thomas Watson (1815-1860) became the senior partner of the Dispensary. (Image 1)
Alexander Skirving Watson (ASW, 1837-1865) who was born in Dabrowa, Province of Silesia, Prussia (now Poland) came to Hong Kong to take over the Dispensary from his uncle, Dr Watson, in 1858. Under ASW’s leadership, the Dispensary switched its business focus as a marine supplier cum retail chemist in 1860.
John David Humphreys (JDH, 1837-1897) joined the Dispensary as a bookkeeper in 1867, a year after ASW’s return to the UK, and became the sole proprietor of the Dispensary in 1872. A couple of years later, JDH had sought funding from his opium trader friends in Hong Kong and Shanghai to import a distillation plant to manufacture six flavoured soda waters in Hong Kong.
In 1886, the Dispensary sought more external funding from investors to expand its operations in the mainland, and the Philippines with its initial public offering and became A S Watson & Company Limited.
JDH’s eldest son, Henry Humphreys (Humphreys, 1867-1943) who was born in Hong Kong, went to study in the UK as a teenager and was subsequently qualified as a pharmaceutical chemist and registered with the Pharmaceutical Society of Great Britain in 1888.
Humphreys returned to Hong Kong and became ASW’s pharmacy manager in 1889 at the young age of twenty-two. He soon developed a product portfolio with a full range of Watson’s brand of locally produced liquors, opium substitutes, health, and beauty care products to meet the growing market needs of the mass market instead of relying on expensive imports.
King of Opium Substitutes and Soda Water
Humphreys succeeded his father, and a pocket diary was issued to commemorate his first year of the taipan of ASW in 1897. (Image 2) By 1900, ASW became the King of Opium Substitutes with over a hundred retail chemists distributing Watson’s brand in the Far East.
The Boxer Rebellion burnt down the British Dispensary owned by ASW in the Legation Quarter in Peking (now Beijing) in the summer of 1901. By 1904, ASW’s business had gradually recovered, and it continued to be the leading supplier of opium substitutes, soda water and family medicines up to 1909.
By 1912, the Chinese sliver currency depreciated by half due to a string of events including the floods in the Yangtze River in 1909-1910, the collapse of the rubber commodities market in 1910, the Manchurian plaque in 1910-11, and lastly Dr Sun Yat-sen’s republican revolution in 1911. Then it came the WWI (1914-1918) with the prohibition of sugar and pharmaceutical raw materials exported from Europe which hit ASW badly.
With the growing appetite of the urban population in China in the 1920s, ASW enlarged its soda water distribution business, and as Coca Cola’s bottler in both Hong Kong and Shanghai in 1927. (Images 3 and 4)
The Great Depression and WWII Years
Business recovered soon after WWI ended. However, the Great Depression (1828-1932) resulted in the return of hundreds of thousands of Chinese labourers working in the tin mines and rubber plantations in Southeast Asia to the Mainland in the early 1930s. Exports of ASW’s highly lucrative opium substitutes grounded to a halt.
A short business rebound occurred when refuges flooding from the southern provinces into Hong Kong after Canton fell to the Japanese imperial army in December 1938. Hong Kong’s population swelled from 500,000 to 1.8 million by early 1941.
It was ASW’s centenary year, but it was not celebrated.
The WWII of the Pacific Theatre was looming in the background. Hong Kong fell on Christmas Day of 1941. Donald Mennie (1875-1944), a famed photographer, who was ASW’s North China managing director, was interned, and died at the Lunghua Camp in Shanghai in 1844. (Image 5)
ASW resumed its business soon after the WWII ended in August 1945. The Chinese civil war flared up in 1946 which led the communist party becoming the legitimate government on October 1, 1949. ASW closed its operations in Canton and Shanghai and exited the mainland.
Changes of Ownership and a Quantum Leap into Europe
Douglas Clague of Hutchison International Ltd. (Hutchison) became the majority shareholder in 1963 thereby ending close to a century’s control by the Humphreys family. In 1977, Li Ka-Shing, dubbed “Superman Li”, of the Cheung Kong Holdings became the single largest shareholder of Hutchison Whampoa Ltd. (HWL).
Ian Wade, an executive director of Asda Stores in the UK, was appointed as ASW’s group managing director by HWL in March 1982. In the following 15 years, Wade, a retail industry veteran, grew a dozen or so retail stores into a truly regional retail health and beauty and supermarket group by serving the burgeoning middle-class families in Asia.
1997 was a historical year in China and Asia.
By the time of Hong Kong ‘s change of sovereignty in 1997 from Britain back to China, ASW had grown to 700 retail stores with more than half of its profit generated in the higher margin retail health and beauty trade. The global hedge fund managers’ sudden onslaught in Thailand on July 2, 1997, had a cascading effect.
ASW decided not to “put all its eggs into one Asian basket” and embarked on a corporate strategy to spread its wings outside of Asia. ASW minimized its risks by entering the European market with the UK as its first stop. ASW acquired the 125-store Savers Health and Beauty in Northeast England in 2000. After Savers, ASW was preparing for his quantum leap into Europe. In August 2002, ASW acquired the Kruidvat Group, based in the Netherlands, which had 1,500 including Kruidvat in the Benelux and Superdrug in the UK. (Images 6 and 7).
Largest Global Health and Beauty Retailer
In 2003, the retail and manufacturing sector of which ASW formed the bulk delivered US$ 8.1 billion or 46% of its parent, HWL’s revenue that year. In the following year, ASW further acquired Kruidvat’s 40% shareholding of Germany’s number 2 drug store chain, Dirk Rossman GmbH, which owned 1,100 stores, with 786 in Germany and the rest in Central European countries. (Image 8)
In 2005, ASW acquired Marionnaud, Europe’s number 1 in beauty and perfume chain of 1,300 shops. (Image 9) By 2006, ASW completed its acquisitions in Eastern Europe and formed joint ventures with local partners in Southeast Asia. ASW became the world’s largest health and beauty retailer store with 7,700 stores at the end of 2006.