October 18, 2025 • 20 mins
<h2>Watsons: The Complete History of the Philippines' Biggest Health and Beauty Retailer</h2>
<p>
Watsons has become a household name in the Philippines. You will find it in nearly every SM mall, beside every grocery, and in almost every major city.
But how did this happen? And why did SM choose to partner with Watsons instead of Mercury Drug, the most established pharmacy chain in the country at the time?
</p>
<br>
<p>
In this episode of Brand Origins, we uncover the full history of Watsons in the Philippines and how it became one of SM's most powerful retail partners.
From its beginnings as A.S. Watson & Co. in 19th century Hong Kong, to its rapid expansion across Asia, to the critical partnership with SM Investments, this episode breaks down how the brand grew from a small apothecary into one of the largest health and beauty retailers in the world.
</p>
<br>
<p>
We explore how Watsons built its reputation for trust, accessibility, and convenience, and how SM's business strategy helped the brand dominate the Philippine market.
</p>
<br><br>
<h2>Timestamps</h2>
<p>00:00 – Intro</p><br>
<p>00:58 – Henry Sy's Vow to Crush Mercury Drug</p><br>
<p>02:40 – How Britain Took Hong Kong</p><br>
<p>06:49 – The Hong Kong Dispensary</p><br>
<p>07:55 – A.S. Watson's Rapid Growth</p><br>
<p>10:17 – Watsons Water</p><br>
<p>11:07 – Hong Kong and Whampoa Dock</p><br>
<p>11:23 – How Li Ka-Shing Acquired the Company</p><br>
<p>12:02 – Brands A.S. Watson Owns</p><br>
<p>14:20 – Watsons in the Philippines</p><br>
<p>15:08 – Watsons' Secret Cash Cow (Optimo)</p><br>
<p>18:39 – Watsons Pink</p><br>
<p>19:43 – Outro</p>
<br><br>
<h2>Sponsorships</h2>
<p>
Want your brand to be featured in future episodes?<br>
Visit <a href="https://chrisgarin.com">chrisgarin.com</a> for sponsorship opportunities, partnerships, or collaboration inquiries.
</p>
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
All my life, I always just assumed that Watson's was SM's
response to mercury drug, but apparently Watson's is so much
bigger than that. They're owned by AS Watson, the
world's largest health and beauty retailer.
They have 16,800 stores globallyas of 2024, and it's a lot of
stores. And AS Watson is owned by the
wealthiest person in Hong Kong, Lika Shing Watson started out in
(00:20):
Hong Kong in the late 1800s. And if you've been to Hong Kong,
you'll see that AS Watson has its hands in so many industries,
they even own one of the largestbottled water companies east in
Hong Kong. Watson's open store number 8000
in 2024, and they're closing in on mercury drug fast.
In this video, I'll take you to a couple of Watson's locations
here in Iluila City while telling you about the brand
(00:42):
origin story of Watson's strategies they use that made
them super successful and how they plan on conquering the
Philippines and the rest of the world in the future.
My name is Chris. Welcome to Brand Origins.
Now, if you're like me, the onlything you know about Watson's is
that it's SM's revenge against Mercury Drug.
(01:03):
So there's this age-old tale that people keep retelling.
Now, we can't prove this, but they say that back in the early
days of SM, when SM's founder, Henry C himself was still
selling shoes from a car, he asked Mercury Drug if he could
set up shop in front of their store.
Mercury Drug was already ahead and they were getting a lot of
foot traffic. And so he asked them, but they
(01:24):
shooed him away and they rejected him.
And the story goes that in this,this is when Henry C vowed
saying that someday when I get rich, you're not getting
anything from me. And they say that that's the
reason why there are no mercury drug badges in any of the many
95 plus malls of SM around the country.
And so instead of having Mercurydrug inside of their malls, SM
(01:47):
open their own. So that's why they have Watsons.
But then Henry C's daughter, Tessie C Coston has already
explicitly denied this. She said that the families
behind SM and Ricky drove you all OK with each other.
She was like, hey, there's no drama.
We're all friends here. We just couldn't agree with the
rental rates, believe it or not.I'm not sure.
It just doesn't make sense to mepersonally because SM would
(02:10):
always bring in the top brands. Why would they suddenly not go
for the most recognized and mosttrusted drugstore brand in the
country and this whole fail? The reason why I thought that SM
launched Watsons, like I really thought that we just did this to
have a mercury drug alternative within SM and I was so wrong
because first of all, SM didn't even launch Watsons.
Watsons has been around way before SM Mercury drug and it's
(02:33):
a completely different monster having a presence all over the
world and owning so many brands under its name.
So what exactly is the story of Watsons?
Now, I know this isn't a channelabout wars and conflict, but
it's impossible to talk about the history of Watsons without
talking about the Opium Wars andhow Hong Kong ended up in
British hands, because it will give us some context as to why
they were doing whatever they were doing at that time.
(02:55):
This is opium. Opium was grown in China since
the 11th century, but it was only around the 17th century
when they started getting hookedon it, because that was when
they discovered that when you burn opium, you get a feeling of
euphoria that's on a whole new level.
Basically, you get high. And so people in China were
loving opium, but then the Chinese government was like, uh
oh, opium is good, but I think it's getting too good because
(03:17):
our people are getting addicted to do this.
And they're pretty much just speaking opium, and that's all
they're doing the entire day. There actually came a point when
the productivity of China's workforce came crashing down
because of opium, because they use it, enjoy it, and they were
hooked. It became such a problem that
they decided to ban opium in China.
And they were very serious aboutthis.
(03:37):
In fact, there were two emperorswho decided to ban opium in
China. Now, during this period, China
was kind of an isolationist country.
Like, they were fine on their own, but of course they were
still involved in trading with others countries.
And this is where Britain comes in.
So you know how the British lovetea.
They love their tea. And at that time, China was
producing really good tea. And so Britain was getting a lot
(03:59):
of their tea from China, like a lot of tea.
Now normally when two nations would trade, this is just an
example. Britain could trade finished
goods like textiles or iron, andin exchange, China trades their
tea. The problem was China didn't
need anything from Britain, or at least not as much as Britain
needed tea from China. So Britain would offer China
(04:20):
goods they would want to trade tea for.
But then China was like, yeah, we don't really need that.
We're doing OK over here. You could just trade your silver
for our tea. And so Britain went for it.
They didn't really have a choice.
They loved their tea. And so Britain was importing
these large amounts of tea from China.
And since they didn't have a choice to trade their silver for
Chinese tea, this was gradually depleting their silver reserves.
(04:43):
And so Britain was like, OK, this is unsustainable.
There has to be a better way. And they figured, all right,
China doesn't want any of the goods that we offer them.
Maybe we could just figure out what they want and we can trade
them for it. And that's when you remember how
much the Chinese loved opium so much that their government had
to ban it. But Britain couldn't produce
opium because the plant where opium comes from, it can only be
(05:04):
grown in specific warmer climates.
And they were like, oh, wait, why don't you just grow them in
one of our colonies? And that colony would happen to
be India. And so Britain would start
smuggling opium from India to China.
But remember, opium was banned in China.
And so instead of trading directly with the government,
they would trade them to independent Chinese merchants.
China's to notice, hey, I think our people are getting high all
(05:27):
day again. Didn't we just ban opium?
That's when they found out that the British were smuggling opium
into China. And one day they stumbled across
this massive supply of opium, around 20 large crates of opium.
There was so much opium that wasmeant to be sold to the Chinese.
And not taking this lightly, China responded.
And So what they did was they burned all this opium.
(05:48):
They burned all the opium they could find, and they did this
publicly to send the message to Britain, if you want to go keep
smuggling opium, we'll just keepburning it.
But what this response did, instead of putting all of this
to an end, it ended up escalating the whole thing
because this is what triggered the start of the First Opium War
in 1839. This would end up being A1 sided
(06:08):
affair because Britain and the Royal Navy were just far too
powerful and far too dominant. So after a series of battles
that ended relatively quickly by1841, they were able to occupy
Hong Kong in the following year.The war ended with the Treaty of
Nanking. The Treaty of Nanking is known
as one of the first unequal treaties in history.
This treaty gave the island of Hong Kong to Britain.
(06:31):
This forced China to allow Britain to freely trade with any
merchants in China, even though it would ruin the lives of
millions of the Chinese people due to addiction and forced
China to pay damages for the opium they destroyed.
This essentially ensured that Britain could continue sparkling
opium into China via Hong Kong. Now around this time, Westerners
(06:51):
started arriving and two of these were Peter Young and
Doctor Alexander Anders. They launched the Hong Kong
dispensary. Dispensaries are basically kind
of like pharmacies. In 1845, this is when Doctor
Thomas Boswell Watson, who is a Scottish doctor, arrived in Asia
and set up his practice in Macau.
He eventually moved to Hong Kongin 1856 and that's when he
(07:12):
became a part owner of the Hong Kong dispensary.
But sadly around this time his health deteriorated.
He invited his 22 year old nephew to come to Hong Kong to
take over his place. His name was Doctor Alexander
Skirving Watson. Now I'm getting ahead of myself,
but if you don't know the parentcompany of Watson's is A S
Watson and A S Watson was named after this guy Alexander
(07:34):
Skirving Watson. He was one of the reasons why
Watson's grew so fast because hefound a way to increase the
supply of medicine to the Navy. He was a great leader, and it
was because of his leadership that they were able to turn this
small dispensary into a fully fledged retail chemist
operation. And you need to talk about the
Opium War so that you get a clearer picture as to how
important opium was during that time.
(07:55):
I mean, wars are being fought over it.
Knowing how important it is. Imagine being one of the few
chemists authorized to sell opium.
And that's the advantage that A S Watson had.
They were one of the few who were allowed to sell it, and
this gave them a huge advantage over the competition.
Now, in the middle of all this, the Second Opium War happened.
This was from 1856 to 1860. I'm not going to get into the
(08:17):
details of all that, but Long story short, Britain was just
way too strong for China. And so China lost.
And when it ended, Britain pretty much made sure that
imports of opium into China werenow free flowing.
Since China couldn't do anythingabout it because of their vast
need for your Navy, they had no choice but to just legalize
opium. Even though they knew that an
entire generation of their people were going to get
(08:39):
addicted to opium, they had no choice.
This was a fascinating discovery, but a bit of a sad
one. I went down the rabbit hole of
the Opium Wars and what opium could do to you when apparently
opium withdrawal could actually kill you.
Like, there's so many stories ofpeople from Hong Kong who have
had relatives, grandparents who have died due to opium
withdrawal. So yeah, because of this,
imports of opium tripled, which also meant that as Watson sales
(09:03):
were through the roof, they werealready doing well.
But when this happened, they were pretty much unstoppable.
Sadly, during the spirit of extreme growth, Alexander
Skirvin Watson had to go back toEngland where he would pass away
at the age of 28. Well, writing this, it shocked
me how young he was when he accomplished all this.
Like, wait, the story with Watson started when he was 22,
(09:24):
and he did all that maybe 8 to 28 in six years.
That's amazing now by 1895 AS Watson had over 35 stores.
What's interesting is that AS Watson was actually already
slowly diversifying into other industries at this point, they
weren't only selling medicine anymore.
They were producing over 300 dispensary, toiletry, perfumery
lines, all kinds of stuff. Despite the rise in popularity
(09:48):
of opium during that time, people in Europe started seeing
the disastrous effects of opium.It started getting a bad drop
and so AS Watson, the company started shifting towards opium
substitutes. When it was no longer profitable
for Britain to trade the opium and when it started being
regulated, opium substitutes rose in popularity.
And so once again, S Watson was able to take advantage.
(10:09):
They were able to ride the popularity of these new
products. By 1901, they've now grown to
over 100 locations and they evenhad branches in China and the
Philippines. In 1903, they saw an opportunity
in selling water because around that time the quality of water
in Hong Kong was just really bad.
So in 1903, they established Watson's Water.
Watson's Water isn't here in thePhilippines, but they actually
(10:29):
have a huge presence in a coupleof countries in Asia.
Now at this point is Watson was already this big company with a
regional presence, but they got even bigger, eventually landing
in the hands of Hong Kong's wealthiest man, Lika Shing.
So how did this happen? Now there's a couple of
companies involved here, but it all starts with Hutchison
International, a company that imported large amounts of
(10:50):
consumer products, founded in 1877.
There was a time when the Hutchison Group went on a
shopping spree, acquiring a handful of companies which in
19, 63 included a partial acquisition of AS Watson and all
these acquisitions formed the Hutchison Group.
Two years later, the Hutchison Group went on an acquired a
company called Hong Kong in Wampoa Dock.
It's a port management company operating what once was one of
(11:12):
the largest dockyards in Asia. And the new group as a result of
this acquisition became Hutchison Wampoa.
Now unfortunately, things took athird in 1975.
Leaders of the company made these very risky financial bets
on the stock market and on foreign currency, hoping for a
profitable return. But these backfired and caused
major financial losses. It was so bad that the company
(11:35):
needed to be bailed out. HSBC, the Hong Kong and Shanghai
Banking Corporation refused to bail out Hutchison Whampoa and
instead acquired a 22% stake in the company.
The following year, the company was listed on the Stock
Exchange. In 1979, Lika Sheng ended up
acquiring HSBC's 22% stake via his holding company Chiang Kong
Holdings. 2 years later in 1981,the now Lika Sheng partially
(11:58):
owned Hutchison, the full control of AS Watson.
Now at this point, as Watson nowhave that financial war just to
expand operations and oh man didthey expand because as Watson
went shopping in the 1980s, AS Watson grew rapidly, they
entered Taiwan, Macau, Singaporeand China, all under the name
(12:19):
Watson's the Chemist, which was the name of their retail stores
that time until they rebranded to the present day Watson's.
We all know today, Noel Watson'swas expanding in Asia, growing
its own brand AS Watson, the parent company embraced a market
entry acquisition strategy. That's when instead of growing
their own brand, the company simply decides to acquire an
existing brand in order to quickly gain entry into a new
(12:41):
market. So this is what they did when
they wanted to, let's say, entera new country.
And that's because these existing brands, they already
have their own customer base, distribution networks and
building all that from scratch, even though they're capable,
it'll just take so much time andso much resources.
And it was simply cheaper to just cash out and acquire these
brands because at this point, money wasn't really a problem
(13:03):
for AS Watson anymore. They started in Hong Kong when
they acquired Fortress. Interestingly, AS Watson
acquired a Hong Kong based juicebrand called Mr. Juicy in the
early 2000s AS Watson wanted to enter the UK and Europe and so
they acquired Savers Health and Beauty and he also did this with
the Netherlands based. I'm probably going to ruin this,
OK. Kroidvat Group which owned
(13:23):
brands just Superdrug, the second largest health and beauty
retailer in the UK. Rosman, a health and beauty
brand in Germany which had 4700 stores and this was a €7 billion
acquisition since the group had a store portfolio over around
1900 outlets. In 2004, Nika Sheng increased
his stake in Hutchinson from 22%to 49.9%.
(13:45):
And then the acquisitions continued because in the same
year as Watson acquired Drogas, the leading health and beauty
chain in the Baltics, which includes Lithuania, Latvia,
Estonia. In 2005, they acquired The
Perfume Shop, the UK's leading fragrance retailer, and in this
same year they entered Turkey byacquiring Cosmos Shop and when
(14:06):
they wanted to enter Russia, they simply acquired Spectre.
In 2006, they entered Ukraine byacquiring BC, the only
nationwide health and beauty retail chain in the Ukraine.
Now there were several other acquisitions, but at this point
I'm sure now you know just how big AS Watson is.
So how about the Philippines? Well, in 2002, the SM Group and
(14:27):
AS Watson formed a joint ventureto bring Watson to the
Philippines. Even though Mercury Drug which
opened in 1945 at a 57 year headstart, Watsons has grown rapidly
in the country. Now part of their growth is due
to their new store formats. Now you remember a time when you
could only find Watsons inside the SM models, but recently
could now find Watsons in these independent locations outside of
(14:50):
SM. In this case, there's a Watsons
here in a pond in Iloilo here inthis pure gold branch.
So these smaller Watsons locations are what they call
their community stores. In 2004, Watson celebrated the
opening of its 8000 store in Asia and end of the year with a
store count of 1166 in the Philippines.
But perhaps what fascinated me the most was this new thing that
(15:12):
Watsons was rolling out. Now, before we talk about this,
you have to understand that AS Watson isn't just this massive
retail company, it's a data empire.
They have so much data on their hands and they found a way to
monetize it with 16,500 stores in 28 markets worldwide, 1000 of
which are Watsons. AS Watson serves an unbelievable
(15:33):
5.3 billion customers per year, that's around 14.5 million
people per day. Now, these numbers alone should
paint a picture of how big Ace Watson is and most importantly,
the incredible amount of data they have about their customers.
But here's where it gets really interesting. 137 million people
use the Watsons loyalty card. And this card tracks purchases,
(15:58):
preferences, shopping habits. And so when you have that much
data about this many people, which extends or covers several
years, you get to see trends because you know what people are
buying, how often they buy it, what they bought in the past and
what they're likely to buy next.They don't even need you to get
a physical card anymore. There's an electronic version
(16:20):
and it's free because this data is very important to them.
So they just need to get into their system as seamless as
possible. So how does this work?
Let's take facial wash as an example.
Let's say you've been buying this particular brand of facial
wash from Watson since January up until May.
And so Watson sees this in your transaction history, in your
rewards card. Now the data shows that you
(16:43):
didn't stop buying facial wash. You simply stopped buying that
particular brand of facial wash in May because in June they see
it that you bought another brandof facial wash.
And so because of this data, brands can now investigate
accurately and get insights. So then they could study this
particular customer and they could be like, why didn't Chris
switch to another brand in June?Before June?
(17:06):
Did our competitor, did that other facial wash brand lower
their prices? Was it possible that before June
they launched a new marketing campaign?
Or did they launch a new productwhich triggered Chris to switch?
Maybe that product was superior or maybe it's our fault.
Did we run a marketing campaign?Did we use a new tagline?
(17:26):
And maybe Chris no longer responds to that which made him
switch in June. And so these are the insights
that they can get from the data Watsons has.
And so for brands, this is very valuable.
And not only that, brands also get insights as to what other
products their customers are buying.
So, so they can like see parallels.
We get to see like, for example,70% of women from ages 20 to 25,
(17:50):
every time they buy their Colgate, they also buy that
facial wash. This might push them to propose
a partnership with that particular brand of facial wash.
And that's why in the supermarket, I don't know if you
guys have noticed, sometimes you'll see brands partnering up
like they'll have this bundle like tuna and Sky Flakes.
I don't know, sometimes see it, it looks weird, but there's a
reason why they they did that bundle.
(18:10):
It means there's enough data that supports that.
Now you understand how valuable this data is, especially for
those big brands. And Watsons has monetized this
with optimal. It's their new data analytics
platform. And so brands pay to get access
to this data that helps them understand their customers
better and helps them make better decisions.
And it is so smart because this is data that Watsons and all the
(18:32):
other brands under as Watson, they accumulate all this data
for free simply by running theirstores.
So yeah, this just gets more valuable the bigger Watson grows
and they continue to grow. Watson's is constantly building
and trying to cement its space as the leader in the health and
needy space. And it's making sure that it
appeals to younger Gen. Z and the growing Gen.
Alpha audience in China. They introduced Watson Spink.
(18:55):
It's a pink Watson's. But that's not all that it is,
though. So Watson's Spink locations have
spa services inside them, and they're all about giving
customers the opportunity to do self-care while browsing their
favorite products. It was designed primarily for
the younger demo graphic, and they're hoping that their
customers appreciate it beyond just the pink aesthetics.
So yeah, Watson's isn't showing signs of stopping.
(19:17):
In 2023, they underwent a major rebrand and a S Watson announced
an additional investment of $250million to upgrade 6000 of its
stores in key markets in Asia, Europe and the Middle East.
So even though our initial tendency is to compare Mercury
Drug with Watson, since they have like a pharmacy, now,
Watsons is in a completely different category and only time
(19:40):
will tell if anyone can even getin their way.
So yeah, that's about it. Now you know about the grand
Origin story of Watsons. Thanks for joining me in this
episode of Grand Origins. It would help me a lot if you
could click the like button and maybe comment down below what
you've learned from this episode.
It's the only way for the algorithm to push my videos to
more people like you. And follow me on Instagram and
(20:02):
TikTok. I have shorter clips there.
My name is Chris. I'll see you in the next
episode.
All my life, I always just assumed that Watson's was SM's
response to mercury drug, but apparently Watson's is so much
bigger than that. They're owned by AS Watson, the
world's largest health and beauty retailer.
They have 16,800 stores globallyas of 2024, and it's a lot of
stores. And AS Watson is owned by the
wealthiest person in Hong Kong, Lika Shing Watson started out in
(00:20):
Hong Kong in the late 1800s. And if you've been to Hong Kong,
you'll see that AS Watson has its hands in so many industries,
they even own one of the largestbottled water companies east in
Hong Kong. Watson's open store number 8000
in 2024, and they're closing in on mercury drug fast.
In this video, I'll take you to a couple of Watson's locations
here in Iluila City while telling you about the brand
(00:42):
origin story of Watson's strategies they use that made
them super successful and how they plan on conquering the
Philippines and the rest of the world in the future.
My name is Chris. Welcome to Brand Origins.
Now, if you're like me, the onlything you know about Watson's is
that it's SM's revenge against Mercury Drug.
(01:03):
So there's this age-old tale that people keep retelling.
Now, we can't prove this, but they say that back in the early
days of SM, when SM's founder, Henry C himself was still
selling shoes from a car, he asked Mercury Drug if he could
set up shop in front of their store.
Mercury Drug was already ahead and they were getting a lot of
foot traffic. And so he asked them, but they
(01:24):
shooed him away and they rejected him.
And the story goes that in this,this is when Henry C vowed
saying that someday when I get rich, you're not getting
anything from me. And they say that that's the
reason why there are no mercury drug badges in any of the many
95 plus malls of SM around the country.
And so instead of having Mercurydrug inside of their malls, SM
(01:47):
open their own. So that's why they have Watsons.
But then Henry C's daughter, Tessie C Coston has already
explicitly denied this. She said that the families
behind SM and Ricky drove you all OK with each other.
She was like, hey, there's no drama.
We're all friends here. We just couldn't agree with the
rental rates, believe it or not.I'm not sure.
It just doesn't make sense to mepersonally because SM would
(02:10):
always bring in the top brands. Why would they suddenly not go
for the most recognized and mosttrusted drugstore brand in the
country and this whole fail? The reason why I thought that SM
launched Watsons, like I really thought that we just did this to
have a mercury drug alternative within SM and I was so wrong
because first of all, SM didn't even launch Watsons.
Watsons has been around way before SM Mercury drug and it's
(02:33):
a completely different monster having a presence all over the
world and owning so many brands under its name.
So what exactly is the story of Watsons?
Now, I know this isn't a channelabout wars and conflict, but
it's impossible to talk about the history of Watsons without
talking about the Opium Wars andhow Hong Kong ended up in
British hands, because it will give us some context as to why
they were doing whatever they were doing at that time.
(02:55):
This is opium. Opium was grown in China since
the 11th century, but it was only around the 17th century
when they started getting hookedon it, because that was when
they discovered that when you burn opium, you get a feeling of
euphoria that's on a whole new level.
Basically, you get high. And so people in China were
loving opium, but then the Chinese government was like, uh
oh, opium is good, but I think it's getting too good because
(03:17):
our people are getting addicted to do this.
And they're pretty much just speaking opium, and that's all
they're doing the entire day. There actually came a point when
the productivity of China's workforce came crashing down
because of opium, because they use it, enjoy it, and they were
hooked. It became such a problem that
they decided to ban opium in China.
And they were very serious aboutthis.
(03:37):
In fact, there were two emperorswho decided to ban opium in
China. Now, during this period, China
was kind of an isolationist country.
Like, they were fine on their own, but of course they were
still involved in trading with others countries.
And this is where Britain comes in.
So you know how the British lovetea.
They love their tea. And at that time, China was
producing really good tea. And so Britain was getting a lot
(03:59):
of their tea from China, like a lot of tea.
Now normally when two nations would trade, this is just an
example. Britain could trade finished
goods like textiles or iron, andin exchange, China trades their
tea. The problem was China didn't
need anything from Britain, or at least not as much as Britain
needed tea from China. So Britain would offer China
(04:20):
goods they would want to trade tea for.
But then China was like, yeah, we don't really need that.
We're doing OK over here. You could just trade your silver
for our tea. And so Britain went for it.
They didn't really have a choice.
They loved their tea. And so Britain was importing
these large amounts of tea from China.
And since they didn't have a choice to trade their silver for
Chinese tea, this was gradually depleting their silver reserves.
(04:43):
And so Britain was like, OK, this is unsustainable.
There has to be a better way. And they figured, all right,
China doesn't want any of the goods that we offer them.
Maybe we could just figure out what they want and we can trade
them for it. And that's when you remember how
much the Chinese loved opium so much that their government had
to ban it. But Britain couldn't produce
opium because the plant where opium comes from, it can only be
(05:04):
grown in specific warmer climates.
And they were like, oh, wait, why don't you just grow them in
one of our colonies? And that colony would happen to
be India. And so Britain would start
smuggling opium from India to China.
But remember, opium was banned in China.
And so instead of trading directly with the government,
they would trade them to independent Chinese merchants.
China's to notice, hey, I think our people are getting high all
(05:27):
day again. Didn't we just ban opium?
That's when they found out that the British were smuggling opium
into China. And one day they stumbled across
this massive supply of opium, around 20 large crates of opium.
There was so much opium that wasmeant to be sold to the Chinese.
And not taking this lightly, China responded.
And So what they did was they burned all this opium.
(05:48):
They burned all the opium they could find, and they did this
publicly to send the message to Britain, if you want to go keep
smuggling opium, we'll just keepburning it.
But what this response did, instead of putting all of this
to an end, it ended up escalating the whole thing
because this is what triggered the start of the First Opium War
in 1839. This would end up being A1 sided
(06:08):
affair because Britain and the Royal Navy were just far too
powerful and far too dominant. So after a series of battles
that ended relatively quickly by1841, they were able to occupy
Hong Kong in the following year.The war ended with the Treaty of
Nanking. The Treaty of Nanking is known
as one of the first unequal treaties in history.
This treaty gave the island of Hong Kong to Britain.
(06:31):
This forced China to allow Britain to freely trade with any
merchants in China, even though it would ruin the lives of
millions of the Chinese people due to addiction and forced
China to pay damages for the opium they destroyed.
This essentially ensured that Britain could continue sparkling
opium into China via Hong Kong. Now around this time, Westerners
(06:51):
started arriving and two of these were Peter Young and
Doctor Alexander Anders. They launched the Hong Kong
dispensary. Dispensaries are basically kind
of like pharmacies. In 1845, this is when Doctor
Thomas Boswell Watson, who is a Scottish doctor, arrived in Asia
and set up his practice in Macau.
He eventually moved to Hong Kongin 1856 and that's when he
(07:12):
became a part owner of the Hong Kong dispensary.
But sadly around this time his health deteriorated.
He invited his 22 year old nephew to come to Hong Kong to
take over his place. His name was Doctor Alexander
Skirving Watson. Now I'm getting ahead of myself,
but if you don't know the parentcompany of Watson's is A S
Watson and A S Watson was named after this guy Alexander
(07:34):
Skirving Watson. He was one of the reasons why
Watson's grew so fast because hefound a way to increase the
supply of medicine to the Navy. He was a great leader, and it
was because of his leadership that they were able to turn this
small dispensary into a fully fledged retail chemist
operation. And you need to talk about the
Opium War so that you get a clearer picture as to how
important opium was during that time.
(07:55):
I mean, wars are being fought over it.
Knowing how important it is. Imagine being one of the few
chemists authorized to sell opium.
And that's the advantage that A S Watson had.
They were one of the few who were allowed to sell it, and
this gave them a huge advantage over the competition.
Now, in the middle of all this, the Second Opium War happened.
This was from 1856 to 1860. I'm not going to get into the
(08:17):
details of all that, but Long story short, Britain was just
way too strong for China. And so China lost.
And when it ended, Britain pretty much made sure that
imports of opium into China werenow free flowing.
Since China couldn't do anythingabout it because of their vast
need for your Navy, they had no choice but to just legalize
opium. Even though they knew that an
entire generation of their people were going to get
(08:39):
addicted to opium, they had no choice.
This was a fascinating discovery, but a bit of a sad
one. I went down the rabbit hole of
the Opium Wars and what opium could do to you when apparently
opium withdrawal could actually kill you.
Like, there's so many stories ofpeople from Hong Kong who have
had relatives, grandparents who have died due to opium
withdrawal. So yeah, because of this,
imports of opium tripled, which also meant that as Watson sales
(09:03):
were through the roof, they werealready doing well.
But when this happened, they were pretty much unstoppable.
Sadly, during the spirit of extreme growth, Alexander
Skirvin Watson had to go back toEngland where he would pass away
at the age of 28. Well, writing this, it shocked
me how young he was when he accomplished all this.
Like, wait, the story with Watson started when he was 22,
(09:24):
and he did all that maybe 8 to 28 in six years.
That's amazing now by 1895 AS Watson had over 35 stores.
What's interesting is that AS Watson was actually already
slowly diversifying into other industries at this point, they
weren't only selling medicine anymore.
They were producing over 300 dispensary, toiletry, perfumery
lines, all kinds of stuff. Despite the rise in popularity
(09:48):
of opium during that time, people in Europe started seeing
the disastrous effects of opium.It started getting a bad drop
and so AS Watson, the company started shifting towards opium
substitutes. When it was no longer profitable
for Britain to trade the opium and when it started being
regulated, opium substitutes rose in popularity.
And so once again, S Watson was able to take advantage.
(10:09):
They were able to ride the popularity of these new
products. By 1901, they've now grown to
over 100 locations and they evenhad branches in China and the
Philippines. In 1903, they saw an opportunity
in selling water because around that time the quality of water
in Hong Kong was just really bad.
So in 1903, they established Watson's Water.
Watson's Water isn't here in thePhilippines, but they actually
(10:29):
have a huge presence in a coupleof countries in Asia.
Now at this point is Watson was already this big company with a
regional presence, but they got even bigger, eventually landing
in the hands of Hong Kong's wealthiest man, Lika Shing.
So how did this happen? Now there's a couple of
companies involved here, but it all starts with Hutchison
International, a company that imported large amounts of
(10:50):
consumer products, founded in 1877.
There was a time when the Hutchison Group went on a
shopping spree, acquiring a handful of companies which in
19, 63 included a partial acquisition of AS Watson and all
these acquisitions formed the Hutchison Group.
Two years later, the Hutchison Group went on an acquired a
company called Hong Kong in Wampoa Dock.
It's a port management company operating what once was one of
(11:12):
the largest dockyards in Asia. And the new group as a result of
this acquisition became Hutchison Wampoa.
Now unfortunately, things took athird in 1975.
Leaders of the company made these very risky financial bets
on the stock market and on foreign currency, hoping for a
profitable return. But these backfired and caused
major financial losses. It was so bad that the company
(11:35):
needed to be bailed out. HSBC, the Hong Kong and Shanghai
Banking Corporation refused to bail out Hutchison Whampoa and
instead acquired a 22% stake in the company.
The following year, the company was listed on the Stock
Exchange. In 1979, Lika Sheng ended up
acquiring HSBC's 22% stake via his holding company Chiang Kong
Holdings. 2 years later in 1981,the now Lika Sheng partially
(11:58):
owned Hutchison, the full control of AS Watson.
Now at this point, as Watson nowhave that financial war just to
expand operations and oh man didthey expand because as Watson
went shopping in the 1980s, AS Watson grew rapidly, they
entered Taiwan, Macau, Singaporeand China, all under the name
(12:19):
Watson's the Chemist, which was the name of their retail stores
that time until they rebranded to the present day Watson's.
We all know today, Noel Watson'swas expanding in Asia, growing
its own brand AS Watson, the parent company embraced a market
entry acquisition strategy. That's when instead of growing
their own brand, the company simply decides to acquire an
existing brand in order to quickly gain entry into a new
(12:41):
market. So this is what they did when
they wanted to, let's say, entera new country.
And that's because these existing brands, they already
have their own customer base, distribution networks and
building all that from scratch, even though they're capable,
it'll just take so much time andso much resources.
And it was simply cheaper to just cash out and acquire these
brands because at this point, money wasn't really a problem
(13:03):
for AS Watson anymore. They started in Hong Kong when
they acquired Fortress. Interestingly, AS Watson
acquired a Hong Kong based juicebrand called Mr. Juicy in the
early 2000s AS Watson wanted to enter the UK and Europe and so
they acquired Savers Health and Beauty and he also did this with
the Netherlands based. I'm probably going to ruin this,
OK. Kroidvat Group which owned
(13:23):
brands just Superdrug, the second largest health and beauty
retailer in the UK. Rosman, a health and beauty
brand in Germany which had 4700 stores and this was a €7 billion
acquisition since the group had a store portfolio over around
1900 outlets. In 2004, Nika Sheng increased
his stake in Hutchinson from 22%to 49.9%.
(13:45):
And then the acquisitions continued because in the same
year as Watson acquired Drogas, the leading health and beauty
chain in the Baltics, which includes Lithuania, Latvia,
Estonia. In 2005, they acquired The
Perfume Shop, the UK's leading fragrance retailer, and in this
same year they entered Turkey byacquiring Cosmos Shop and when
(14:06):
they wanted to enter Russia, they simply acquired Spectre.
In 2006, they entered Ukraine byacquiring BC, the only
nationwide health and beauty retail chain in the Ukraine.
Now there were several other acquisitions, but at this point
I'm sure now you know just how big AS Watson is.
So how about the Philippines? Well, in 2002, the SM Group and
(14:27):
AS Watson formed a joint ventureto bring Watson to the
Philippines. Even though Mercury Drug which
opened in 1945 at a 57 year headstart, Watsons has grown rapidly
in the country. Now part of their growth is due
to their new store formats. Now you remember a time when you
could only find Watsons inside the SM models, but recently
could now find Watsons in these independent locations outside of
(14:50):
SM. In this case, there's a Watsons
here in a pond in Iloilo here inthis pure gold branch.
So these smaller Watsons locations are what they call
their community stores. In 2004, Watson celebrated the
opening of its 8000 store in Asia and end of the year with a
store count of 1166 in the Philippines.
But perhaps what fascinated me the most was this new thing that
(15:12):
Watsons was rolling out. Now, before we talk about this,
you have to understand that AS Watson isn't just this massive
retail company, it's a data empire.
They have so much data on their hands and they found a way to
monetize it with 16,500 stores in 28 markets worldwide, 1000 of
which are Watsons. AS Watson serves an unbelievable
(15:33):
5.3 billion customers per year, that's around 14.5 million
people per day. Now, these numbers alone should
paint a picture of how big Ace Watson is and most importantly,
the incredible amount of data they have about their customers.
But here's where it gets really interesting. 137 million people
use the Watsons loyalty card. And this card tracks purchases,
(15:58):
preferences, shopping habits. And so when you have that much
data about this many people, which extends or covers several
years, you get to see trends because you know what people are
buying, how often they buy it, what they bought in the past and
what they're likely to buy next.They don't even need you to get
a physical card anymore. There's an electronic version
(16:20):
and it's free because this data is very important to them.
So they just need to get into their system as seamless as
possible. So how does this work?
Let's take facial wash as an example.
Let's say you've been buying this particular brand of facial
wash from Watson since January up until May.
And so Watson sees this in your transaction history, in your
rewards card. Now the data shows that you
(16:43):
didn't stop buying facial wash. You simply stopped buying that
particular brand of facial wash in May because in June they see
it that you bought another brandof facial wash.
And so because of this data, brands can now investigate
accurately and get insights. So then they could study this
particular customer and they could be like, why didn't Chris
switch to another brand in June?Before June?
(17:06):
Did our competitor, did that other facial wash brand lower
their prices? Was it possible that before June
they launched a new marketing campaign?
Or did they launch a new productwhich triggered Chris to switch?
Maybe that product was superior or maybe it's our fault.
Did we run a marketing campaign?Did we use a new tagline?
(17:26):
And maybe Chris no longer responds to that which made him
switch in June. And so these are the insights
that they can get from the data Watsons has.
And so for brands, this is very valuable.
And not only that, brands also get insights as to what other
products their customers are buying.
So, so they can like see parallels.
We get to see like, for example,70% of women from ages 20 to 25,
(17:50):
every time they buy their Colgate, they also buy that
facial wash. This might push them to propose
a partnership with that particular brand of facial wash.
And that's why in the supermarket, I don't know if you
guys have noticed, sometimes you'll see brands partnering up
like they'll have this bundle like tuna and Sky Flakes.
I don't know, sometimes see it, it looks weird, but there's a
reason why they they did that bundle.
(18:10):
It means there's enough data that supports that.
Now you understand how valuable this data is, especially for
those big brands. And Watsons has monetized this
with optimal. It's their new data analytics
platform. And so brands pay to get access
to this data that helps them understand their customers
better and helps them make better decisions.
And it is so smart because this is data that Watsons and all the
(18:32):
other brands under as Watson, they accumulate all this data
for free simply by running theirstores.
So yeah, this just gets more valuable the bigger Watson grows
and they continue to grow. Watson's is constantly building
and trying to cement its space as the leader in the health and
needy space. And it's making sure that it
appeals to younger Gen. Z and the growing Gen.
Alpha audience in China. They introduced Watson Spink.
(18:55):
It's a pink Watson's. But that's not all that it is,
though. So Watson's Spink locations have
spa services inside them, and they're all about giving
customers the opportunity to do self-care while browsing their
favorite products. It was designed primarily for
the younger demo graphic, and they're hoping that their
customers appreciate it beyond just the pink aesthetics.
So yeah, Watson's isn't showing signs of stopping.
(19:17):
In 2023, they underwent a major rebrand and a S Watson announced
an additional investment of $250million to upgrade 6000 of its
stores in key markets in Asia, Europe and the Middle East.
So even though our initial tendency is to compare Mercury
Drug with Watson, since they have like a pharmacy, now,
Watsons is in a completely different category and only time
(19:40):
will tell if anyone can even getin their way.
So yeah, that's about it. Now you know about the grand
Origin story of Watsons. Thanks for joining me in this
episode of Grand Origins. It would help me a lot if you
could click the like button and maybe comment down below what
you've learned from this episode.
It's the only way for the algorithm to push my videos to
more people like you. And follow me on Instagram and
(20:02):
TikTok. I have shorter clips there.
My name is Chris. I'll see you in the next
episode.
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