WLJ vs. JDB. Murky waters.
In 1906, Japan’s Kakuzo Okakura published the Book of Tea, lamenting the fact that western powers saw Asians as civilized only once the latter gave up the “gentle arts of peace” in favor of war and territorial expansion. These days, tea is once again at the centre of a struggle that highlights Asia’s unique traits: Two companies are claiming the right to use China’s most popular herbal tea brand in a plot that stretches back to colonial times and involves bribery, charity, a struggle between private and state-owned enterprises, and potential encroachment from foreign powers.
Wang Lao Ji (王老吉) is China’s most popular herbal tea brand, holding around 80% of a market estimated at RMB 25 billion (here, in Chinese). The brand was first launched in 1828 in Guangdong province, where it is still referred to in its Cantonese name, Wong Lo Kat. Following China’s “liberation” in 1949, the brand was split between a company in Hong Kong and a mainland SOE called Guangzhou Pharmaceutical. We’re not sure what happened to the original HK entity, but in 1997 and 2000 Guangzhou Pharma authorized Hong Kong’s Dao Group to distribute Wang Lao Ji in China. The license was limited in scope to red tins, and was limited in time to May 2010. Dao Group, in turn, started to distribute Wang Lao Ji in China using its subsidiary, JDB (Jia Duo Bao 加多宝). Guangzhou Pharma reserved the rights to distribute Wang Lao Ji in parallel, but only in green-colored paper packs. Confused? It gets worse.
Between 2002 and 2003, a series of agreements extended Dao Group’s tin can distribution license to 2020. A year later, it was discovered that Guangzhou Pharmaceutical’s Chairman had been bribed, calling into question the validity of the extended license granted to the Hong Kong company (more here, in Chinese). In 2009, one year before the expiration of the original, unextended license, Wang Lao Ji was formally recognized as one of China’s leading brands, following its RMB 100 million donation to Sichuan’s earthquake victims. From what we can gather, the donation was orchestrated by Dao Group and not by Wang Lao Ji’s original owners. A year later, once the licensing agreement expired, Dao Group refused to give up its distribution rights and continued to market herbal tea under the Wang Lao Ji brand. Guangzhou Pharma, for its part, announced that the brand is worth RMB 100 billion and called on its former licensee to cease and desist. In May 2012, following a lengthy arbitration and appeals procedure, Guangzhou Pharma won back the rights to distribute Wang Lao Ji in red tin cans and it is now setting up factories and distribution centres across China.
But the story did not end there. The now popular red tin cans were designed by Dao Group and the company is now trying to stop Guangzhou Pharma from using them to market Wang Lao Ji. In paralel, Dao Group is now selling herbal tea in identical red tin cans, but using the brand name of its mainland subsidiary – Jia Duo Bao. To put things in perspective, Wang Lao Ji’s red tin can sales reached RMB 16 billion in 2010, eight times more than the green package versions of the same product. Guangzhou Pharma is moving to secure its hold on the brand and plans to open a museum to celebrate (and rewrite) Wang Lao Ji’s history and a legal push to register trademarks in 58 countries. Earlier this month, a panel of Chinese IP experts met to devise a fair compromise between the owner of the original brand and the company who designed its popular package. So far, the issues between Guangzhou Pharma and Dao Group remain outstanding.
Meanwhile, China’s herbal tea market is heating up, with second-tier brands like He Qi Zheng and Ba Wang hoping to take advantage of the leader’s identity crisis. Yinlu, a Xiamen-based softdrink maker controlled by Nestle, recently became an OEM manufacturer for Guangzhou Pharma’s red Wang Lao Ji cans. This, in turn, fueled speculation that Nestle might step into the branding battle as well. It would be amusing if a Swiss company ends up being the main beneficiary from China’s red tin wars. The Europeans, it seems, did not give up their dream of selling tea to the Chinese. At least as long as opium is out of the question.
