Wanglaoji, a domestic Chinese herbal tea brand has been contested over by its state-owned original owner, and the Hong Kong-based company that “rented out” the brand in 2005 and built it into the biggest canned drink brand in China today, ahead of The Coca-Cola Company (NYSE:KO), with 13.72 percent of the market share.
The saga began in 1995, when Hong Kong Hung To Group Co., Ltd., licensed the right to use the Wanglaoji trademark from Guangzhou Pharmaceutical Holdings, Ltd. and started selling the now famous herbal tea in red cans, which at the time was a little-known, marginalized product under its subsidiary, Jiaduobao Beverage Co., Ltd.
The drink became exceedingly successful in subsequent years, topping canned beverage products in China starting in 2007. The lease of the brand name was renewed several times, the last one giving Hung To Group rights to the name until 2020.
In 2005, it was discovered that the Guangzhou Pharmaceutical manager in charge of renting the license to Hung To was guilty of fraud, and accepted 3 million HK dollars ($386,403) from Hung To that Guangzhou Pharmaceutical never received.
In 2011, Guangzhou Pharmaceutical submitted a Wanglaoji trademark issue for arbitration. In May 2012, China International Economic and Trade Commission ruled in favor of Guangzhou Pharmaceutical, citing the fact Hung To obtained the license with what qualified as bribes.
Starting in June, Hung To Group began to produce the same drink under its subsidiary name, Jiaduobao, and a slogan that informed consumers “the top selling herbal tea brand has been renamed Jiaduobao.” Guangzhou Pharmaceutical quickly rolled out an identical can with the name Wanglaoji.
As of now the two red cans co-exist in supermarkets across China, but their market shares are far from equal. Ending in December of last year, Jiaduobao sold about 77.15 percent of the herbal tea in China in 2012, compared to Guangzhou Pharmaceutical’s measly 9 percent.
Now, the battle is heating up as the two companies face off one more time for the right to use the red can. Both know that’s an important part of consumer recognition, as the can has come to be associated with herbal tea in China. Netizens have commented that the battle over Wanglaoji is like a custody battle over a grown child between Guangzhou Pharmaceuticals, the birth parent who'd given the child up and did no work, and Hung To Group, the adopted parent who raised the child but cannot claim giving birth to the brand. No matter what the outcome is, it will be a bloody battle.
Sophie is a graduate of Northwestern University. She covers the emerging markets in Southeast Asia, with a particular interest in foreign investment in the region....