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Such "imitation" soon came under attack by JDB, which sued Guangzhou Pharmaceutical in the court for "infringing upon the design of the red cans." JDB holds that the red cans were designed by Chan Hung To, founder of Hong Kong Hung To Group, who once owned the design patent. JDB argues that it had invested several billion yuan in nurturing the Wanglaoji brand and therefore should own the design rights of the iconic red cans. JDB argues that Guangzhou Pharmaceutical has never produced any herbal tea in red cans and hasn't invested in its development but has launched its own herbal tea with the same look.
Guangzhou Pharmaceutical claims that the red can is an inherent characteristic of the Wanglaoji brand. Therefore, JDB is the one infringing upon Wanglaoji's package design by using the red cans for its own tea.
The court has made no decision in the case, but JDB is clearly unwilling to surrender its hold on the herbal tea market after years of domination. It has increased its ad presence on television, on subways across the country and on the Internet, and is even blocking Wanglaoji from accessing its sales channels.
JDB salesmen work six days a week. Part of their job description includes spying on Wanglaoji employees. Whenever Wanglaoji holds any promotional event, JDB's people appear on the scene, offering up their own herbal tea for free.
According to a press release by Guangzhou Pharmaceutical, JDB salesmen interrupted its 23 promotional events across the country in the last three months. On August 15, JDB employees brutally beat Wanglaoji salesmen in Nanchang, Jiangxi Province, during a promotional event. That incident was followed by other attacks against Wanglaoji workers.
These scuffles led to a more serious encounter on August 28. Yao and some other Wanglaoji salesmen were holding a promotional event at the Mudu Shopping Center in Suzhou. According to police, at about 9 a.m. some JDB employees appeared on the scene and covered Wanglaoji's advertisement banners. Later that afternoon, JDB employees began slashing their rivals' advertising material with knives. Wanglaoji employees stepped in to stop the defilement, leading to Yao's stabbing.
In 2006, Wanglaoji was deemed a part of China's intangible cultural heritage. The brand has a reach beyond business and has become a symbol of the national culture. But the feud between Wanglaoji and JDB risks becoming a detriment to both companies and even the entire herbal tea industry, said industry watchers, citing another feud in the beverage-making world.
In 1984, Li Jingwei, head of Sanshui Brewery Factory in Guangdong Province, got hold of a formula for a sports drink and launched the beverage Jianlibao. The drink was a massive sales hit and was even called Chinese "magic water" by the Japanese media. When Jianlibao celebrated its 10th anniversary in 1994, it had sales of 1.8 billion yuan ($283.91 million) and was the top revenue-generating beverage in the industry.
In 1997, the local government of Sanshui started eyeing for shares of Jianlibao. On January 15, 2002, Sanshui transferred 75 percent of Jianlibao's shares to Zhejiang International Trust and Investment Corp. at a price of 338 million yuan ($53.31 million). A 28-year-old, Zhang Hai, was appointed chairman of Guangdong Jianlibao Group Co. Ltd. Tension over stock ownership plagued the company's development and its stock plunged. Production was suspended. On December 7, 2004, Jianlibao resumed production but was unable to revive the brand. Today, Jianlibao's market share is paltry, and many of the country's young people are unaware of the brand.
With escalating tension between Guangzhou Pharmaceutical and JDB, Wanglaoji could follow in Jianlibao's footsteps. In June, Guangzhou Pharmaceutical launched Wanglaoji herbal tea in red cans, with sales expected to reach 2 billion-3 billion yuan ($315.46 million-473.19 million) this year. Together with its green paper packaged herbal tea, Guangzhou Pharmaceutical expects to sell 4 billioin-5 billion yuan ($630.91 million-788.64 million) worth of herbal tea, much lower than JDB's annual sales performance of 16 billion yuan ($2.52 billion) in the last two years. Industry insiders believe that without JDB's sales acumen, Wanglaoji is unlikely to mimic its past sales performance.
Some attribute government interference to Jianlibao's downfall. A hint of government presence is also evident in the feud over Wanglaoji.
Guangzhou Pharmaceutical is a state-owned enterprise under the State-Owned Assets Supervision and Administration Commission of the State Council. As a big shareholder, the Guangzhou Municipal Government hopes Guangzhou Pharmaceutical develops into a bigger player in the herbal tea market.
According to a report by Shenyin and Wanguo Securities Co. Ltd., the conflict over Wanglaoji raises a key question: How should China develop a national brand using state capital?
Historically, Chinese brands have been infused with state capital and usually cooperate with market-oriented companies to develop operations. The Shenyin and Wanguo report concludes that in these cases, success depends on both parties strengthening trust and cooperation.
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