China Consumer

Brand new?

Sanlu’s toxic trademark is sold at auction for a million bucks.

Brand new?

New owner: Sanlu's logo gets sold

Who is the mysterious bidder number 56? Sections of the Chinese press are keen to find out, after the sale of the Sanlu brand to a secretive buyer last week.

They know the bidder is female and that she was willing to pay Rmb7.3 million ($1.07 million) for the failed milk producer’s name and logo.

They are less clear why anyone would be interested in purchasing such a tainted trademark.

As many WiC readers will know, Sanlu was at the heart of last year’s milk formula scandal, when powder adulterated with the chemical melamine killed a number of children and made many thousands more ill.

In the aftermath of the scandal, four Sanlu executives were found guilty of selling fake and substandard products, and the company was forced into liquidation. The majority of Sanlu’s remaining assets have since been sold off, so the company’s trademarks were amongst the last items to be auctioned.

The newspapers speculate that the bidder may have some kind of emotional attachment to Sanlu or (more likely) might think that there is a chance of selling on the name for a profit.

Defunct brands have sometimes been revived successfully. But specialist firms like the Himmel Group (which has resuscitated dormant products including Ovaltine) usually rely on tapping into consumer nostalgia for days gone by.

So it is not just a case of buying a brand name that many people might remember. Brand equity is only worth something if the memories are positive ones.

Although Xinhua reports that the Sanlu brand was once a valuable asset – worth as much as Rmb14.9 billion three years ago by the calculation of the China Brand Asset Evaluation Centre – it is now going to be remembered only as a bringer of sickness and death.

Few will recall the company’s fifteen consecutive years of market share leadership or wish to recount the once starry career of its general manager Tian Wenhua, a hugely successful female entrepreneur and a member of the Chinese People’s Political Consultative Conference. More likely they’ll remember her recent sentence to life imprisonment.

In fact, Sanlu did once trade on a reputation for excellence, especially in product quality. As recently as September 2007, “Made in China”, a CCTV programme, discussed how products underwent stringent testing before they left the factory gate.

And Sanlu enjoyed recognition at the National Scientific Techniques Awards for ‘innovative infant formula research and other related techniques’ as late as early 2008. By then, says the Chinese media, the first wave of complaints about contaminated formula were already reaching official channels.

Of course, other corporate reputations have been under assault in recent months, especially in the financial sector. In the direst circumstances these firms are taking the nuclear option, and ditching their brand names and logos.

AIG – the erstwhile insurance giant founded in Shanghai in 1919 – recently did just this and renamed itself at holding company level. But the change – from AIG to AIU – is already under review, as the company’s subsidiaries want a more radical switch.

Nonetheless, Sanlu’s fall from grace was especially rapid. Death, illness, criminal charges and bankruptcy were all compressed into an apocalyptic few months.

Blame the company, certainly. But regulatory oversight was found wanting too. It turns out that Sanlu was able to gain exemption from future inspection once it had passed government quality checks three times in succession.

A case, perhaps, of allowing a reputation to trump common sense.

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