China Consumer

Bun fight over tea

Why trouble may be brewing for herbal tea firm

Bun fight over tea

China’s top brand is...

Fancy a guess at China’s best-selling canned beverage? Coke head-to-head with Pepsi, perhaps? In fact, leading the pack is Wanglaoji, a herbal tea. Although a bottle of Wanglaoji tea costs double a Coke or a Pepsi, it outsells them both, reports the Global Times.

Late last year Wanglaoji was also awarded the title of China’s most valuable brand in the domestic marketplace, according to a ranking completed by Sinocap Asset Appraisal, says Nanfang Daily.

Brand equity is notoriously difficult to measure, of course, and Wanglaoji doesn’t feature so high in all such surveys. But Sinocap thought Wanglaoji’s brand was worth Rmb108 billion ($16.2 billion).

So why is Wanglaoji so popular? For a start, consumers believe that the herbal drink has many health benefits. Wanglaoji, which is a version of liang cha (which means cooling tea and is said to drive away the excess ‘heat’ that most Chinese believe can ges trapped inside the human body). It is also widely believed to cure sore throats caused by dry weather. “My parents and grandparents told me long ago that [Western] soft drinks are not good for our body and have high calories, so I seldom drink cola,” says Liu Yuexia, a 15 year-old student in Guangdong.

Liu also told Asia Times that “drinking liang cha like Wanglaoji could help remove the heat and dampness in my body, so when I have pimples on my forehead and cheeks, I immediately drink the herbal tea to speed up the elimination process.”

But Wanglaoji’s popularity really soared after 1995, when Hong Kong drink maker Jia Duo Bao (JDB Group) licensed the right to produce and sell the Wanglaoji label from Guangzhou Pharmaceutical, the state-owned pharmaceutical company that owns the brand.

JDB immediately updated the drink’s packaging, scrapping an old green paper box for a catchy red can (Guangzhou Pharmaceutical, meanwhile, continues to sell the herbal tea in green paper packages). It also repositioned the brand as a health drink to appeal to health-conscious consumers.

Wanglaoji also made an impression when JDB donated Rmb100 million to earthquake victims in Sichuan province in 2008. The amount rendered it the biggest donor at a charity event broadcast live on China Central Television (CCTV), and immediately triggered a rise in the popularity of its product.

By the end of 2008, the sales value of the red canned herbal tea had surpassed Rmb10 billion, and data from the National Bureau of Statistics shows that Wanglaoji has been first in China’s beverage market in terms of sales value for three consecutive years since 2007.

That clearly caught the attention of Guangzhou Pharmaceutical, which announced in late March that, in an effort to expand the brand further, another Guangzhou-based beverage maker had been sold the rights to produce a porridge and a green bean soup under the Wanglaoji label. The two new products, slated to go on sale this month, will be packaged in red cans that bear a striking resemblance to JDB‘s canned tea.

The Hong Kong-based company quickly cried foul, and China Business reports that JDB has filed a complaint with Chinese trade authorities against Guangzhou Pharmaceutical’s actions, saying that the company is infringing on its red packaging, which is separately trademarked. It complains further of an “ungrateful” attitude, given the marketing effort it has put into building brand awareness. (Its own sales contract with Guangzhou Pharmaceutical runs till 2020, says the Information Times.)

Who will win the war of the red and green Wanglaoji? No doubt the dispute will rumble on for a while. But for those outside China curious to know what the herbal drink tastes like, good news: Guangzhou Pharmaceutical says it is talking with Hutchison Whampoa, the Hong Kong conglomerate owned by billionaire Li Ka-shing about possible cooperation to sell it overseas.

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