China Consumer

Splitting end

Co-founders’ divorce rocks shampoo maker

Wan-Yuhua-w

Wan Yuhua: not a clean divorce

“The times were against me,” concluded the Qin Dynasty warlord, Xiang Yu, in a ballad he composed on the night he lost control of China. Popularly known as Bawang, which means “all-conquering king’, Xiang had been defeated in battle by his rival Liu Bang, who went on to found the Han Dynasty.

He could only fret about what would come of his great love and consort, Yu the Beauty. “Yu, my Yu what will your fate be?” he lamented.

Legend has it that she also responded in verse, bringing tears to the eyes of Xiang’s remaining soldiers as she sung that she “couldn’t hope to live on,” and killed herself with a sword. A few days later, Bawang committed suicide too, slitting his own throat after being surrounded by the enemy during one last stand.

Xiang and Yu’s love affair has been commemorated throughout Chinese history, most recently and famously in the film Farewell My Concubine. But it has not been a case of history repeating itself when it comes to relations between the husband and wife team behind Hong Kong-listed Bawang International, a shampoo maker named after the great warrior.

The knives are also out, but husband and wife are aiming them squarely at each other. The two are in the process of divorcing and in late December, the wife, Wan Yuhua, filed a petition with a Hong Kong court to wind up the private entity which controls the public one. Her husband, Chen Qiyuan, is contesting it.

The saga marks another tragic chapter for the company they founded. Like Bawang, the duo once presided over a huge empire of their own after creating a successful line of herbal shampoo products. Their IPO was deemed one of the territory’s most successful in 2009.

And then it all went suddenly and spectacularly wrong. In 2010, Next Magazine suggested Bawang products contained a cancer-causing agent. Sales were decimated. As we wrote in WiC326, the company scored a pyrrhic victory six years later when it finally won its libel battle with the magazine.

Yet it only received 0.5% of the damages it had asked for, plus 80% of its legal costs. In the intervening period, revenues had dropped from HK$2.1 billion ($269 million) in 2009 to just HK$278 million by 2015.

The legal victory did lead to a small bounce. Sales ended 2016 up at HK$317 million, but they started falling again in the first half of 2017. Chinese newspapers attribute this to the couple’s marital woes.

Wan alleges that after she stepped down and allowed their son to become CEO, her signature was forged on a number of documents, which watered down her 49% stake in the controlling shareholding entity. At a press conference, she claimed her husband had slapped her face and cut off her finances, forcing her to borrow money from her sister to file her lawsuit in Hong Kong. Chen has responded that her accusations are groundless.

The latest dispute has not attracted a huge amount of comment among netizens: a sign of how far the brand has fallen in the public consciousness. But those who are posting, express support for Wan who was previously responsible for product development.

Most commentators note how easy it is for brands to end up being hoisted by their own petard. “Neither of the founders’ hair was convincing,” says one in reference to the product’s supposed rejuvenating properties, which clearly never worked on Chen’s visibly receding hairline.

Wan and Chen also spent millions hiring film star Jackie Chan to promote their products. But those millions created proportionately bad publicity after Bawang’s woes helped fan the flames about the socalled “Jackie Chan curse”.

This states that any brand the movie star endorses tend to subsequently run into difficulties or collapse. We first wrote about the curse in WiC187 and since then, it has added more victims to a growing list (the most recent being Asian gym chain, California Fitness).

However, the Chinese government appears to be paying the curse little heed. Chan is currently promoting the Communist Party in a series of short films called The Glory and the Dream. Domestic cinemas have been told to screen them before the main event. The government says they will, “help people to better understand and accept the Party’s principles and policies.”


© ChinTell Ltd. All rights reserved.

Brought to you by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.