This article is reprinted from the WeChat public account New Weekly (ID: new-weekly)
Neither Wanglaoji nor JDB is willing to admit defeat, and they can selectively publish data, but the market will not deceive. Look at the production dates of herbal teas sold on the street; the fact is that it is not as easy as before to find a convenience store selling herbal tea. On September 3, 2013, Guangzhou Pharmaceutical sued JDB for "false advertising" in the Guangzhou Intermediate People's Court / Tuchong Creative At some point, walking into convenience stores of all sizes on the streets, JDB and Wanglaoji have become rare in the freezers. People seem to have forgotten that Chinese herbal tea once had a glorious moment when it defeated Coca-Cola, Pepsi, Red Bull, and other beverages. In 2011, the booming Chinese herbal tea industry experienced a major earthquake: Guangzhou Pharmaceutical wanted to take back the "Wanglaoji" trademark, officially starting a fight with JDB's parent company, Hongdao Group, and won a complete victory in court in July of the following year. From then on, the Wanglaoji herbal tea, which originally held an absolute dominant position in the industry, was split in two—the trademark went to Guangzhou Pharmaceutical, but the herbal tea formula belonged to Hongdao Group itself. At that time, the value of the "Wanglaoji" trademark had exceeded 100 billion RMB. Hongdao Group, having lost "Wanglaoji," created its own herbal tea brand, JDB. In the following years, the herbal tea market became a battlefield between JDB and Wanglaoji, suing over trademarks, advertising slogans, false advertising, packaging, and formulas... In court, Wanglaoji won several battles; in marketing, JDB won sympathy. Herbal tea ingredient packets available for purchase on the market One of the latest lawsuits between the two companies to conclude was the dispute over the advertising slogan "The red-can herbal tea with the nation's leading sales has changed its name to JDB." On August 16, after five years of litigation, the final judgment was reached: JDB was ordered to pay a total of 1 million RMB in compensation to Guangzhou Pharmaceutical Group and Wanglaoji Company, and was required to immediately stop publishing advertisements containing the slogan "In China, for every 10 cans of herbal tea sold, 7 are JDB," and to stop using and destroy product packaging printed with the slogan "The red-can herbal tea with the nation's leading sales—JDB"; other claims by Guangzhou Pharmaceutical Group and Wanglaoji were dismissed. As for slogans like "The red-can herbal tea with the nation's leading sales has changed its name to JDB" and "The original red-can Wanglaoji has changed its name to JDB herbal tea," the court found that these did not constitute false advertising. Previously, JDB had been ordered to pay cumulative compensation of up to 20 million RMB in three false advertising lawsuits, but in the final judgment, the compensation was reduced to 1 million RMB. Wanglaoji didn't get much money, JDB didn't gain much ground, and neither side benefited much. However, this is just one of dozens of lawsuits between the two sides. Old herbal tea shops in Hong Kong The Northern Expedition of Guangdong Herbal Tea How did herbal tea, originally a Guangdong specialty, spread across the country? On this issue, no one can ignore JDB's contribution. In 1990, Hongdao Group obtained the authorization for the Wanglaoji herbal tea formula from the descendants of Wang Laoji in Hong Kong. However, there were also descendants of Wang Laoji in Guangzhou, and this branch also held the Wanglaoji brand. In 1949, Guangzhou's Wanglaoji was nationalized, and after several twists and turns, it was not until 1986 that it was re-registered as a trademark. Two branches of descendants, two trademarks, the fuse was already laid, and it was only a matter of whether Hongdao Group would step on it. Later, as we all know, in order to sell tea in the north, Hongdao Group took that step. In 1995, Chen Hongdao signed a contract with Guangzhou Pharmaceutical to obtain the license to use the Wanglaoji trademark in mainland China, reuniting the Hong Kong "Wanglaoji" and Guangzhou Wanglaoji, which had been separated for more than half a century. Chen Hongdao, Chairman of JDB Group Before this, Guangzhou Pharmaceutical Group had been producing boxed Wanglaoji for more than two years, but it did not cause much of a stir. Before Chen Hongdao's northern expedition, Wanglaoji herbal tea was not seen as a beverage by the public, but more as a common medicine or health product. Walking into herbal tea shops on the streets, sticking out your tongue for the owner to examine, and then having the owner suggest whether you should drink something to reduce heat or relieve heat, whether to treat illness or prevent disease—this was also the reason why boxed Wanglaoji sales were sluggish at the time. The public was accustomed to drinking herbal tea according to symptoms, but the boxed herbal tea on the shelves did not have the function of "diagnosis," and the bitter taste was not suitable for daily consumption. At that time, Guangzhou Pharmaceutical Group's focus was mainly on medicine rather than beverages. He Qing, marketing director of Wanglaoji Pharmaceutical, once said in an interview: "Since someone is willing to make beverages, and we can't use our resources ourselves, we might as well rent them out." In the eyes of Guangzhou Pharmaceutical, the early Wanglaoji, which had not seen much sales growth, was quite a chicken rib / Tuchong Creative Herbal tea originated in Guangdong and basically stopped there. It was not until after 2000 that Chen Hongdao changed the fate of the herbal tea category with the slogan "Afraid of getting heaty? Drink Wanglaoji." From a positioning perspective, Chen Hongdao's move was to extract the essence and discard the dross, cutting off a large part of the "treat illness, prevent disease" function of herbal tea, focusing on the key point of "heatiness," which is equivalent to using marketing positioning to fulfill the "diagnosis" function of herbal tea. Although herbal tea is from Guangdong, the saying "heaty" is understood across China. With overwhelming TV advertisements, the red-can Wanglaoji produced by JDB swept across the country. Data shows that from 2002 to 2005, Wanglaoji sales surged 10 times in three years, and in 2006, it surpassed Coca-Cola, the giant that had dominated the Chinese market for many years. Standing on the street and finishing a bowl of herbal tea before leaving is a hardcore health regimen for many old Guangzhou residents After the Breakup, Deep Hatred The red-can Wanglaoji became popular, but Guangzhou Pharmaceutical could only collect a few million RMB in trademark usage fees according to the contract, which was negligible compared to JDB's huge revenue. Fortunately, only the red-can Wanglaoji was rented out; Guangzhou Pharmaceutical could still produce green-box Wanglaoji itself, and it changed the previous bitter taste, becoming as sweet as JDB's. The improved green-box Wanglaoji performed well. An article in China Entrepreneur in 2007 pointed out that Guangzhou Wanglaoji's sales revenue in 2006 increased by 300% compared to the previous year, and 50% of the revenue came from Wanglaoji herbal tea—although their Wanglaoji sales were only one-seventh of JDB's. For Guangzhou Pharmaceutical, this was probably like sending a son to be fostered, and he became successful, while they could only eat scraps. How could they be willing to accept that? The green box is clearly not as deeply rooted in people's hearts as the red can / Tuchong Creative In the end, it was Guangzhou Pharmaceutical Group's own people who created the opportunity to take back Wanglaoji: Li Yimin, former general manager of Guangzhou Pharmaceutical Group, confessed that the contract in Chen Hongdao's hands to extend the term of the Wanglaoji trademark usage rights was signed after bribing Li Yimin with 3 million Hong Kong dollars. The extension of the usage period meant that after the original contract expired (in 2010), the lease term was extended to 2020. Because the procedure was improper, this extension agreement was legally untenable. The bribery case came to light in 2004. In the same year, Guangzhou Pharmaceutical's Yangcheng Pharmaceutical officially transformed into "Guangzhou Wanglaoji Pharmaceutical." At that time, JDB was at its peak. After the 2008 earthquake relief event "If we donate, we donate 100 million," there was even an online craze to "buy up all Wanglaoji." Its national reputation and sales grew rapidly, and it continuously won the canned beverage market, with sales reaching 15 billion RMB in 2010. Under the overwhelming presence of JDB's red-can Wanglaoji, Guangzhou Pharmaceutical's green-box herbal tea, also bearing the three characters "Wanglaoji," sold over a billion. However, compared to JDB, a billion was still too little. JDB donated 100 million yuan to the earthquake-stricken area, which was also the peak of JDB's glory Around 2010, when the original lease contract expired, Guangzhou Pharmaceutical demanded to renegotiate the contract with JDB, but the two sides failed to reach an agreement. More critically, while Guangzhou Pharmaceutical demanded that JDB change the contract, it also authorized other companies to produce Wanglaoji herbal tea, and even allowed Baiyunshan Pharmaceutical's other herbal teas to share sales channels with Wanglaoji. What made JDB most uneasy was that Guangzhou Pharmaceutical crossed industry boundaries, authorizing Guangliang Group to produce Wanglaoji Guyuan Porridge, Wanglaoji Lotus Seed and Mung Bean Shuang, and other foods, also in red cans. Wang Jianyi, a descendant of Wang Laoji, was furious about this and publicly expressed support for JDB in front of the media. At this point, whether the lease agreement was valid or not no longer mattered; the split between JDB and Wanglaoji was a foregone conclusion, and a protracted commercial war began. Wang Jianyi, a descendant of Wang Laoji After the ungraceful breakup with Guangzhou Pharmaceutical, no matter how good JDB was at marketing, it could not immediately transfer consumers' recognition of the three characters "Wanglaoji" accumulated over the years. To this end, JDB spent lavishly on advertising, leveraging the London Olympics, buying live broadcast ads for the Brazil World Cup, sponsoring "The Voice of China"... It is said that in 2012 alone, JDB spent nearly 1.2 billion RMB on advertising, while Guangzhou Wanglaoji only spent 7 million RMB in this regard. Of course, Wanglaoji quickly caught up: you sponsor "The Voice of China," I buy ads on "News Broadcast"; you dare to lower prices, I'll offer discounts... To grab market share, JDB and Wanglaoji used every trick, ignoring costs just to win customers. The direct consequence of the price war was not only that both companies bled and felt pain, but also that other herbal tea brands in the market were squeezed out. Data from the Prospective Industry Research Institute shows that in 2016, JDB's market share in the herbal tea market was 52.6%, Wanglaoji's was 42.4%, and other brands like Heqizheng, Pan Gaoshou, and Huang Zhenlong, all combined, shared the remaining 5% in the corners, and were already hard to find. Although JDB's market share was slightly higher, in brand rating data, the honor of "China's No.1 Herbal Tea Brand" belonged to Wanglaoji, even though JDB had built most of it with its own hands. On the road to market competition, JDB sacrificed too much profit. Sponsorship fees of hundreds of millions were paid without hesitation, exclusive terminal agreements were signed without hesitation, but even so, it could not return to its glorious days. In the herbal tea industry, JDB's Wanglaoji was the absolute No.1. After being forced to change its name, it could only watch as Guangzhou Wanglaoji took half of the market, while its previous sales were just a fraction of JDB's. Feeling wronged? Understandable. Angry? Also reasonable. But it is undeniable that JDB's agreement to extend the usage period was indeed legally untenable. As their own posters said, when it came to lawsuits, Guangzhou Pharmaceutical was clearly superior. After losing the lawsuit, JDB's "Sorry" posters once flooded the internet; when it came to playing marketing, Guangzhou Pharmaceutical was indeed no match Competition is Good for Health, but Fierce Fighting Hurts Eight years have passed, and Wanglaoji and JDB have been fighting for eight years. The outcome is still undecided, but the herbal tea market has already withered. Facing Wanglaoji's aggressive expansion, JDB's huge promotional expenses increased year by year, while also causing lawsuits over infringing advertising slogans and huge compensation, coupled with the investment in price wars and terminal battles, the funding gap became increasingly serious. Last year, the industry reported that JDB was insolvent, owing 350 million yuan and with a net profit of -580 million yuan. Although JDB quickly denied the rumor, frequent changes in senior management, layoffs, and production halts made JDB's predicament impossible to hide. Wanglaoji, with a more stable background, seemed to be in a much more comfortable position. In last year's annual report, the revenue of Baiyunshan's health sector, to which Wanglaoji belongs, increased by 10.66% year-on-year, with Wanglaoji herbal tea being the main revenue generator. It seems that Wanglaoji has won again. However, Wanglaoji only won against JDB, not the beverage market. The bleak prospects of the herbal tea market are an indisputable fact. The Prospective Industry Research Institute once conducted a statistical analysis. In the years when JDB still held the "Wanglaoji" trademark, the year-on-year growth rate of the herbal tea market scale once reached as high as 16.7%. In 2012, when the "Wanglaoji" trademark changed hands, war and decline began simultaneously, and market growth slowed down. The most obvious decline was in 2015-2016, when it quickly fell to single digits. During this period, JDB lost its 12th lawsuit and faced a claim of 2.9 billion RMB from Wanglaoji. In eight years, milk tea became popular, fruit tea emerged, and various teas appeared one after another. Herbal tea is really getting cold. AI Finance and Economics mentioned in an article in 2017: "Zhu Danpeng, a researcher at the China Brand Research Institute's food and beverage industry, said that to judge whether an FMCG product is recognized by the market and whether it sells quickly, you can look at the production dates of products sold in the market." Wanglaoji opened a milk tea shop, but it did not attract much discussion Neither Wanglaoji nor JDB is willing to admit defeat, and they can selectively publish data, but the market will not deceive. Look at the production dates of herbal teas sold on the street; the fact is that it is not as easy as before to find a convenience store selling herbal tea. Coca-Cola and Pepsi, which once lost to Chinese herbal tea, are also a pair of rivals who have been entangled for many years. Despite the competition, Coca-Cola and Pepsi have not ended up in a lose-lose situation; instead, they have made consumers see their mutual teasing as a harmless game between friendly rivals. Judging from the current situation, it is difficult for the herbal tea industry to see a peaceful competition like the cola industry. What stands between JDB and Wanglaoji is not only interests, but also the historical legacy of trademarks and different understandings of the spirit of contract. To achieve win-win, healthy competition is the best help. But the fierce battle between Wanglaoji and JDB has been too intense; neither has shown mercy to the other, and there is no intention of meeting again in the future. Who really cares about survival and victory? The empty herbal tea spaces on the shelves will be filled by other beverages in an instant. Those unpublished data and consumers who bought other drinks have already given a painful answer to this battle of giants. References: "The Nine Years of JDB and Guangzhou Pharmaceutical's Entanglement" Interface News, 2019 "JDB's Debt, Unpaid Wages, and Production Halt: What Happened to the Herbal Tea King with Sales of 100 Billion?" Sina Finance, 2018 "The Herbal Tea Industry's Glory Days Are Gone: Wanglaoji's Profit Turns at an Inflection Point, JDB Faces Operational Difficulties" Prospective Industry Research Institute, 2018 "JDB's Five Years: Losing the Red Can Battle Means Death, Drawing Means Survival" AI Finance and Economics, 2017 "The Fight for Wanglaoji" China Entrepreneur, 2007 If you provide a tip, we will pay 400-2000 yuan after it is adopted.