---
title: "Lee Kum Kee Loses Oyster Sauce Dominance: Is It Because of Overemphasizing Brand and Quality?"
description: "When Lee Kum Kee first entered the Chinese market, it achieved great success with its high-quality oyster sauce. Today, despite maintaining quality, its market share is being eroded by competitors, and its relative advantage is lost, with Haitian replacing it as the oyster sauce leader. Lee Kum Kee's business philosophy of refusing to lower quality has allowed competitors to imitate and surpass it through low-price competition. Lee Kum Kee twice launched mid-to-low-end products, 'Da Chu Lai' and 'Jinzhen Oyster Sauce,' to counter competition, but both were discontinued within half a year."
author: "木棉"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2018-04-15"
language: "en"
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# Lee Kum Kee Loses Oyster Sauce Dominance: Is It Because of Overemphasizing Brand and Quality?

> When Lee Kum Kee first entered the Chinese market, it achieved great success with its high-quality oyster sauce. Today, despite maintaining quality, its market share is being eroded by competitors, and its relative advantage is lost, with Haitian replacing it as the oyster sauce leader. Lee Kum Kee's business philosophy of refusing to lower quality has allowed competitors to imitate and surpass it through low-price competition. Lee Kum Kee twice launched mid-to-low-end products, 'Da Chu Lai' and 'Jinzhen Oyster Sauce,' to counter competition, but both were discontinued within half a year.

Source: Condiment Business Circle (ID: twpsq0909)
When Lee Kum Kee first entered the Chinese market, it achieved great success with its high-quality oyster sauce. Compared to its early days, although Lee Kum Kee's quality remains the same, its market share is being gradually eroded by competitors, and its relative advantage is lost, with Haitian replacing it as the oyster sauce leader.
Lee Kum Kee's business philosophy is to refuse to lower quality, watching competitors go from imitation to surpassing, seizing market share through low-price competition.
Lee Kum Kee twice launched mid-to-low-end products, "Da Chu Lai" and "Jinzhen Oyster Sauce," to counter competition, but each was discontinued after half a year. Behind the discontinuation, was it because low-priced products affected sales of high-priced products? Or were there other reasons?
1
**Lee Kum Kee Loses Oyster Sauce Advantage**
**▼******
Lee Kum Kee can be considered the "pioneer" of oyster sauce and steamed fish soy sauce, achieving remarkable results with excellent product quality.
Even such an excellent company took many detours in product decisions.
Jiuzhuang Oyster Sauce is Lee Kum Kee's signature product and the foundation of its success. In the 1990s, many Chinese consumers did not know what oyster sauce was or how to use it. Apart from Lee Kum Kee, there was no other company capable of mass-producing oyster sauce.
The high price of Jiuzhuang Oyster Sauce also discouraged consumers from trying it; all users of Lee Kum Kee oyster sauce were restaurants and hotels. The excellent product quality made Jiuzhuang Oyster Sauce quickly popular in the catering channel, subsequently influencing households.
But at that time, Chinese consumers had relatively low purchasing power, and the high-priced Jiuzhuang Oyster Sauce kept many consumers away, while Lee Kum Kee still refused to lower quality to accommodate price. As a result, the market they had painstakingly cultivated was exploited by Haitian, which implemented a low-price strategy.
The oyster sauce market was monopolized by Lee Kum Kee. Haitian, before solving the technical problem of oyster sauce liquefaction, eagerly launched low-end products targeting mid-to-low-end catering.
In 2000, Haitian made a technological breakthrough, solving the liquefaction problem. This product was positioned as premium oyster sauce, priced at only half of Jiuzhuang Oyster Sauce, offering good quality and low price. Sales quickly caught up with Lee Kum Kee.
2
**Mid-to-Low-End Products "Da Chu Lai" and "Jinzhen Oyster Sauce" Both Discontinued**
**▼**
Seeing competitors catching up, Lee Kum Kee panicked and hastily launched a mid-range new product "Da Chu Lai," with quality lower than Jiuzhuang Oyster Sauce, positioned between Jiuzhuang and Haitian. But shortly after Da Chu Lai was launched, Lee Kum Kee cut off its own path and stopped production and sales of Da Chu Lai.
Haitian took advantage of this gap, using its dense sales channels to quickly distribute, and sales soon surpassed Lee Kum Kee, becoming the new leader in the oyster sauce market.
Seeing the market being continuously eroded, in 2009, Lee Kum Kee again launched a new mid-to-low-end product "Jinzhen Oyster Sauce," still under the Lee Kum Kee brand. Unexpectedly, within less than half a year, this new product was again urgently discontinued.
Lee Kum Kee's product decisions changed repeatedly. After many changes, it still could not resist the temptation of the mid-to-low-end market. In 2011, Lee Kum Kee again launched the mid-to-low-priced Weihaoxian series.
3
**Reason: Low-Priced Products Affecting Sales of High-Priced Products?**
**▼**
After the launch of Da Chu Lai and Jinzhen Oyster Sauce under the Lee Kum Kee brand, sales were good, but Lee Kum Kee discontinued both within a short time. What was the reason?
If we look at surface analysis, it was because the launch of low-priced oyster sauce affected sales of high-priced oyster sauce. High-end products have always been an important source of profit, and companies naturally do not want high-end market share to be squeezed by low-end products.
**Looking back now, Lee Kum Kee's decision to abandon the mid-to-low-end oyster sauce market was a major mistake.**
A senior executive of Lee Kum Kee once proudly stated to the media: "Mid-range oyster sauce sells well in the mainland. We will produce products that sell according to market demand, but we will adhere to product quality and will not lower quality to accommodate price, as that would harm the brand image."
The important reason Lee Kum Kee hesitated in launching mid-to-low-end oyster sauce was the fear that low-priced, low-quality oyster sauce would ruin its century-old brand. In fact, Lee Kum Kee could have implemented a multi-brand strategy like Meiweixian and Jinlongyu, proactively setting up competitors for the main brand. Self-defense is better than being revolutionized by competitors.
Obviously, Lee Kum Kee also realized the urgent need for a mid-to-low-end sub-brand to cater to the current market. When Haitian's oyster sauce sales were increasing day by day, Da Chu Lai was hastily launched to counter market competition.
Lee Kum Kee considered the supply side but ignored the demand side. Think about the sales situation at that time: supermarket shelves displayed three different oyster sauces: high-priced Lee Kum Kee Jiuzhuang, mid-priced Lee Kum Kee Da Chu Lai, and low-priced Haitian.
How would consumers choose? Haitian's past poor quality image had not yet faded. Professional chefs believed that using Lee Kum Kee oyster sauce was professional, while ordinary consumers, lacking knowledge about oyster sauce, dared not buy products priced more than twice as much, so they naturally chose Haitian.
▲ Lee Kum Kee Jiuzhuang Oyster Sauce
During the initial promotion of new products, market pricing was chaotic. Da Chu Lai and Jinzhen Oyster Sauce faced the same situation. Many merchants, to obtain higher profits, sold the mid-to-low-end new products as high-end Jiuzhuang Oyster Sauce.
Chefs in restaurants and hotels who knew the product discovered that Lee Kum Kee's oyster sauce quality was not as good as before, which affected overall sales of Lee Kum Kee oyster sauce. This situation in the market easily led decision-makers to conclude that low prices were the culprit, ignoring competitors and their own channel management capabilities.
4
**Should Products That Do Not Align with Brand Positioning Be Launched?**
**▼**
If Lee Kum Kee had implemented a dual-brand strategy or set up a sub-brand in the early days of entering the mainland, it would not have ceded most of the oyster sauce market to competitors that caught up later. But Lee Kum Kee, after hastily launching and then discontinuing twice, left opportunities for competitors and missed development opportunities.
Most companies, when they reach a certain scale, have a common psychology: to cover all consumer groups. At this time, many companies diverge in positioning decisions: whether to set up a sub-brand based on the main brand or implement a multi-brand strategy.
Multi-brand requires large investment in brand promotion, but there is no worry of "one loss affects all." A sub-brand can easily launch a series of products by leveraging the main brand's influence, but the disadvantage is that once a brand problem occurs, it can be a total failure.
Da Chu Lai and Jinzhen Oyster Sauce were two sub-brands distinct from the main brand Jiuzhuang Oyster Sauce, both using the Lee Kum Kee brand. Meiweixian and Chubang are results of a dual-brand strategy.
When a low-end brand launches high-end products, it is often difficult, as customers' low-end perception of the brand determines that the probability of high-end product success is extremely low. But the benefit is that it sends a signal to the outside world: low-end brands also have the capability to produce high-end products. This can enhance the overall brand image.
A typical example is the Phaeton, a high-end product launched by German automaker Volkswagen. Although the Phaeton was perfect in terms of product, because Volkswagen did not represent a high-end brand in customers' minds, Phaeton sales remained poor. Some media commented: "The only flaw of the Phaeton is the Volkswagen logo."
Conversely, when a high-end brand launches low-end products, it always has the same concern as Lee Kum Kee: worrying that low-end products will harm the brand image and cause irreparable damage. It was precisely based on this consideration that Lee Kum Kee wavered in launching mid-to-low-end products.
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