The Battle for the Red Bull Trademark

Click 'Read Original' to register. The market uncertainty facing Red Bull is increasing. The brand owner and the actual operator are in internal conflict, with both sides deadlocked, and Red Bull could become a market outcast. At this time, competitors in the second tier of the functional beverage market are seizing the opportunity to expand their market share. The battle over the Red Bull functional beverage brand has entered a white-hot stage. The two wealthy Thai families, the Xu Shubiao family and the Yan Bin family, are engaged in a brutal and intense commercial war over the brand ownership of "China Red Bull." In mid-January, Yan Bin's Huabin Group stated that the renewal of the Red Bull trademark is still undecided. After a year of litigation tug-of-war last year, the Xu family and Yan Bin have not returned to rationality. The market has already reacted to the litigation between the two sides. In 2017, Red Bull's sales in the Chinese market fell to 16 billion yuan, a decrease of 27.86% compared to 2016. Yan Bin Both the Xu Shubiao family and Yan Bin have kept backup plans to strike at each other. The Xu family, using its controlled Hainan Red Bull Beverage Co., Ltd. (hereinafter "Hainan Red Bull") as a platform, attempted to introduce Red Bull's Austrian operator, Mateschitz, and its subsidiary Red Bull GmbH (hereinafter "Austrian Red Bull") into the Chinese market, while also launching other beverage categories. Yan Bin began laying out other beverage categories from the end of 2014 and launched the Red Bull-like product "War Horse" functional beverage at the end of 2016. In 2018, the sales target for "War Horse" is 1.5 billion yuan, and Yan Bin is strengthening marketing and distribution efforts. The market uncertainty facing Red Bull is increasing. The brand owner and the actual operator are in internal conflict, with both sides deadlocked, and Red Bull could become a market outcast. At this time, competitors in the second tier of the functional beverage market are seizing the opportunity to expand their market share, including Dongpeng Special Drink, Lehu, Heika, and "Monster," all of which have launched ambitious market expansion plans. Some big players, such as Li Ka-shing, Zong Qinghou, Danone, and Coca-Cola, are also eyeing the functional beverage market. The impact of the Red Bull dispute extends far beyond the Xu Shubiao family and Yan Bin, affecting the interests of all suppliers, employees, distributors, and consumers in the upstream and downstream of the industry chain. In particular, the Xu family, in order to win the lawsuit, has even filed lawsuits against upstream and downstream companies unrelated to the brand dispute, such as Aeon supermarket and the Red Bull can manufacturer ORG Technology (002701.SZ). From Partners to Enemies ◇◆◇ Red Bull founder Xu Shubiao and Yan Bin both have rags-to-riches stories. In 1995, 72-year-old Xu Shubiao met 41-year-old Yan Bin through a friend and became good business partners, jointly developing the Chinese market. Before meeting Yan Bin, Xu Shubiao established Hainan Red Bull in 1993. However, since there was no functional beverage category in China's commodity classification catalog, government approval faced obstacles. Additionally, the Xu family had moved from China to Thailand two generations ago and did not understand the Chinese market, so Red Bull's development in China was not smooth. Xu Shubiao Xu Shubiao shifted from self-management to choosing partners to jointly develop the market, just as he had done in expanding into the European market. In 1984, Xu Shubiao and Austrian Dietrich Mateschitz jointly established Austrian Red Bull, with the Xu family holding 51% of the shares. Mateschitz opened the European market for Red Bull. In March 1995, Xu Shubiao and Yan Bin jointly established Red Bull Vitamin Beverage (Thailand) Co., Ltd. (hereinafter "Thailand Red Bull"), with the Xu family and Yan Bin holding 68% and 32% respectively. In December of that year, Red Bull Vitamin Beverage Co., Ltd. (hereinafter "China Red Bull") was registered in Shenzhen with a registered capital of US$4 million, with the Xu family and Yan Bin holding 54.24% and 45.76% respectively. In September 1998, China Red Bull was re-established in Beijing, transforming from a wholly foreign-owned enterprise to a Sino-foreign joint venture, with registered capital increased to US$56.02 million. Among them, Thailand Red Bull held 88%, the township enterprise corporation under the State-owned Assets Supervision and Administration Commission of Huairou District, Beijing (hereinafter "Huairou Enterprise General") held 1%, the Xu family's wholly-owned company Inter Biopharmaceutical Holdings Limited (hereinafter "Inter Biopharma") held 7%, and Yan Bin's wholly-owned company Global Market Holdings Limited (hereinafter "Global Market") held 4%. With the entry of state-owned capital and the change in the company's identity, Red Bull obtained legal status to enter the Chinese market. At the beginning of the cooperation, Xu Shubiao and Yan Bin had a clear division of labor. The Xu family provided brand authorization, technical and expert support for China Red Bull, while Yan Bin was responsible for production and sales. As China Red Bull gradually grew, Yan Bin's voice surpassed that of Xu Shubiao. What the Xu family did not expect was that after the establishment of the joint venture in 1998, Yan Bin began to interfere with the registration of the Red Bull trademark. By 2014, the Xu family discovered that, apart from the core trademark in Class 32, Yan Bin had registered most other categories of Red Bull trademarks and design patents. Moreover, Yan Bin built production bases and sales channels outside the joint venture, with a scale even exceeding that of the joint venture. In 2005, 2009, and 2012, Huabin Investment, a subsidiary of Yan Bin's Huabin Group, successively established Red Bull Vitamin Beverage (Hubei) Co., Ltd. (hereinafter "Red Bull Hubei"), Guangdong Red Bull Vitamin Beverage Co., Ltd. (hereinafter "Guangdong Red Bull"), and Red Bull Vitamin Beverage (Jiangsu) Co., Ltd. (hereinafter "Red Bull Jiangsu"). In 2006, Yan Bin established Beijing Red Bull Beverage Sales Co., Ltd. (hereinafter "Red Bull Sales Company"). Currently, Red Bull Sales Company has set up 40 branches nationwide, of which 10 are subsidiaries under the sales company. Xu Shubiao started his career as a pharmaceutical salesman and gradually became a wealthy Thai tycoon. He spent his life in business. In 2009, Xu Shubiao's brand-holding company, Thailand T.C. Pharmaceutical, authorized China Red Bull to use the Red Bull trademark (limited to mainland China) until October 2016, which seemed to indicate Xu Shubiao's attitude. At that time, Xu Shubiao was 83 years old. After supporting Yan Bin to grow in the Chinese market through a "release water to raise fish" approach, he clearly wanted his children to reap the harvest. In 2012, Xu Shubiao passed away at the age of 86. He had 11 children with two wives. His son, Xu Xiongxiong, became the new head of the Xu family, serving as CEO of Thailand T.C. Pharmaceutical and Thailand Red Bull Beverage Co., Ltd. (hereinafter "Thailand Red Bull Beverage"). Xu Shubiao's son Xu Xiongxiong (left) and brother Xu Shu'en (right) with F1 driver Mark Webber (center) at an event After becoming the head of the Xu family, Xu Xiongxiong began to attack Yan Bin. In December 2014, the Xu family commissioned Global Law Office to investigate China Red Bull, which made the conflict between the Xu family and Yan Bin public. After discovering problems in China Red Bull, the Xu family held a meeting with Yan Bin in Singapore. At this meeting, the Xu family demanded that Yan Bin transfer all the "Red Bull" trademarks and design patents that had been registered by the joint venture and its subsidiaries to T.C. Pharmaceutical. Yan Bin agreed to the Xu family's request. The two sides signed a trademark and design patent transfer agreement. After recovering the trademarks and design patents, possibly to appease Yan Bin, the Xu family increased Yan Bin's equity in Thailand Red Bull in September 2015. Originally, the Xu family and Yan Bin held 68% and 32% of Thailand Red Bull respectively. After the adjustment, the shareholding ratio became 51% and 49%. Thailand Red Bull holds 88% of China Red Bull, so the Xu family's and Yan Bin's shareholding in China Red Bull was also adjusted to 51.88% and 47.12%. In contrast, when China Red Bull was re-established in Beijing in 1998, the Xu family and Yan Bin held 66.84% and 32.16% respectively. While increasing Yan Bin's stake in China Red Bull, the Xu family also hired Morgan Stanley to create a merger and acquisition plan, hoping that China Red Bull would acquire the three Red Bull production bases in Hubei, Guangdong, and Jiangsu, as well as the Red Bull Sales Company, which were controlled by Yan Bin's Huabin Investment. However, Yan Bin refused on the grounds that the price was undervalued. The wealth status of the Xu family and Yan Bin is also changing. In 2016, the Xu family and Yan Bin were tied at 127th place on the Hurun Global Rich List with fortunes of US$9.3 billion each. By 2017, Yan Bin's wealth had increased to US$11 billion, ranking 107th, while the Xu family ranked 145th with US$9.3 billion. After the failure to acquire Yan Bin's three production bases and sales company, the Xu family filed a lawsuit. In August 2016, the Xu family filed trademark infringement lawsuits against the three factories in Hubei, Guangdong, and Jiangsu. In October, Yan Bin, through the joint venture, applied to the China International Economic and Trade Arbitration Commission to revoke the trademark and design patent transfer agreement signed in December 2014. At this time, it was exactly the deadline for the Xu family's authorization of the China Red Bull brand. The Xu family precisely controlled the pace of reining in Yan Bin, but they underestimated Yan Bin's determination to fight to the death. In 2017, a large-scale and intensive legal battle broke out between the Xu family and Yan Bin. To date, the legal proceedings are still in process and have not yet entered the formal combat phase. Each Has Backup Plans ◇◆◇ In fact, Yan Bin should have anticipated a battle with the Xu family. As early as 2014, Huabin Group began to lay out beverage products other than Red Bull. Previously, Huabin Group had only focused on China Red Bull as a single product. In July 2014, Huabin Group acquired a 25% stake in the American coconut water brand "Vita Coco" for US$165 million, and launched "Vita Coco" coconut water in the Chinese market in September of that year. In April 2015, Huabin Group introduced the children's beverage "Capri-Sun" from Germany. In January 2016, Huabin Group acquired approximately 51% of the Norwegian premium bottled water brand "VOSS" for US$105 million. At the end of 2016, Huabin Group quietly launched the "War Horse" functional beverage, and just three months later began full-scale market promotion. This year, Huabin Group has intensified marketing and distribution efforts for "War Horse." In terms of distribution, Huabin Group is carrying out fine-grained distribution for "War Horse" and bundling "Red Bull" and "War Horse" for distributors. In terms of channel costs, Huabin Group has begun to reduce support for "China Red Bull" and shift it to "War Horse." For Yan Bin, now is not the best time to completely break with the Xu family. Launching "War Horse" is his backup move. If negotiations with the Xu family succeed, Yan Bin may continue the development of Red Bull. If he breaks with the Xu family, he can continue with "War Horse." At the same time, the development of "War Horse" can also increase his bargaining chips with the Xu family. The Xu family also seems to have made arrangements for a break with Yan Bin. Xu Xiongxiong has publicly stated that the Xu family will expand its product portfolio to eight products beyond Red Bull, including multiple energy and functional beverage categories, to build a "world-class brand family." At the same time, the Xu family is also increasing investment in its controlled Hainan Red Bull and actively introducing Austrian Red Bull. In 2014, the international version of Red Bull was introduced into the Chinese market. Austrian Red Bull established Ruibu Beverage Trading (Shanghai) Co., Ltd., forming a pattern of "International Red Bull" against "China Red Bull." In 2015, the Xu family changed the business scope of Hainan Red Bull from "production and sales of Red Bull beverages" to "production, storage, import and export, wholesale and commission agency of food and beverages, and related activities, as well as technical services and consulting services," paving the way for Thailand Red Bull and Austrian Red Bull to enter the Chinese market. From the current situation, neither the Xu family nor Yan Bin shows any intention of backing down. If the fight continues, it is likely to be a lose-lose situation. Perhaps it is time for them to sit down, restore rationality, and find a win-win solution. This article was first published in Southern People Weekly, Issue 543, with the original title "The Battle for the Red Bull Trademark." Text / Reporter Wang Yanqing, Intern Reporter Zhang Dan