---
title: "The Restless Wang Laoji"
description: "Wang Laoji herbal tea, founded during the Daoguang reign of the Qing Dynasty, has a history of nearly 200 years. After years of stagnant sales, a successful repositioning in 2002 with the 'fear of getting heaty' concept propelled it to national prominence, reaching 12 billion yuan in sales by 2008. However, after winning a decade-long trademark dispute, Guangzhou Pharmaceutical Group's over-licensing of the brand has diluted its equity, leading to concerns about its future."
author: "王币池"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2023-04-18"
language: "en"
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---

# The Restless Wang Laoji

> Wang Laoji herbal tea, founded during the Daoguang reign of the Qing Dynasty, has a history of nearly 200 years. After years of stagnant sales, a successful repositioning in 2002 with the 'fear of getting heaty' concept propelled it to national prominence, reaching 12 billion yuan in sales by 2008. However, after winning a decade-long trademark dispute, Guangzhou Pharmaceutical Group's over-licensing of the brand has diluted its equity, leading to concerns about its future.

Wang Laoji herbal tea was founded during the Daoguang reign of the Qing Dynasty, with a history of nearly 200 years. It once lingered at annual sales of just over 100 million yuan for several years. After six years of stagnation, a successful commercial repositioning suddenly allowed it to surpass Coca-Cola's sales in China. In 2002, leveraging the positioning concept of 'fear of getting heaty,' it successfully expanded from a regional beverage to a national one, reaching sales of 12 billion yuan by 2008. During the Beijing Olympics, accompanied by the fervor of competitive sports, advertising blitzes made 'Fear heaty? Drink Wang Laoji' occupy the minds of consumers nationwide. This herbal tea, originating from Guangdong, surged to all provinces and cities for the first time, and with massive ground promotion, it fully ignited the red-can JDB Wang Laoji. Suddenly, in consumption scenarios like hotpot dinners and all-night sports viewing, drinking the red can became almost standard. Combined with a trendy and dynamic advertising jingle that repeated, 'Don't be afraid of anything, enjoy life to the fullest,' it became ubiquitous. Meanwhile, Guangzhou Pharmaceutical Group (GP) also had its own Wang Laoji. Originating in 1995, Guangzhou Yangcheng Pharmaceutical authorized the production and sales rights of red-box Wang Laoji to JDB. On February 13, 1997, the two parties re-signed a licensing agreement, formally granting Hongdao Group and its invested enterprises the exclusive right to use the Wang Laoji trademark to produce red-can herbal tea. The clues were laid early. On August 28 of the same year, the Wang Laoji branch transferred the Wang Laoji trademark to GP, which sowed the seeds for future disputes.

**A Decade-Long Trademark War**

After the Olympics, red-can Wang Laoji was at its peak. By 2011, JDB Wang Laoji's sales were between 16.5 billion and 20 billion yuan, firmly in the first tier of Chinese beverages, visible everywhere in hotpot restaurants, BBQ joints, and eateries. **However, few know that as early as 2008, GP had sent a lawyer's letter to JDB.** On May 2, 2000, GP and Hongdao Group, JDB's investor, signed a 10-year licensing agreement. Two years later, they signed a supplementary agreement extending the validity to 2020. The licensing agreement between GP and Hongdao Group, aside from increasing licensing fees, retained the same content as the agreement between the Wang Laoji branch and JDB. In 2011, GP formally evaluated the Wang Laoji trademark, valuing it at over 100 billion yuan. In April of the following year, GP filed a lawsuit against JDB with the China International Economic and Trade Arbitration Commission (CIETAC), citing unfair competition among other reasons. A year later, CIETAC ruled that the two supplementary agreements between GP and Hongdao Group were invalid, and JDB was ordered to stop using the Wang Laoji trademark. Thus began a decade-long mutual litigation. JDB refused to accept the ruling and applied to the court to revoke the arbitration award on May 27, which was accepted. The next day, GP claimed JDB's illegal profits amounted to 7.5 billion yuan and would seek compensation. The dispute quickly escalated into the market. In June of that year, a peculiar phenomenon emerged: two types of red-can Wang Laoji appeared on the market. GP officially began producing red-can Wang Laoji, confusing many consumers. In August 2017, the Supreme People's Court's final judgment ruled that GP and its predecessors, as well as JDB and its affiliated companies, jointly owned the packaging and decoration rights for 'Red Can Wang Laoji Herbal Tea.' GP intended to inject Wang Laoji capital into Baiyunshan, monetizing the brand through capital operations. Upon the news of joint ownership, Baiyunshan's stock plummeted, closing down 3.76%. After a year-long wait, JDB finally received the news it had longed for. 'This was a brutal battle, truly described as bloodbath,' lamented Li Chunlin, who became JDB's president in 2018. On July 1, 2019, an official announcement brought the dispute to an end, with JDB having to make a painful sacrifice. As the winner, can GP make good use of Wang Laoji?

**Diluted Brand Equity**

In fact, 13 years ago, GP held a press conference for its 'Big Health Industry Development Plan.' At the meeting, GP announced that the Wang Laoji brand value had reached 108 billion yuan and planned to recruit partners nationwide. Through self-operation, brand licensing, product outsourcing, and brand leasing, it aimed to expand the 'Wang Laoji' brand into areas such as medicinal liquor, medicated cosmetics, health products, food, and sports equipment to maximize brand value. Four months later, at the Chengdu Spring Sugar and Wine Fair, GP authorized two Wang Laoji products—'Wang Laoji' canned Solid Yuan Porridge and Lotus Seed Mung Bean Cool Porridge—which were officially unveiled and began soliciting distributors. Brand licensing proved lucrative for GP; a source close to GP revealed that a licensing contract with one company brought in 5 million yuan annually in royalties alone. But market conditions are unpredictable and remain formidable. According to public data, the growth rates of the herbal tea market from 2012 to 2017 were 16.7%, 15.9%, 15.1%, 15%, 9.7%, and 9.1%, respectively, showing a declining trend. In 2019, consumption of herbal tea in household settings fell 9% year-on-year.

**In 2019, GP authorized the exclusive use of trademarks like Wang Laoji to its subsidiary Baiyunshan**, and Guangzhou Chuangying Company was established to handle brand licensing for GP's group companies. Wang Laoji became Baiyunshan's 'cash cow,' supporting a significant portion of its performance. Currently, the 'Product Center' on Guangzhou Chuangying's official website lists over 300 products, spanning beer, beverages, coffee, pharmaceuticals, cosmetics, daily necessities, and more. 'Wang Laoji' series products include loquat candy, sour plum drink, turtle jelly, Solid Yuan Porridge, lotus root juice, cordyceps drink, and other food and beverages, as well as shower gel, toothpaste, and beer. Unfortunately, none of these products have replicated the success of Wang Laoji itself. More criticized is that due to chaotic licensing, some have used the Wang Laoji name to deceive distributors, leading to endless disputes... The recently launched liquor, Suisui Niu Jiu, is a microcosm of Wang Laoji brand licensing.

Suisui Niu Jiu is not produced by Wang Laoji Company but is a liquor product jointly launched by GP and a Henan enterprise, with one production site in Qionglai, Sichuan. It debuted leveraging Wang Laoji's fame, attracting 300 partners and nearly 3 million yuan in transactions at the sugar and wine fair that day. However, it cannot be found on e-commerce platforms, and there are signs of secondary solicitation. Some believe that imposing the health concept, which is its strength, on alcoholic products is destined to be a laughingstock for consumers. Industry insiders are more direct, stating that the Wang Laoji brand was built with great difficulty and is the result of time; destroying it would be easy. They openly criticize management for being short-sighted, with excessive and indiscriminate brand licensing, expressing concerns about Wang Laoji's future. Nevertheless, the brand licensing business has formed a mature industry chain, with main business revenue of 9.349 billion yuan in 2022 and net profit of 1.448 billion yuan. Revenue slightly decreased compared to 2021, but net profit reached a new level. If this continues, it may lead to the same outcome as American Light Beer, which quickly over-leveraged its brand profitability and ultimately lost the entire beverage market.

**Wang Laoji Trapped in the Resource Trap**

From a sell-through perspective, GP's Wang Laoji is clearly caught in a **resource trap**. For example, a country or region with abundant natural resources may struggle to achieve economic growth, resulting in slow development and low levels of economic performance—this is the resource trap. The same applies to enterprises. After winning the lawsuit, GP fully secured the Wang Laoji trademark. Logically, it should have a winning hand, possessing most of the herbal tea industry's momentum, yet every product it launches fails. Is the Wang Laoji gold-lettered sign not prominent enough? Is GP's distribution capability poor? Or is there a bottleneck in sell-through? None of these. After acquiring Wang Laoji, GP completely abandoned launching new brands. This is what is called 'brand as a basket, put everything in it.' A multitude of licenses, a multitude of categories unrelated to herbal tea or even health, still use the Wang Laoji brand, which consumers associate with herbal tea, to incubate. Unconsciously, this erodes brand equity, and more seriously, causes consumer confusion. Moreover, no new product has achieved success, which indirectly confirms the failure of multiple licensing in the product life cycle. Consumers can't help but wonder: What exactly is Wang Laoji?

**Al Ries, the father of positioning theory in the United States, warned 20 years ago: 'If you believe in brand extension, you won't believe in facts.'** Although Tab's sales exceeded Diet Pepsi, confirming the disadvantages of brand extension, PepsiCo still didn't learn and continued to launch Crystal Pepsi, Wild Cherry Pepsi, Pepsi Max, and Pepsi XL. Additionally, PepsiCo introduced Pepsi Light, Pepsi AM, and Pepsi One. None of these brands succeeded, and they never will. Today, his words have proven prophetic; GP is following Pepsi's old path, but Pepsi didn't venture beyond cola. **People unconsciously and deliberately use what they are best at to compensate for what they are not good at; this is an insurmountable hurdle in human nature.** With the endorsement of the Wang Laoji brand, GP seems to have rested on its laurels, no longer striving to improve marketing capabilities, brand capabilities, or management capabilities... But the enterprise's own problems remain. As consumption evolves, the market environment has become oversupplied, and a shift from 'eating enough' to 'eating well' is quietly underway. Therefore, products must have clear positioning and match usage scenarios. With today's limited resources, focus on core products and innovate accordingly, reducing long-tail products. The brand is the core asset of a product; focusing on the brand means firmly grasping the core product. As a well-known brand, Wang Laoji is positioned in consumers' minds solely as herbal tea. Thus, GP's attempts to change the status quo through various crossovers are unrealistic; it is not a goose that can lay golden eggs at will. Mr. Ries also said: 'If someone tries to seize your positioning, it's very bad. If you voluntarily give up your positioning, it's a tragedy.'

GP, which has voluntarily abandoned Wang Laoji's herbal tea positioning, should stop and think carefully.

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