Unpacking Master Kong's History of Being Vilified Over the Years

"When it rains, it pours; a broken ship meets headwinds"—these words aptly describe Master Kong's situation. Master Kong had just released its 2015 financial report, and as expected, both revenue and profit continued to decline. Just as industry experts were analyzing how Master Kong reached this point, news broke online that Master Kong's drinking water had been reported by a real-name whistleblower.

All Because of Cost Reduction

The story goes like this: Yang Hong, a professional anti-counterfeiting activist from Nanjing, filed a real-name report against Master Kong for adding nitrogen to its "You Yue" water without labeling it on the packaging, which he claimed deceived consumers. Mr. Yang said he had been complaining about this product for years and finally succeeded this time. The Nanjing Jiangning District Market Supervision Bureau indeed found several bottles of liquid nitrogen at the Nanjing Dingjin factory, and the packaging did not indicate whether it was industrial or food-grade nitrogen. Although the inspection team proved from Master Kong's receipts that it was food-grade nitrogen, the activist continued to press: Why add liquid nitrogen to water without disclosing it on the packaging?

Here we must admire the professional spirit of anti-counterfeiting activists, which has driven the improvement of Chinese laws and made significant contributions to a harmonious society. Tracking down corporate oversights is precisely the value of such activists.

Master Kong has faced difficulties in recent years. Like Procter & Gamble, they fell into the misconception that only cheap products can capture the Chinese market. As consumer spending power increased, they wanted to raise prices but couldn't, while raw material costs kept rising. Among all packaging, Master Kong's You Yue water uses the thinnest PET bottle. To increase the bottle's grip strength, Master Kong stated they added a drop of food-grade liquid nitrogen, and according to the enterprise standard filed with the Zhejiang Provincial Health Department, Dingjin Food's packaged drinking water (other drinking water) may be filled with nitrogen. Although this is on file, consumers are unaware. With food safety scandals constantly exposed in recent years, consumers are like startled birds; any slight disturbance causes a citywide uproar.

What Master Kong has been criticized for over the years, besides lack of innovation, is occasional safety issues. Does Master Kong know its problems? Yes, but changing is too difficult. It's like a giant ship about to hit an iceberg; even if you know the danger ahead, it's too late to turn around. First, the system of over twenty years means basically dismantling the entire ship's skeleton and rebuilding. Second, brand endorsement has positioned Master Kong's products as low-priced in consumers' minds. Third, there are those waiting to see Master Kong fail, stabbing it in the back from time to time.

This leads Master Kong to only think about patching up existing things, hoping to keep going day by day. Master Kong people may never understand why their once-proud philosophy—"He who controls the channels controls the world"—is so fragile in this era. Why do their imitations, which look so similar and are cheaper, not sell as well as Uni-President's? Master Kong might also wonder what Uni-President's new products have. They just hire a Japanese design company to create high-appearance bottles, fill them with the same old stuff, and maybe one or two out of ten sell well, yet they are praised to the skies. Meanwhile, Master Kong is embarrassed: its best-selling products are still Master Kong Braised Beef Noodles, Master Kong Iced Tea, Master Kong Water, and maybe Jasmine Honey Tea is passable.

Product aging, brand aging—Master Kong's problems are no less than P&G's. And there's another big issue: the occasional backstabbing. Every time they agree with Uni-President to raise prices together, Uni-President stays silent, making Master Kong the guinea pig, further damaging its already poor brand image and causing resentment among distributors and consumers. At this point, Master Kong sadly realizes that although both came from Taiwan, in business, there's no "fellow townsman" sentiment; instead, it's like "fellow townsman stabs you in the back."

We can say Master Kong lacks innovation or has an aging brand, but with its strong channel control, it can still compete—after all, Braised Beef Noodles has been a bestseller for 25 years. However, some things cannot be solved by channel strength alone: public skepticism. Looking back at Master Kong's history of being vilified, besides fierce competition and too many uninformed spectators, Master Kong has brought some of it on itself.

Water Source Gate Incident

In 2008, Master Kong faced its biggest crisis—the Water Source Gate. On July 24, 2008, an anonymous netizen "Qingcao Buding" posted an article titled "Master Kong: Where Is Your Quality Water Source?" on Tianya Community's image section, first exposing the truth about Master Kong's water source. The post claimed the netizen had infiltrated Master Kong's production base at No. 27, 4th Street, Hangzhou Economic and Technological Development Zone, and found no "quality water source" nearby; the only natural water source was the heavily polluted Qiantang River. The netizen concluded that "Master Kong either uses tap water or dirty Qiantang River water, definitely not the 'quality water source' it claims."

Master Kong had to admit that its water was purified city tap water with added minerals, and there was no so-called good water source. Although later evidence suggested the incident was orchestrated by Nongfu Spring, the public no longer cared who was behind it; they only cared whether Master Kong had such problems.

In handling this, Master Kong exposed its lack of public relations capability and decisiveness. In 2013, Nongfu Spring faced a similar water source incident. When Beijing News and other newspapers accused Nongfu Spring of using Zhejiang standards rather than national standards, Nongfu Spring decisively shut down all its large-barrel water plants in Beijing, replaced them with small-barrel or 500ml bottles for customers, and pushed for a new national standard for drinking water. Moreover, the reporters who reported on Nongfu Spring that year, Li Bin of Beijing Times and Shen Hao of 21st Century Business Herald, were both detained.

If Master Kong had foreseen the future, the best move then would have been to stop producing all mineral water, find a real water source, and launch a new brand endorsement rather than putting everything under the Master Kong name. But no company has such courage, especially since Master Kong was the leader in drinking water at the time. This incident also led to serious doubts about the quality of Master Kong's products. Everyone has a devil inside, and especially when your products do have problems, just not exposed yet. This endorsement, like Master Kong's brand, is deeply ingrained in people's minds. (The seeds planted by this incident also mean that every time Master Kong has a problem, people choose to believe it rather than dismiss it.)

Japanese Capital Background Incident

In 2012, the Diaoyu Islands incident triggered a nationwide boycott. All "patriotic" citizens spontaneously boycotted Japanese goods, taking to the streets shouting patriotic slogans, then smashing fellow citizens' shops and cars, beating their compatriots to the ground. At that moment, we wondered if the Cultural Revolution had returned. These same patriotic people, years later, would buy up Japan, forcing Japan to consider visa-free entry for Chinese tourists. Their enthusiasm for boycotting Japanese goods then is matched by their enthusiasm for buying them now. All under the guise of patriotism, they engage in shady dealings.

At this time, Master Kong's good partner cleverly used the opportunity to claim Master Kong was a Japanese company. The emails behind these "boycott campaigns" were suspected to be internal Uni-President emails. On September 15, 2012, an email forwarded by "TeMing Lin" with the subject "Please use personal Weibo to publicize the fact that Master Kong is a Japanese-funded brand" stated: "Notify all staff immediately to use the anti-Japanese sentiment to promote the fact that Master Kong is 85% Japanese-owned, and forward via Weibo." It also suggested using posters or banners with "Boycott Japanese goods - Master Kong" and required supervisors to report the number of forwards via SMS by 8 PM daily. The email explicitly stated that during the boycott, no promotional clothing with Uni-President branding should be worn.

This patriotic drama was staged spectacularly, and the ship of friendship capsized. In fact, instant noodles were invented in Japan, and many technologies are imported from Japan.

(These companies all have some Japanese background, but they are not truly Japanese companies; let them be.)

Gutter Oil Incident

If the previous two incidents had already damaged Master Kong, the 2014 gutter oil incident directly led to two consecutive years of declining profits and performance. On October 8, 2014, Taiwan authorities uncovered a case where Ting Hsin International Group's Cheng I Food Company mixed feed oil with edible lard, exposing the Ting Hsin black-hearted oil scandal. Although the final verdict declared it a false alarm and the Master Kong chairman was acquitted, the public's trust was once again shattered.

In this incident, Master Kong's biggest mistake was in public relations. While the so-called black-hearted oil case was still under trial, a Taiwanese tour guide suddenly released a "doomsday" video claiming Master Kong used black-hearted oil in mainland China at 56 times the amount in Taiwan—what a lucky number. This tour guide apparently knew China has 56 ethnic groups, so one time per ethnic group equals 56 times. In handling this, Master Kong's biggest mistake was being deferential to the Taiwanese guide—inviting him to tour the factory—while suing mainland self-media that reposted the video.

(Remember my unchanging, righteous face)

This lawsuit set a precedent, leading to Jay Chou suing a public WeChat account, Wang Jianlin suing another, and showing us the faces of those who seek attention in the self-media era—crying, making a scene, flattering, and apologizing.

But in the public's mind, it left a deep impression that Master Kong treats Taiwanese and mainlanders differently.

Final Thoughts

This is the fourth major black PR incident Master Kong has faced. We all know professional anti-counterfeiting activists are not early risers without profit; what are their true motives? Is it to build their own brand or are they paid by certain brands? We don't know. Now that the incident has occurred, there will inevitably be another batch of uninformed netizens and paid trolls spontaneously boycotting Master Kong. This water war will again put Master Kong's sales at risk.

Finally, a few words: Food safety needs progress, the public needs to know more, and we must give consumers more right to know. I also want to say to all food industry practitioners: Is it really wise for you big shots to expose each other's flaws and attack each other? For short-term gains, you destroy the entire industry. Even if your competitor falls, you may not necessarily develop better. Haven't you seen that after Yili and Mengniu became state-owned and stopped attacking each other, their performance improved this year?

The result of such mutual attacks is more layoffs and more bankruptcies. If the FMCG industry cannot recover, can you expect the overall economy to improve? If you have the ability, innovate more and let the market test you, instead of using underhanded tactics.

Click the QR code to follow Lao Na, always without shame

****************- END-

China's best FMCG distributor learning platform Focusing on providing professional, practical, and actionable tutorials for companies and distributors Committed to helping Chinese FMCG distributors grow rapidly The most professional and practical knowledge base in the FMCG industry