At the just-concluded Wuhan Erchang Soda distributor conference, Lan Shili was not satisfied with the signing numbers. This re-entrepreneurship project, which he sees as 'surpassing the past,' may face twists and turns. The traditional peak season for beverages starts in April, but Lan only recently rushed to recruit distributors, clearly a few steps behind. A bigger risk looms: whose soda can be called 'Erchang Soda'? Since last year, Wuhan Hengrunshi, the operator of Hankou Erchang Soda, has repeatedly filed oppositions to trademarks applied for by Wuhan Erchang Beverage. The five confrontations are undoubtedly a warning to Lan Shili—in the same city, not everyone can print 'Erchang' on a soda bottle.
The two sodas trace their origins to the 'Erchang Soda' that was popular in Wuhan in the 1990s, which can be traced back to the British-run Heli Soda in the 1920s. That soda was acquired by Coca-Cola over 30 years ago and then shelved, disappearing from public view. 'Erchang Soda' was revived by Wuhan native Jin Yawen and her team six years ago. And soda is an important step for Lan Shili to enter the consumer sector after regaining his freedom.
Those who follow Lan Shili may have noticed his pinned video on Douyin: standing in front of the bustling Yellow Crane Tower, he drinks an orange-red soda in one gulp, with the plaque behind him reading 'Qi Tun Yun Meng' (Swallowing Clouds and Dreams), echoing his ambition. However, his ambition is not the middle reaches of the Yangtze River that Yunmeng refers to, but to sell soda nationwide.
Following the path of Chinese local soda revival, the uniform move is to retell the brand's origins: Beibingyang traces back to the Beijing Ice Factory founded in 1936; Dayao originated from the Bayi Beverage Factory; Zheng Guanghe Soda appeared on Shanghai streets 130 years ago. 'Erchang Soda' also has a century-long history. In the 1920s, British man Cossain founded Heli Ice Factory in the French Concession in Hankou. During the Anti-Japanese War, it was transferred to Hankou merchant Liu Yaotang. After the founding of the People's Republic of China, it was nationalized and renamed State-owned Wuhan Beverage No. 2 Factory, with the main brand 'Heli' changed to 'Binjiang', commonly known as 'Erchang Soda' by Wuhan locals.
In the 1990s, a wave of foreign acquisitions swept the national beverage industry, and 'Erchang Soda' was not spared. In 1990, Wuhan Beverage No. 2 Factory was acquired by Coca-Cola, and production ceased ten years later, causing the once-popular soda to vanish. At the end of 2017, Wuhan native Jin Yawen led a team to recreate 'Erchang Soda', with carbonation, fruit juice, and retro glass bottle design, similar yet innovative compared to the original. Coinciding with the rise of the national trend, the product became an instant hit, becoming a phenomenal product in the local beverage market. According to public reports, the product's transaction volume reached 300 million yuan in 2018. Since then, many local soda brands have emerged in Wuhan, such as Hanyangzao and Heli Soda, awakening the collective memory of Wuhan people. Only the word 'Erchang' holds extraordinary magic for old Wuhan residents.
Lan Shili, who has over 500,000 followers on a video platform, is skating on thin ice. He claims his soda is called 'Wuhan Erchang', but the tags at the end of his video captions often say 'Erchang Soda'. With another 'Erchang Soda' appearing on the market, consumers are already confused. Perhaps to reduce misunderstandings, the Wuhan Erchang Soda official account previously issued a special statement: 'Wuhan Erchang Soda' is not 'Hankou Erchang Soda', please note the difference.
Same-City 'Soda Fight'
Over a year ago, Lan Shili returned from Guangzhou to Wuhan, the base of East Star Group. One important event was climbing the Yellow Crane Tower again. Perhaps with special feelings for this city landmark overlooking the Yangtze River, after taking charge of the soda project, he returned again, holding a bottle of soda and talking about his past. In this short video with 19,000 likes, Lan Shili, wearing a butter-yellow Kent & Curwen polo shirt, chatted enthusiastically, then excitedly drank the soda in one gulp.
Venturing from aviation and tourism into the consumer sector, Lan Shili's approach remains a low-price strategy, vowing to disrupt the beverage industry. In fact, after he 'controlled' the soda operating entity Wuhan Erchang Beverage Co., Ltd. (referred to as Wuhan Erchang Beverage) last September, a battle has been brewing. Starting in October last year, in response to applications by Wuhan Hanpai Lao Erchang Food Co., Ltd. (renamed Wuhan Erchang Beverage in August last year) for trademarks such as 'Lao Erchang Laboratory' in Classes 35 and 32, 'Hanpai Lao Erchang 1952 and Design' in Class 32, and 'Lao Erchang Xiaomaibu' in Class 35, Wuhan Hengrunshi filed oppositions one by one, claiming that its 'Hankou Erchang', 'Erchang Soda' Class 35 trademarks, and 'Erchang Zhengqi' trademark were registered earlier, and both parties' trademarks contain the text 'Erchang' and are in the same city, which could easily cause public confusion. After rulings by the trademark department, except for the partial refusal of the 'Hankou Lao Erchang' trademark, 'Hanpai Lao Erchang', 'Hanpai Lao Erchang and Design', 'Hanpai Lao Erchang 1953 and Design', etc., were all refused registration. As of now, the more critical trademarks such as 'Erchang' in Class 32, 'Erchang Beverage' in Classes 32 and 35, are still under application by Wuhan Erchang Beverage. For Lan Shili to compete with Hankou Erchang in the same city, resolving intellectual property issues is urgent.
At the recent Wuhan Erchang Soda distributor conference, because the 'Erchang Soda' trademark has not been approved, many potential distributors were worried. Although both parties can currently use the Erchang Soda and related trademarks, once the trademark registration is completed, one party may have the opportunity to file retrospective lawsuits, which would inevitably affect the distributor community. Since 2017, Wuhan Hengrunshi has been applying for the 'Erchang Soda' Class 35 trademark but has not succeeded. Although the company does not hold the 'Erchang Soda' trademark, it holds the 'Hankou Erchang' and 'HANKOW ER CHANG' trademarks, which are already obstacles on Lan Shili's soda-selling path. Previously, Wuhan Hengrunshi clarified through the media that it has no relationship with Wuhan Erchang Beverage.
Left, Right
The different styles of the two operators determine that these two sodas will go in different directions—one left, one right. At the beginning of 2018, Wuhan Hengrunshi, based on the Binjiang brand orange soda, recreated a classic orange soda, and the 'Hankou Erchang' brand came into being. In the following years, 'Hankou Erchang' launched more than ten soda flavors, and in recent years entered the low-alcohol and sparkling water fields, building itself into a creative food and beverage enterprise. It received investments from Qinqin Food, Hillhouse Capital, Country Garden Venture Capital, and other institutions, with A-round and A+ round financing each exceeding 100 million yuan. With capital support, 'Hankou Erchang' left Wuhan in the second half of 2018, first landing in Shanghai. Convenience stores, premium supermarkets, and Hema Fresh and similar mid-to-high-end channels became the first choice. To establish a foothold in these channels, Hankou Erchang came prepared. Jin Yawen's team insisted on a mid-to-high-end positioning from the early days, maintaining a price range of 6-8 yuan, and managed to pry open a gap in the seemingly impenetrable carbonated beverage market.
Lan Shili, ambitiously joining the soda track, has a completely opposite approach—low-price strategy. Perhaps he is too cost-conscious; compared to Hankou Erchang, Bingfeng, and Beibingyang, Wuhan Erchang Soda appears somewhat rough, with a long list of additives on the ingredient label. He may focus more on channel construction, first creating a low-price buzz online, then having agents expand offline. Although he reduces distribution layers and flattens channels, the profit margin reserved for distributors is actually not generous. According to recent information, the profit space given to distributors is only 1.9 yuan per bottle, which is hard to cover logistics, warehousing, personnel, losses, and terminal profits. This is an important reason why many potential distributors are waiting on the sidelines. Although Lan Shili operates Wuhan Erchang Soda, he has no legal equity relationship with Wuhan Erchang Beverage. Even on the shareholder list of its controlling shareholder, Wuhan Xingkong Investment Electronics, his name does not appear. However, on the Wuhan Erchang official account, Lan Shili left his mobile number and acts as customer service.