Tea wars

Observant consumers will have noticed that there are now two kinds of red-canned herbal tea available in most supermarkets - called Wong Lo Kat and Jiaduobao. The packaging of the two brands looks remarkably similar, and both of them are priced at around 3.8 yuan ($0.6) each.

The producer of the new Jiaduobao herbal tea - JDB Group, used to be the maker of red-canned Wong Lo Kat herbal tea. But in a trademark dispute that ended in May, JDB lost the right to operate the Wong Lo Kat brand to Guangzhou Pharmaceutical Holdings, which used to produce green-paper packaged Wong Lo Kat herbal tea.

Now Guangzhou Pharmaceutical has also began to produce the red-canned Wong Lo Kat herbal tea. And after JDB lost the right to use the Wong Lo Kat brand, it started offering its new Jiaduobao herbal tea brand, still with the same red cans.

It has been three months since the China International Economic and Trade Arbitration Commission (CIETAC) ruled in favor of Guangzhou Pharmaceutical in the long brand dispute between the two companies. But JDB hasn't given up yet.

"JDB Group is still authorized to use the Wong Lo Kat brand until January 2013, and we have appealed to the CIETAC to revoke the previous ruling," JDB said in a statement e-mailed to the Global Times Monday, citing an agreement that it said it had signed with Guangzhou Pharmaceutical.

However, Ni Yidong, a spokesman for Guangzhou Pharmaceutical, told the Global Times that the agreement was invalid.

Previous deal

In 1997, Guangzhou Pharmaceutical Holdings granted JDB the right to use its Wong Lo Kat trademark until 2010. The agreement was initially extended until 2013 and following a second extension, JDB was allowed to use the trademark until 2020.

Though the Wong Lo Kat brand boasts a history of more than 170 years, it was only a regional brand before it was operated by JDB, and not well-known outside Guangdong Province.

But under JDB, the brand became popular throughout the country, and annual sales of Wong Lo Kat reached over 18 billion yuan.

However, Guangzhou Pharmaceutical claimed that it only extended the usage term to 2020 because the company's now jailed vice president Li Yimin had been taking bribes from JDB's parent company, and it decided to take back the brand.

In April 2011, Guangzhou Pharmaceutical appealed to the CIETAC. In May this year, the commission ruled that the two contract extensions had both been invalid and that JDB's right to use the brand had expired in 2010.

Several days after the ruling, JDB appealed to a Beijing court to revoke the ruling. But the court rejected the appeal in July.

Even though JDB says it has not given up the fight for the brand, the company announced in May that its herbal tea products would be sold under the name Jiaduobao in the future.

Dispute intensifies

After Guangzhou Pharmaceutical reclaimed the brand, it signed production agreements with 30 companies including beverage maker Yinlu Group to produce the herbal tea.

Now, its products have reached some big supermarkets such as Wal-Mart. On August 15, when a group of sales staff from Guangzhou Pharmaceutical were promoting their herbal tea on a street in Nanchang, East China's Jiangxi Province, sales people from JDB Group were also trying to conduct a promotion in the same street, and an argument broke out that eventually descended into a brawl.

"Promotions by our company have been obstructed by JDB, and sometimes illegal practices have been involved," Ni said.

However, JDB said that Guangzhou Pharmaceutical was to blame for the incident in Nanchang, and that JDB's image had been greatly "tarnished" by Guangzhou Pharmaceutical's remarks.

The dispute between the two companies has expanded to the red-can packaging and also the slogan. JDB claimed that it was illegal for Guangzhou Pharmaceutical to use the red cans, as JDB had been granted a patent for them in 1997.

JDB also claimed that the case should be heard in a third place other than Guangzhou and Beijing, so that it wouldn't be influenced by the local government. "JDB has been treated unfairly in the previous hearings," the company said in the statement.

However, Ni from Guangzhou Pharmaceutical denied the company's State-owned background had exerted any influence in court. "The judiciary is independent," he noted.

Ni also noted that the packaging is an inseparable part of the product itself, so the company is legally authorized to use it after taking back the brand.

Liu Jiahui, a lawyer specializing in copyright at Beijing-based Derun Law Firm, said that if the packaging was included in Guangzhou Pharmaceutical's patent for the Wong Lo Kat brand, then the company is authorized to use the packaging.

Brand is not everything

JDB claimed that it had invested some 30 billion yuan in marketing its red-canned herbal tea. "It is known by the whole nation that it is JDB that made Wong Lo Kat a well-known brand," the company said.

But experts noted that with strong sales channel management and JDB's marketing savvy, it is very possible the company could build Jiaduobao into another famous brand.

Currently, in some major supermarkets like Carrefour as well as small convenience stores, the red-canned herbal tea produced by Guangzhou Pharmaceutical is still not available.

"Supermarkets and restaurants are key channels for reaching consumers. If Guangzhou Pharmaceutical cannot penetrate the two channels, it will be in a disadvantaged position," Liu Hui, an industry analyst with Capital Securities, told the Global Times.

Ni from Guangzhou Pharmaceutical admitted that it will take time for their product to achieve a wider presence, and he also said that the company will cooperate with State-owned enterprises and some local governments to gain a stronger foothold.

Earlier this month, Guangzhou Pharmaceutical signed an exclusive distribution agreement with Easy Joy, a convenience store brand owned by Sinopec, which analysts said would help the company in building stronger distribution channels.

"It is a crucial time for the two companies to educate consumers about their new products, and the current marketing strategy of JDB seems very successful," said Zhao Yong, an industry analyst with Haitong Securities.

Zhao also told the Global Times that the dispute between JDB and Guangzhou Pharmaceutical has helped to promote the herbal tea market as a whole, which could also mean opportunities for other herbal tea makers.