Toothpaste firm squeezes out new products

A worker bundles packages at the toothpaste production line of Liuzhou Liangmianzhen Co Ltd in Guangxi Zhuang autonomous region. Huo Yan / China Daily

Daily necessities provide base for rapid growth of Guangxi company

After catching its breath from the first round of battles with foreign brands, Liangmianzhen, or LMZ, the herbal toothpaste that takes its name from a Chinese herbal medicine, is weighing its odds to win the next round through new ideas in its product lines and marketing.

"Our researchers and innovations are the strengths that our foreign rivals do not have, but their management and marketing models are our 'short board,'" said Li Zuanhuang, president of Liuzhou Liangmianzhen Co Ltd.

The predecessor of LMZ was a soap mill built by Japan's invading army in 1941 in Liuzhou, a regional hub in the Guangxi Zhuang autonomous region.

LMZ herbal toothpaste is just one of the company's many products. The company produces 2 billion tubes of toothpaste, 150 million bars of soap, 1.5 billion medical pills and capsules, 170,000 tons of bamboo pulp paper, 500 million sanitary napkins and 1,500 tons of the artificial sweetener sucralose each year.

Sales revenue for LMZ in 2012 was reportedly about 1.3 billion yuan ($213 million) with net profits of 50 million yuan. Half of its sales revenue comes from daily-use products such as toothpaste.

"Because LMZ quickly expanded after 2004, when the enterprise was listed on the Shanghai stock exchange, the statistics do not seem that rosy yet. But I am confident the balance sheet will improve soon," Lin said.

LMZ built its pharmaceutical factory in Rongshui county of Guangxi in 2004 to produce medical treatments for oral diseases and yield herbal medicine as raw materials for its daily products. It merged a hotel supply production factory in Yangzhou of Jiangsu province in the same year, which became the main export hotel toothpaste manufacturer for LMZ.

LMZ purchased the Fangcao toothpaste factory in Hefei of Anhui province in 2005 and built its sucralose factory in Yancheng of Jiangsu in 2007. That plant now contributes up to one-third of its sales revenues.

In 2009, LMZ merged a local paper mill in Liuzhou and turned it into a producer of daily hygiene products. At the same time, it started investing in the real estate sector to make money from the sizzling housing market.

"Although LMZ is known as an herbal toothpaste brand, consumers will find that LMZ actually provides products and services based on our green life concepts," said Mo Ruixian, head of the company's strategic planning department.

In January 2013, LMZ got a new board chairman, Zhong Chunbin, the former vice-president of Guangxi Liugong Machinery Co Ltd.

Though some analysts wonder whether he can revitalize LMZ's toothpaste business, they believe Zhong, with his 20 years of management experience in Liugong, can develop LMZ into a much bigger company.

Zhong is credited with turning a lackluster road roller producer in Jiangsu province into a success, increasing its production value by five times in three years.

'National treasure'

After he took his new post, Zhong has focused on LMZ's toothpaste business.

"LMZ has been synonymous with herbal toothpaste for 30 years in China and honored as a 'national treasure' by former president Hu Jintao. We should cherish our historical legacy and promote LMZ at home and abroad," said Zhong, a down-to-earth industrial engineer.

LMZ has actually never stopped going global since China's reform and opening up some 30 years ago.

In 1982, LMZ products were sold in stores run by Chinese migrants in California. In the 1990s, Africa became its largest overseas market. A Liuzhou city mayor was even recognized as "the mayor of LMZ" by Ugandans on his visit to a sister city.

After 2001, when China entered the World Trade Organization, the Latin America and Southeast Asia markets gained more importance than ever for LMZ.

It then began importing toothpaste production equipment from Germany, Italy, Switzerland and the United States.

According to the marketing department of LMZ, it still relies on local retailers as its main marketing channel. The brand attracts a certain group of overseas Chinese customers, and the low prices attract customers in many developing countries. About 10 percent of LMZ toothpaste is sold abroad.

Yet herbal toothpaste makers from Wuzhou of Guangxi, Chongqing, Tianjin, Yunnan, Heilongjiang and Guangdong, which are all strong in the pharmaceutical, herbal medicine and daily products categories, also are eyeing a domestic market share of 30 percent as estimated, after foreign brands Unilever, Procter & Gamble and LG are factored out.

Homegrown competition is quite serious, and the future of herbal medicine lies in the oversea as market, experts say.

But foreign markets have their own obstacles. Some countries have separate standards for herbal toothpaste. "That makes it harder for our integration into the local daily products market, because LMZ toothpastes are sold in drugstores," Lin said.

But, he said, "the fast developments in electronic commerce and express delivery systems save us a lot in marketing costs and extend our marketing network further at home and abroad."

"In spite of the great potentials of robust growth in other fields of our business and fierce competition in the toothpaste industry, we cannot discard the toothpaste brand. LMZ will lose its identity if people cannot find a tube of toothpaste carrying the brand," stressed Luo Huaiyu, vice-manager of LMZ's daily products department.

Last summer, with the powerful support of Zhong, LMZ launched its most expensive line of herbal toothpastes to date. Priced from 30 to 60 yuan, the products address such things as inflammation, bleeding gums and bad breath.

The new products, together with bright new packaging for LMZ's other toothpastes, are changes brought about by Zhong.

"I appreciate that Mr. Zhong attaches great importance to innovation and increased research and development," noted Huang Hualai, vice-director of the technological center of LMZ.

"We used 10 to 20 kinds of herbal medicines before in one tube of toothpaste. What we are doing now is to find the specific functions of certain kind of herbal medicines to make our products better targeted," noted Huang, team leader of LMZ's postdoctoral toothpaste research station. With 40 engineers, it's the only one of its kind in China.

Referring to the look of many Western products, Huang said, "It is easy to make the paste body dazzlingly transparent, which is held by many customers as a symbol of good toothpaste.

"But LMZ's toothpaste is organic light green that comes from the herbal medicines in it. The color is LMZ's best brand," he said.