Home » Business » Biz Commentary
Trademark win won't guarantee sales windfall
By Jessica Li |
May 16, 2012, Wednesday
|
Print Edition
Print Edition
GUANGZHOU Pharmaceutical Co, a listed company in both Shanghai and Hong Kong, has announced that the China International Economic and Trade Arbitration Commission had ruled in its favor in its dispute over the Wong Lo Kat trademark against JDB Group.
The trade body ruled that Hung To, JDB's parent, will have to cease its use of Wong Lo Kat and Guangzhou Parma's parent will resume all rights regarding the trademark.
We expect sales of green-pack Wong Lo Kat, originally produced by Guangzhou Pharma, to benefit from JDB ceasing its use of the brand as well as its expanded production capacity and increased promotional efforts.
However, we see significant hurdles for Guangzhou Pharma to reap sales windfall considering its weak marketing ability and the long-prepared counter-attack from JDB.
Derived from its insight that a niche market existed for a functional herbal drink, JDB successfully repositioned Wong Lo Kat from traditional Chinese medicine herbal tea into a red-can popular drink capable of reducing "pathogenic fire" in the early 2000s.
In 2009, red-can Wong Lo Kat surpassed even Coca-Cola with annual sales of 16 billion yuan (US$2.54 billion) and became China's best-selling beverage. JDB uses about 25 percent of its margin in its marketing campaign annually.
A entity newly established by the Guangzhou Pharma has recruited 3,000 persons to prepare for the production of red-can Wong Lo Kat herbal drink. We deem the success of the red-can Wong Lo Kat a pay-off of JDB's potent and continuing marketing efforts, rather than the color of the can or the brand itself.
Lacking marketing savvy
Guangzhou Pharma does not have a strong marketing background. It may have the exclusive rights to the use of the red-can Wong Lo Kat brand, but it lacks the marketing savvy to eat up the market share which was occupied by the JDB-marketed Wong Lo Kat. In order to catch up, Guangzhou Pharma has to divert its energy into the marketing of fast-moving consumer goods, which it is not good at.
JDB has been preparing for a potential adverse verdict for a long time. Since late 2011, it has been in the process of diluting the Wong Lo Kat brand on both its production packages and on its marketing campaigns. We believe that JDB is creating its own brand of Jia Duo Bao herbal drink with the help of its powerful distribution network.
Despite the output of the marketing campaign, the soaring marketing costs will result in a low margin and harm the company's short-term performance. Guangzhou Pharma will also have to deal with the potential cannibalization of the green-pack Wong Lo Kat if it decides to launch the red-can itself.
Jessica Li is the China healthcare analyst with China International Capital Corp.
The trade body ruled that Hung To, JDB's parent, will have to cease its use of Wong Lo Kat and Guangzhou Parma's parent will resume all rights regarding the trademark.
We expect sales of green-pack Wong Lo Kat, originally produced by Guangzhou Pharma, to benefit from JDB ceasing its use of the brand as well as its expanded production capacity and increased promotional efforts.
However, we see significant hurdles for Guangzhou Pharma to reap sales windfall considering its weak marketing ability and the long-prepared counter-attack from JDB.
Derived from its insight that a niche market existed for a functional herbal drink, JDB successfully repositioned Wong Lo Kat from traditional Chinese medicine herbal tea into a red-can popular drink capable of reducing "pathogenic fire" in the early 2000s.
In 2009, red-can Wong Lo Kat surpassed even Coca-Cola with annual sales of 16 billion yuan (US$2.54 billion) and became China's best-selling beverage. JDB uses about 25 percent of its margin in its marketing campaign annually.
A entity newly established by the Guangzhou Pharma has recruited 3,000 persons to prepare for the production of red-can Wong Lo Kat herbal drink. We deem the success of the red-can Wong Lo Kat a pay-off of JDB's potent and continuing marketing efforts, rather than the color of the can or the brand itself.
Lacking marketing savvy
Guangzhou Pharma does not have a strong marketing background. It may have the exclusive rights to the use of the red-can Wong Lo Kat brand, but it lacks the marketing savvy to eat up the market share which was occupied by the JDB-marketed Wong Lo Kat. In order to catch up, Guangzhou Pharma has to divert its energy into the marketing of fast-moving consumer goods, which it is not good at.
JDB has been preparing for a potential adverse verdict for a long time. Since late 2011, it has been in the process of diluting the Wong Lo Kat brand on both its production packages and on its marketing campaigns. We believe that JDB is creating its own brand of Jia Duo Bao herbal drink with the help of its powerful distribution network.
Despite the output of the marketing campaign, the soaring marketing costs will result in a low margin and harm the company's short-term performance. Guangzhou Pharma will also have to deal with the potential cannibalization of the green-pack Wong Lo Kat if it decides to launch the red-can itself.
Jessica Li is the China healthcare analyst with China International Capital Corp.
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
