Beverage Maker Guzzles Up New Investment From National Food Giant

Chinese herbal tea maker JDB Group has secured a major new investment from state-owned food giant China National Cereals, Oils and Foodstuffs Corp. (COFCO), winning needed financial support after a difficult period due to a trademark dispute.

COFCO’s CPMC Holdings Ltd. packaging unit announced Thursday it plans to buy about 30% of JDB subsidiary Qingyuan JDB Herbal Plant Technology Co. Ltd.

The exact investment is still under negotiation, but the deal will take advantage of both companies’ resources to “enhance the market influence of JDB herbal tea,” CPMC said in a filing to the Hong Kong Stock Exchange.

JDB was one of two producers of the Wanglaoji herbal tea, also known as Wong Lo Kat, a popular beverage that originated in early 19th century.

But after a years-long dispute with the brand’s owner, Guangzhou Pharmaceutical Group, JDB has lost a series of lawsuits and was forced to pay millions of yuan as compensation. It was also forced to stop using the Wanglaoji name, and its own drinks were rebranded as “JDB” in 2012.

The company has been forced to spend heavily on marketing for the newer brand and packaging adjustments, and has continued its own string of lawsuits in a bid to regain rights to the Wanglaoji brand.

Media have reported that JDB was cutting both manpower and production since the end of last year. JDB denied that it closed some production lines, and said layoffs were aimed at optimizing the company’s structure and ensuring efficiency.

But concerns continue to linger about the health of the privately held company, especially after it stopped sponsoring a popular singing talent show in 2016, ending four years of sponsorship.

JDB has also grappled with sluggish demand for herbal teas in China’s competitive beverages market. Guangzhou Wanglaoji Great Health Industry Co. Ltd., the current exclusive owner of the Wanglaoji brand, reported that its annual growth rate declined from 632% in 2013 to just 11% last year.

Shares of Hong Kong-listed CPMC were down 1.3% at HK$3.81 (49 U.S. cents) late in the Friday trading day.

Contact reporter Coco Feng (renkefeng@caixin.com)