Editor’s note: Shanzhai (山寨), a word that many an expat has come to learn due to its rampant presence in all aspects of Chinese society, is usually associated with the copy-cat rip-off of phone brands (i-Phnoe), luxury fashion brands (YLS), electronics and basically any product under the moon that can be counterfeited. Unfortunately, food products have not escaped from the phenomenon unscathed. The following article, which was translated from chinaairn.com, attempts to shed light on how the shanzhai food industry is hurting both the country’s legitimate food industries and the trust of consumers.

Recently, Shanghai resident Mr. Wang returned to Shandong province to visit relatives. At the local bus station, Mr. Wang wanted to buy a box of Yili milk from a small store nearby. But because he was in a hurry, he didn’t closely inspect the milk box. It was only after he reached his destination that he realized the “Yili” milk he’d bought—which is normally written with the character ‘伊’—was written with the character ‘尹’. This box of Shanzhai Yili milk not only replicated the packaging of the real Yili box, it also cost the same price.    

At present, shanzhai foods are mainly found in provincial cities and town markets – however, since there are over 1600 provincial cities in the entire country the quantity and scope of this phenomenon should not be overlooked. To give a rough estimate, the sale of Shanzhai food products accounts for about one third of all food sales in China. Due to the sneaky, covert nature of this shanzhai industry (which involves abusing loopholes in trademark laws) and the fact that it is very difficult for people to keep track of which products are real and which ones are not, shanzhai enterprises are often described as “locusts”.

Clever copy-cat names

The clever tweaking of names like Kangshuaibo (康帅博, which should be康师傅), Wang Haha (旺哈哈, which should be哇哈哈) or Maijie (脉劫, which should be脉动) is something that most people only get to see as funny pictures posted online. Entertaining as they may be, these Shanzhai products are actually causing a lot of trouble for legitimate businesses. Many enterprises have been complaining to journalists, describing how they constantly receive complaints from customers who discover that the product is fake. Beverage giant Wahaha is one of many to suffer.

The sale of shanzhai rip-offs and real Wahaha products often clash in county-level townships and villages where Shanzhai products enjoy their biggest market. Despite not directly entering through the same sales channels, Shanzhai and real products often find themselves sitting side by side on the shelf, which has an adverse effect on consumers’ trust towards the Wahaha brand. Because of this problem, it is plausible to assume that many consumers are shunning the Wahaha brand altogether. When customers consume a Wahaha product that tastes strange, they’re most likely to grow suspicious of the brand.

Who are the culprits?

So, who are the culprits behind the production of these shanzhai brands? According to one source, there are two types of culprits behind the Shanzhai phenomenon: the ones that directly copy a brand’s trademark and packaging but which cannot obtain the proper registration from the relevant business departments, and those who use trademark registration loopholes by quickly snatching up names that sound almost identical to the brand they are imitating. What’s more, some of these Shanzhai enterprises will often sell off their trademark names to other companies who then produce the fakes.

In Changsha, one company called Hawang Food LTD. (hereafter referred to as Hawang) registered a “nutri-express” drink made of soya milk. As one representative from Wahaha explained to the journalist, despite Wahaha also registering the trademark of over 170 similar nutri-express products, companies like Hawang are still able to get away with registering identical names through various loopholes.

According to reports from local Hunanese media, Hawang have registered a large number of trademark names similar to Wahaha’s such as “Heqizheng Liangcha” (和其正凉茶) which is almost identical to Wahaha’s “和气正凉茶” or Wangzi Milk (旺仔牛奶) which blatantly copies the legitimate Hazi Milk (哈仔牛奶). Recently, many of these licensed Shanzhai products have failed inspections by related departments but for Wahaha the biggest concern is the fact that consumers mistakenly believe that Wahaha themselves were behind the production of the fake products. 

Shanzhai industries sustain themselves by low prices and strategic factory locations

Many Shanzhai factories and dealers are concentrated in Yiwu, Zhejiang province, Chaozhou, Guangdong province and Quanzhou in Fujian province—some of the largest commodity distribution areas in the country. It is precisely the fact that these areas are such large hubs for distribution that attract the Shanzhai producers who can more easily find dealers to distribute their fake products across the country. Their rock-bottom prices at low-end markets have proven to be a golden ticket for these industries’ survival. The Shanzhai Yili brand’s yoghurt drink is a good example of this: The wholesale price of one box of Shanzhai yoghurt drink containing 24 250 ml bottles costs 11.5 RMB. Meanwhile, the same box of real Yili yoghurt milk costs 30-34 RMB.

“The low cost of the goods proves to be very profitable. Many rural supermarkets and mom-and-pop stores are happy to sell Shanzhai products,” says Chen Xiaolong, an industry insider.  So how should shanzhai products be dealt with? Firstly, companies should improve their own sales system to prevent Shanzhai products from abusing loopholes. Secondly, brands should strengthen their cooperation with business and quality control departments, together busting Shanzhai brands. Finally, companies can also try to increase their products’ turn-over rate as a means of cracking down on Shanzhai goods. Chen Xiaolong cites Procter & Gamble as one company who successfully took this approach. In a move to obliterate Shanzhai imitations, the company began to significantly increase their sale output and thereby essentially flooding out the fakes. But in terms of improving social integrity, relevant laws must be revised to stop the imitation of legitimate brands and more crackdowns should be instigated. Both these suggestions have been approved by the government but no specific changes have been implemented so far.

Source: chinairn.com
 

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Keywords: shanzhai food