When Wisconsin Ginseng Met A Fake China

 

It was 2004. Butch Weege was in a trade mission to China with a Wisconsin governor. A year ago, Weege was elected as the executive director of international marketing at the Ginseng Board of Wisconsin (GBW), the official organization of Wisconsin ginseng growers. He had been growing ginseng since 1982, the crop that has a high value in oriental medicine, and has a large market in China.

The mission for his trip was to understand the end users of the ginseng market. He went to Shanghai, Nanjing, Guangzhou and Hong Kong and many others cities. In every city he stopped in, he found the trade mark of Ginseng Board of Wisconsin. In the Chinese traditional medicine portion of town, in the shops, in the pharmacies, he found the trade mark everywhere in the cities. The state’s prized Wisconsin ginseng seal was printed on countless ginseng products, but no one was authorized to be using it.

“People were taking our brand, our registered trade mark, and they were putting ginseng from other countries, they were putting on their home grown Chinese ginseng,” Weege said. “It made us realize why our market was falling apart.”

He knew he needed to do something. He needed to do something right now.

******

 

In the early 1980s Wisconsin had 1,400 ginseng growers. Now, it has only about 150. In middle 90s, Canada and China entered in the global market, and the largely increased supply has been making the price of ginseng plummet since then. In 2007 the price that ginseng growers received was lower than the profitable price by $5 per pound on average.

“That is a huge collapse in the industry,” Paul Mitchell, an assistant professor, agricultural and applied economics at UW-Madison.

“It was a hard time for us,” Kirk Baumann, a ginseng grower in Wisconsin. “Many of other farmers gave up the ginseng and began to grow other crops.”

Baumann stayed in the industry while his brothers started to grow corns or wheat. The bad economic situation made him almost gave up as well, especially considering that ginseng is extremely hard to grow.

“Kids are easier to raise than ginseng,” a ginseng grower said in an interview with WSJ. Kristin Johannsen wrote in her book Ginseng Dreams the ideal condition for ginseng: “The climate must be cool and temperate, with plenty of rain, but the water must not stagnate around its roots. …It needs protection from the direct rays of the sun by an unbroken canopy of forest. It needs soil that will keep the roots growing slowly as they force their way down. And most of all, it needs a particular combination of nutrients found only in the decaying leaves of certain hardwood trees that drop their leaves early in the fall, such as maples and poplars.”

But in his mind Baumann believed that the thing would work out one day, and it would come to a good end.

What Kirk didn’t know is that in the other side of the Pacific, a large underground ginseng market was taking advantage of Wisconsin ginseng’s reputation illegally. While ginseng growers in Wausau like him had to pay in 20 cents per pound of ginseng that they sold to Hong Kong, mainland China, Malaysia and Korea buyers, for using the GBW seal, the counterfeit Wisconsin ginseng market in China was using the trademark for free for many years and making great profits.

 

******

 

Liang Xie, had been taking ginseng capsules for 2 years. The stress from his job made the 45-year-old businessman fatigue all the time. A Chinese traditional medicine pharmacist told him that Western ginseng could relief the fatigue and make him full of energy.

Xie accepted the suggestions. He went to the nearest drugstore, and saw many different kinds of Western ginseng products produced by different drug brands. He decided to buy Eagle Stars and Stripes ginseng, the brand he was familiar with, whose advertisement of its Western ginseng played on different television channels all the time. The price of ginseng capsules was pretty high, but it was worth, Xie thought.

In the May of 2006, he went to the drugstore as usual, but the people who sold the Eagle Stars and Stripes ginseng told him that the product was out of stock.

“It is odd, I have been buying this for 2 years and it never sold out before,” he thought.

He asked when the products would be in stock, the people said they didn’t know. Driven by this curiosity as well as the need to consume the product, he finally forced the drugstore workers tell his the real reason why the Eagle brand’s ginseng products were gone: they were confiscated by the market supervisors from Industry and Commerce Ministry, because the Eagle brand as well as other ginseng production brands stole the trademark of Ginseng Board of Wisconsin and counterfeited the American ginseng, which was actually produced in Northeast China.

“They were basically confusing Chinese consumers and during the meantime, our farmers here were being paid for much less for their products,” Weege said. “In 2005 and 2006, we spent a lot of time taking people to court.”

A war without gunsmoke flared up. In 2005, GBW set up a bureau in Shanghai, appointing a sale representative to investigate the counterfeited Wisconsin ginseng products, as well as to promote their authentic ginseng. In 2007, the Ginseng Board of Wisconsin filed and won lawsuits against 30 to 40 Chinese Pharmaceutical companies in Chinese courts. The result of the lawsuit was a fine, for each vendor, of up to 22,429.5 US dollars, and more importantly, forced them to stop selling their products with the Wisconsin Seal.

The lawsuits went on successfully. Pharmaceutical companies paid the fine and stopped immediately, partly because local Chinese governments actively involved in the enforcement of these sanctions and they found no loophole that they could take advantage of anymore.

“I believe we had effectively cleaned up the market place, so we could go in there fresh, and began to re launch our Wisconsin American ginseng in its image, and regain the consumers’ confidence that had been tarnished by the counterfeited ginseng,” Weege said.

 

******

In Baumann’s business card, his Chinese name was printed in the opposite side of his English name. Keqin Bao, which is pronounced similarly to Kirk Baumann, is named by Mabel Zhuang, the Chinese sale representative of GBW, in order to make it easy for Baumann to communication with Chinese buyers.

In 2008, GBW signed a deal with Beijing Tong Ren Tang Health Pharmaceutical Company (TRT Health), a company with a 400-year history, and about 1,000 drugstores in China, to distribute genuine Wisconsin ginseng in the country. The Chinese drugstore giant is now the exclusive Chinese dealer for the Ginseng Board of Wisconsin, the only one that could use the “Wisconsin Seal”, certifying that the ginsengs are 100 percent Wisconsin grown.

The target consumer of TRT’s ginseng products is up class and up-middle class in China. The price of Wisconsin ginseng is too high to working class and major middle class, not everyone has the ability to consume the nutrient product on a daily basis.

But the obstacles for Wisconsin ginseng still exist. Although GBW won the lawsuits, and stopped the unauthorized usage of GBW’s trademark, there are still Chinese ginseng products using the name of “American ginseng”, “Western ginseng”, or printing American maps, the Star Spangled banner of America and the Statue of Liberty on the box to confuse consumers.

“It is hard on that level. We cannot stop them using the American map or flag, even American government has no such right,” Zhuang said. “What we can do is to try whatever we can to build the reputation of our organization in Chinese market and make as many as Chinese consumers know us.”

“They’re gonna to be there to maintain the presents. It’s important for them to know their market,” Mitchell said. “And I really think production control is important. Have a few selected marketers, maybe they should have more than one, I don’t know, but keeping that number small and controlled is important.”

Weege is now learning Chinese. He can already speak a few Chinese words like Nihao (Hello) and Zaijian (goodbye). He knows that winning the lawsuits and signing the exclusive deal are not enough. The potential of the Chinese market is waiting for him to explore.

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Where does the American ginseng sold in China come from?

Ginseng, a bitter root looks like a carrot is a crop well known for its medical value in oriental world, especially in China. Chinese traditional medicine has regarded ginseng as one of the most valuable herbs for centuries, and has been using it to enhance the energy of the body and to cure ailments like fatigue and cold. It is also believed that ginseng can slow down the speed of people getting older.

Wisconsin ginseng has higher medical value in the eye of Chinese traditional medicine, than the ones produced in the other part of the world. The ginseng grown in Wisconsin contains on average much higher levels of ginsenoside, the active and valuable ingredient in ginseng, than the ones from Canada and China, the main competitors in the global ginseng market.

Marathon County, which is part of Wausau, located in the central part of Wisconsin has been producing the largest amount of ginseng in the world. The hills with rock, the granite to aid drainage and the topsoil rich in minerals and nutrients give the crop its desired characteristics. Wisconsin produces 95% of the nation’s ginseng by pounds. Marathon County produces about 85% of that.

In 2008, Ginseng Board of Wisconsin signed a deal with Beijing Tong Ren Tang Health Pharmaceutical Company (TRT Health), a company with a 400-year history, and about 1,000 drugstores in China, to distribute genuine Wisconsin ginseng in the country. The Chinese drugstore giant is now the exclusive Chinese dealer for the Ginseng Board of Wisconsin, the only one that could use the “Wisconsin Seal”, certifying that the ginsengs are 100 percent Wisconsin grown.

Let’s start a journey following the ginseng to see where it comes from!

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Check out more pictures of ginseng on Flickr.

Dairy Industry Crisis: What Does A Better China Need?

By linduyichu (from image.baidu.com)

Mrs. Zhu lived with her husband and her 3-year-old son in Beijing. The little toddler hadn’t drunk any made-in-China powdered milk since he was born. All of his powdered milk was from a Netherlands-based company, Friesland-Campina, which was only sold in Hong Kong. During the past three years, his parents travelled all the way to Hong Kong, the city 1224.9 miles away from Beijing every several months, only to buy some bottles of the Netherlands-made milk products, or asked people who went to Hong Kong to purchase for them. Mrs. Zhu complained the high costs of shopping like this, but since she doubted the quality and safety of the milk powder products made in China, (seemly she even didn’t trust the foreign brands sold in mainland) she felt she had to do so.

I read this story from a news website, and then I searched online and found out that purchasing foreign brand milk powder from abroad is now a kind of a phenomenon among Chinese young mothers. It’s not just Mrs. Zhu’s one case.

Since the melamine tainted milk incident first brought the food safety of milk out of the surface, and was widely covered by the both domestic and international mainstream media in 2008, Chinese consumer’s trust on “made-in-China” dairy products, especially the ones for infants, has been vanishing. But Chinese consumer’s grudge against dairy industry is not from the bad memory of two years ago, but also from a similar safety issues occurred recently:  some rumors spread widely online by blog posts and news reports, saying that the milk products for children and infants, produced by two Chinese dairy giants, Yili Group and Synutra International, lead to kids’ premature sexual development, even the growth of breasts. The rumors had a huge negative impact on the two dairy companies, whose stock price immediately plummeted, but then it turned that the rumor was themed by another Chinese dairy company-also the largest one-Mengniu Group through PR agents, to revenge a similar smear planned by Yili and targeted at Mengniu in 2003.

The rumors have been clarified, but the negative impact on Chinese consumers cannot easily go away. Mengniu hoped that the smear could make its competitors crash down, but it didn’t realize that the negative information like this would also frighten the consumers, and bring shame on the whole dairy industry.

From image.baidu.com

But that is not the most important part. What really matters is not about the unethical company, or the ill-regulated market, or the fierce business competition, or the powerful PR manipulation with a wrong purpose. What really matters is how the dairy companies, or I should say the whole food industry in China, treats the consumers: the companies who produces food for the whole society don’t care the people they service. The only thing they care is the money-how to maximize the profits, how to enlarge the market, how to beat the enemies, and how to make people willing to pay for the products. The Chinese consumers-millions of young mothers, millions of innocent infants and millions of individual families-are just their tool to achieve the business goal, that’s why those companies could add toxic ingredient in spite of the life of millions of infants, that’ way those companies could use the rumors concerning millions of children’s growth as a weapon to fight against each other.

What a shame.

I read many reports, editorials and blogs about this smear scandal. Chinese experts and media generally urge that the business competition should be moderate and the industry giants should be trustworthy, while in the Western eyes this is just another case of the unregulated China. But for me, I feel like it is the time for the whole dairy industry to really take care of their consumers, those infants and toddlers who could not healthily grow up without good quality milk products, those mothers who love their kids so much that any illness the kids suffering could break their hearts, and those families which may lose the happiness and peace forever if their kids have any severe damage, rather than to focus less on coming up with another round of PR activities to save its own reputation.

A booming economy is supposed to lead to a better society, a society is surrounded by loves and cares, a society that people trust and respect each other. But our economy has been focusing too much on the rapid growth and has forgotten its mission to build a better society.

Let’s slow down the pace. Let’s retrieve the situation by facing the problems and solving them, rather than covering the mistake. Let’s pick up the oldest moralities that were inherited from our ancestors, to love, to care and to respect. Let’s promise not only a rich China, but also a better China.

Wheat in China

by bernat...(flickr.com)

Today I was exploring the Economic Research Service website of USDA, and attracted by a graphic and some analysis on Chinese wheat industry. Let see the graphic first:

We can see from the graphic that China had an increasing wheat trade deficit, until 1996, when the imports was almost equal to the exports. But then it worsened again in 2004.

China net trade of Rice, Wheat and corn (from ERS/USDA)

Bryan Lohmar summarized several reasons for the low production of wheat in China, in his report China’s Wheat Economy: Current Trends and Prospectsfor Imports:

  • Decreasing sown area in China
  • Low wheat prices: farmers moved productive land from wheat to high-value horticultural crops.
  • Policy changes, market development, and increasing commercialization in rural areas: many provinces abandoned the grain quota delivery obligation; instead, they accepted taxes and fees in cash.
  • Depleted resources, particularly water: both ground and surface water sources are showing signs of severe overexploitation

And he concluded:

China’s wheat production will likely remain at or below 90mmt for the foreseeable future. China will continue to expand horticultural production, especially for export markets. China’s wheat marketing institutions are becoming more market oriented and are moving beyond government intervention, and farmers are increasingly making decisions based on commercial considerations.

Is this the case for Chinese wheat production? Chinese wheat industry is going to be market-oriented and the government intervention is going to fail?

Well, it may be not. China is self-sufficient in wheat production last season, even when a series of flood and drought in several provinces have badly damaged the wheat and other grains’ productions in China, the wheat price is constantly going up, but it is basically self-sufficient. Chinese government considers food self-sufficiency as “a matter of national security”, and has been trying to subsidize the wheat production and sale in many ways.

What Leslie Hook wrote in this article at Financial Time precisely describes the whole picture:

China’s self-sufficiency policies are often costly for consumers as they drive up the cost of grain. But today, as world wheat markets shudder after an export ban from Russia and similar talk from Ukraine, China’s leaders are no doubt breathing sigh of relief.

Happy Individuals, Weeping Land

 

Huaxi Village, from Wang Zhiming’s blog

In this village, people live in multi-storey villas with two-car garages and nicely trimmed gardens. The K-12 education is free to all residents. Men over 55 years old and women over 50 receive pensions every month from the local government. The healthcare system is so developed that residents’ medical costs are 100 percent covered.

 

Not in Norway or in Sweden, the village is in China. Take a two-hour drive from Shanghai into southeastern Jiangsu Province, and search for a small town called Huaxi Village, you will find it, whose well-known name is “the richest village in China”.

Surprise? Believe it or not, wealthy villagers in Huaxi Village are not alone in China. They are in Shaanxi Province, in Shanxi Province, in Sichuan Province, in Yunnan Province, you list.

That’s a pretty happy story, isn’t it? But the story hasn’t finished yet. If you look closely to these people, you will find out that no matter where they are, they often have a same characteristic: their wealth has nothing to do with agriculture. Some open clothing factories, others exploit coal mine. In Huaxi’s case, villagers operate 12 main factories covering textile, clothing, steel and non-ferrous metal industries, with a total turnover of 40 billion Yuan (6 billion USD) in 2006.

In other word, the only way for Chinese villagers to get rich is not to be peasants any more. The sooner they escape from agriculture, the richer they could possibly get. What an irony.

Pressured by the central government’s “GDP-lism”, those local governments are eager to maximize their economic income from the land to compete with their counterparts in the government performance measurement. Driven by the greediness for money, individual peasants, businessmen and official authorities have the same motive of turning the arable land into something else more profitable. As a result, the worst-case scenario for agriculture is happening in China: the expropriation of farmland has increased 15-fold over the past decade. Until the end of 2008, the total amount of arable land in China is 1.82574 billion acre, accounting for 12.68 percent of China’s total land area, a per-capita average of less than 1.4 acres.

It is so close to 1.8 billion acre, officially called the “bottom red line” for China’s agriculture, a goal set by Chinese central government in 2006 and highlighted in the Outline of China’s the Eleventh Five-year Plan, which is almost the most important and practical governing guideline of Beijing government.

Beijing government may not be the one to blame for the problem. Having been trying to solve the problem, the Central Committee repealed agriculture tax in 2006. The Ministry of Land and Resources also supervised the local governments not to seize the cultivable land in many ways. But after years’ endeavor, the Ministry of Land and Resources still discovered 8514 cases of illegally using land in 2009, 33. 7 percent of which was happened in cultivable land.

The problem is not coming from the policy. The problem is coming from the pocket of every individual: the peasant who is desperate to get out of the poverty, the businessman who greedily stares at the underground coal mine, and the official authority who want to build more factories, develop more industries, and in turn, have a great governing reputation of high economic growth, of course, and get more tax.

Can you change any of these people’s minds? Do you dare to draw any money out of their pocket?

I am afraid no one can.

That comes to the end of the story: a bunch of happy individuals, and a weeping land.

Lost Appetite for Farmer’s Market

By dianaoftripoli (Flickr.com)

The dream of Zhi Zhang, a recent graduate from Xi’an Technical Collage, is to be a white collar businessman. The 24-year-old man knows it is much harder to find a job than helping his father´s business, a vendor’s stand in a farmer´s market, but selling vegetables and meat isn’t attractive at all. He wants to be someone elegant, sitting in the office room and dealing with documents and files, rather than fishes and cucumbers.

I heard his story from my mom, who is a regular customer of his father. Every morning the middle-aged man loads all the food into his pedal-operated tricycle at 4:00 a.m., drives to the market at 4:30 a.m. and begins selling food at 5:00 a.m., when his son is still sleeping in the bed. The other farmers in the market are all in their 40’s or 50’s as well.

Farmer’s market is smelly, young Chinese would say. This generation who was born after the economy reform and opening up in 1970s, isn’t anything like their parents. They would rather pay more in Wal-Mart or Carrefour than go to a farmer’s market. They like more choices. For those who live in inland cities, supermarket is the only place they can find tropical fruits or seafood or even imported food. They also like the feeling of shopping in a large supermarket, where the fluorescent light is lighting the food up and the air conditioners cooling the room down, where fruits and vegetables are arranged orderly in the shelves, while pork, steak and fish are already cut into pieces and frozen in plastic box. It is easy, clear, and convenient.

So when these young Chinese graduate from college, get a decent job and become the main customers, supermarkets find their firm foothold in China. Within the past two decades, supermarket companies have turned themselves from an alternative food supplier into a big player in food industry, penetrating not only well-developed areas such as Beijing, Shanghai and Guangzhou, but also remote villages and inland towns. With 45,587 locations nationwide, the supermarket industry boosted its annual turnover of 710.47 billion Yuan, 12.2 percent of the total sales of retail market in China in 2008.

Supermarkets/hypermarkets in China

Yet young citizens are not the only ones that turn back on farmer’s market, local governments abandon it too. In September 2001, Beijing local government announced that the farmer’s markets would be moved out of 3rd Circle Rd, the dividing line between the downtown and the outskirt, within three years. In the same year, Fuzhou and Guangzhou local governments respectively disclosed their plans to turn local farmer’s markets into supermarkets.

I feel sad for Chinese farmer’s market, which has been serving fresh food for China over the past four decades and providing millions job opportunities for people who migrate from villages to cities. But no one can help the market before solving its stubborn problem – food safety. Intensively issued by Chinese mainstream media in recent years, vendors selling meat are notorious for smearing pork with a chemical power to keep the meat fresh, and injecting water to make the meat weigh more, while peddlers selling vegetables and fruits are marked as “pesticide infectors”. In comparison, supermarket companies always have their regular chains of purchasing the food, and pay more attention to the food safety to build their brand reputation. No wonder Chinese favors them.

But even so, the Chinese farmer’s market is not dying. The regular customers of individual vendors, like Zhi Zhang’s father, are still in a big amount. Since the total cost of running a food stand in a farmer’s market, including rent, labor, maintenance and repair, is minimal, their food prices can be very competitive. A survey of thousands of Beijing citizens conducted by Beijing Industrial and Economic Bureau shows that the lower income households under 1000 Yuan income per month, or 148 US Dollar, only purchase in farmer’s market, while the lower-middle income households with an average income of 3000 Yuan per month, or 444 US Dollar, frequently purchase food directly from farmers as well. The main format of fresh food supply in China in 1970s is becoming an alternative market for cheaper food.

Rumors are saying that the local government is going to turn the land near my community, including the farmer’s market area, into a green belt. But it doesn’t matter for Zhi Zhang, who has packed the luggage and headed for job opportunities in big cities, where are crowded by the same ambitious young Chinese. It even doesn’t bother his father. With no successor come after, the vendor is going to retire very soon.

Goodbye to the farmer’s market, and good luck for the young man.

Tomato, Ketchup and China

By An& (Flickr.com)

Most Chinese don´t know ketchup. If you say “ketchup” to a Chinese who just comes to the United States, I bet he/she will look at you strangely, and ask, “What?” I remember when I first came to America last August, I got off the plane at Chicago O’Hare Airport, brought some fries at McDonalds, and asked for “tomato sauce”.

“Tomato sauce”, that is what we call all the processing tomato food  in China. Most Chinese only use it with fries or pizzas in Western restaurants. Chinese cuisine doesn’t have it at all.

Not only ketchup, tomato also has a foreign identification. Four centuries ago, in the middle of Chinese Ming Dynasty, European missionaries followed the Silk Road on their journey to ancient China, bringing seeds of tomatoes and other Western plants. Chinese accepted the tomato, and began to plant it in its own land. The tomato found a new home there, also a new name, “foreign eggplant” (fan qie) in Mandarin.

The ancient European missionaries didn’t expect China accepts tomatoes much easier than bibles, and they would never know China could become one of the world’s largest tomato paste producer and exporter one day. But it is a true story. China, the country where people have no appetite for ketchup, without mentioning other tomato processing food, has only been growing processing tomatoes since the mid to late 1970s, has made a surprising growth in tomato processing industry. Its export volumes of processing tomatoes rose from 100,000 tonnes in 1999, the year that China marked its debut in international tomato market, to 600,000 tonnes in 2005.

In 2009, China exported 8.65 million tons processing tomato products to 150 countries, rising up 35.1% from a year earlier, and increasing the market share to 20.5% in the global processing tomato export market. In particular, the export volume to Italy, Russian Federation and Nigeria accounted for 13%, 12.1% and 6.8% respectively.

The main regions for the tomatoes industry are in Xinjiang Province, a plateau to a number of Muslim ethnic groups, used to be a landlocked frontier crossroad on the ancient Silk Road, and followed by Inner Mongolia and Gansu Province. The dry continental climate there is an ideal condition for tomato growth. The long daylight hours, sufficient sunshine and the significant temperature difference between day and night are all good for sugar and lycopene accumulating inside the crop.

It is a promising industry. But for those farmers living in Xinjiang, tomato is more than just a business. It is a way of life. Xinjiang Production and Construction Corps, an affiliate lead by Xinjiang local government and Beijing, have more than one million employees, most of whom were soldiers, or ex-convicts, who had been sent to the remote barrens, “being reformed through labor” in Chinese political term. Those Han Chinese have been living in this land for decades. Their sons and daughters have grown up, gone to college or had their own jobs. No matter which regions of China they came from, now they are all Xinjiang farmers (though their official identification is “farming soldier”), sinking roots in this plateau, turning the wild land into a fertile spot.

In spite of the boom, Chinese tomato processing industry has its troubles. The irrigation system needs to be improved. The poor transportation causes the tomatoes rotten before reaching the tomato processing plants. The non-brand tomato processing products are given a “made in Italy” label after exporting to Europe and being reprocessed in Italian small plants. China wants its homemade brand, while Europe chides China for dumping products into oversea market.

From "Apple and Tomato Chains in China and the EU" by Xiaoyong Zhang, Huanguang Qiu, Zhurong Huang

The change will not come about by itself. Chinese tomato processing industry should reinforce its agricultural research, improve the rural transportation, develop a better management system to meet the international quality standard, and engage in building its international reputation. The industry with only a history of four decades is still too young. It should learn, learn and learn more, before it boasts its large exporting volume.

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