When Wisconsin Ginseng Met A Fake China
November 22, 2010 2 Comments
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.
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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.
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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.
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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.
China Business and Economy 