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Beer War Rages in Hong Kong

January 13, 1999

HONG KONG (AP) _ Go to a Chinese restaurant virtually anywhere in the world and you can wash down your roasted duck with a cold Tsingtao beer.

But in Hong Kong, a mecca of fine Chinese cuisine, sales of China’s most famous beer _ perhaps its best-known brand name of any kind _ have been falling.

Tsingtao Brewery Co. Ltd. blames its old Hong Kong distributor and a lack of good marketing, a source says, and is now furiously fighting back with lawsuits seeking full control of the Tsingtao trademark in Hong Kong.

In an attempt to reverse the slide, Tsingtao Brewery dumped the distributor, China Beer (Hong Kong) Co. Ltd., at the end of last year and signed on with Tsingtao Beverage (Hong Kong) Co. Ltd.

Tsingtao Brewery hopes a strong advertising campaign can persuade more drinkers in the territory to reach for Tsingtao instead of heavily advertised rivals such as Heineken and Carlsberg. Tsingtao executives fear that with no persuasive ad strategy, their brand has quietly developed a local image as a stodgy beer for older people, according to a source familiar with the situation who spoke to The Associated Press only on condition of anonymity.

Whatever the drinkers may be thinking, Tsingtao sales in Hong Kong have fallen by a third over the past five years.

A top export official with Tsingtao Brewery, Wang Zhiguo, vowed in a statement that the brewery will ``re-launch its product in Hong Kong in a creative manner.″

Standing in the brewery’s way is China Beer, which says it owns the Hong Kong trademark rights for Tsingtao beer.

Tsingtao’s former distributor has launched a series of big newspaper advertisements, threatening to sue anybody who sells Tsingtao here without its permission.

Tsingtao Brewery worries the ads could spook drinkers into thinking the local supply of Tsingtao will dry up.

``Already you see Chinese reporters are writing speculative stories suggesting there will be no supply of Tsingtao beer,″ said spokesman Andrew Fung.

Has that hurt business?

``Not yet, but it will,″ Fung fretted.

After years of trying to regain the Hong Kong trademark through peaceful negotiations _ but apparently without offering any money, Fung says _ Tsingtao Brewery went to court in late December and again in early January, hoping to get the Hong Kong trademark and an injunction to stop China Beer’s ads.

The two sides were scheduled to appear in court on Feb. 2 to present arguments on the case, Fung said.

No one has been available for comment at China Beer, according to employees who have answered the phone when a reporter rang several times over the past two weeks.

The Hong Kong beer war is the latest and perhaps final battle to be fought over Tsingtao in a saga that involves the communist Chinese ``planned economy″ of the 1950s and China’s efforts to become more market-oriented in the 1980s.

The Tsingtao Brewery was founded in 1903 by Germans who brought their fabled beermaking skills to the city of Tsingtao, Germany’s old colonial capital in the province of Shandong.

Decades later, China’s communist economic micro-managers decided that foreign sales of Tsingtao would be handled by professional exporters and not by the brewery. The Hong Kong trademark for Tsingtao was granted in 1958 and has changed hands several times since.

China moved in 1988 to get all overseas sales licenses for Tsingtao back for the brewery and by now has succeeded every place but Hong Kong.

Tsingtao Brewery officials have watched with concern as sales plunged in Hong Kong, from 9,000 tons of beer a year in 1993, when the company was publicly listed in Hong Kong and Shanghai, to just 6,000 tons annually, Fung said.

Fung could not say how many bottles of beer this is _ it depends on the size of each bottle _ and the company would not specify its Hong Kong revenues for competitive reasons.

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