A must for canmakers doing business with China: know the best selling drink in China, Wanglaoji 王老吉(Part 1)

wangloji can2Guess which is the best selling drink in China? Coke? Pepsi? No, it is Wangloji 王老吉 (WLJ), which is little known to other peoples outside of China other than the Chinese communities. Look at the photo on the  left, one wonders what is inside this ordinarily looking can (I am being nice) and why it is so popular in China. WLJ is a kind of traditional Chinese herbal tea. According to a reliable source sales  of canned WLJ amounted to RMB2.5 billion or US$365 million in 2008, which surpassed sales of Coca Cola in the country.

What is relevant to the canmaking industry is that the canned WLJ emerged from its obscurity only in or about 2004, when the company first started to sell the drink in cans. At that time, WLJ was sold only in Tetra paks. The China WLJ, which holds the license, thought that WLJ in cans would have no market at all and  granted the use of the license to a Hong Kong company, which is related through history, at a low price for 20 years. Herbal teas in cans were then considered a revolutionary idea.

The type of cans currently used by WLJ belongs to the kind known as 3 piece steel can. The company is taking  another  innovative move this year by changing the cans to 2 piece aluminum. It is said  that the state owned corporation, COFCO, is building a huge plant in Wuhan for producing 2 piece cans mainly to cope with WLJ’s demands.

I am not an expert on canmaking technology. Nevertheless, I consider WLJ’s switching to 2 piece cans a bold move.  Some of the experts in the idnustry have doubts that herbal teas are chemically compatible with aluminum, the metal which most 2 piece cans are made of. Further, WLJ, being a non-carbonated drink, is said to be not suitable for a 2 piece can which relies on the gas of the liquid inside to support the soft aluminium wall and keep it in shape. I think WLJ will face a lot of challenges on the technical front for switching over to 2 piece cans. That said, I was told that WJL by doing so it could save about 15% of the costs for each can it produces and on the whole the company could save hundred millions of dollars in costs each year. It will save on materials costs as aluminium is cheaper than steel and also on operating costs as the former is a lighter material, hence, cheaper transportation and storing costs. I was told that WLJ’s competitor, Red Bull, which is in a similiar situtaion, is watching the related developments closely. If WLJ’s move is proven to be successful, Red Bull, will likely to follow suit.

That is enough on the tecnical aspect or I should say that is all I  know. As a matter of fact, the history of WLJ is quite intriguing and so is the drink. I will talk more on these two subjects in the subsequent blog.

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