Red Bull license Renewal Causes Rifts

Red Bull Vitamin Drink's main shareholder is locking horns with its partner in the Chinese market over a trademark dispute, due to the pending renewal of a trademark licensing agreement that expired last year.


The joint venture was established by two Thai companies: TC Pharmaceutical Industries, the creator and owner of Red Bull energy drink and its trademark, and Reignwood Group, which has a smaller share in the company.


Together, they introduced the popular Red Bull beverage to China on a 20-year licensing agreement, with Chanchai Ruayrungruang, founder of Reignwood, serving as board chairman.


"Whatever the final result might be, the Red Bull trouble sounds the alarm - companies need to develop their own brands and increase trademark awareness," Ning Lizhi, director of the Center for Intellectual Property Rights and Competition Law at Wuhan Unviersity in Hubei province, told China Intellectual Property News based in Beijing.


After two decades of sales in China, Red Bull has grown into a market leader in the energy drink segment with a mature and widespread distribution network across the country.


But after the trademark contract expired in 2016, the companies have yet to reach an agreement on an extension of the authorization contract.


This is partially due to speculation around TC Pharma's potential involvement of another trademark licensee in the joint venture, its subsidiary Red Bull GmbH in Austria, according to Chinese media reports. If true, this could reduce Reignwood's control of the joint venture.


The Austrian company - which sold more than 6 billion cans of Red Bull worldwide in 2016, an increase of 1.8 percent year-on-year - has also entered the Chinese market separately to the joint ventures' activities.


Market insiders have noted similarities to the situation Jiaduobao faced, in which the noted Chinese herbal drink lost its pole position in the market due to a failure to renew its trademark license agreement after it came to an end.


In early July, Red Bull Vitamin Drink announced it will invest heavily in a summer promotional campaign nationwide, arousing speculation that the negotiations for the authorization seemed to have made progress.


But that speculation soon evaporated when one of its parents, TC Pharma, filed a trademark-related complaint against ORG Packaging, the Chinese supplier for Red Bull Vitamin Drink, later that month, further increasing tensions. TC Pharma alleges that ORG infringed its rights via unauthorized usage of the Red Bull trademark on packaging distributed since the licensing agreement came to an end.


ORG will continue to fulfill its contract and provide packaging before the court makes its final ruling, according to the company.


ORG had ridden on its close partnership with the joint venture for 17 years, increasing its annual net profits from 405 million yuan ($60.25 million) in 2012 to 1.15 billion yuan in 2016.


The two sides signed a renewal contract in 2012 to extend their cooperation for another 10 years.

By Wang Xin

Source: China Daily