A couple of years ago a European paint manufacturer, (let’s call them Alfa Paint) set up shop in The Middle Kingdom. Although the company’s price was at least 70% higher than the local equivalent, customers still took notice.
As Chinese home ownership was growing fast, business boomed. Smart Marketing strategies, specifically fine-tuned to the Chinese proud homeowners, created such a buzzzzz, that distributors and Do It Yourself chains were almost literally fighting to get the Alfa-Paint brand on their racks.
A text book Pull-Push effect was created in a matter of months.
Pots and cans filled with the colors of the rainbow flew off the production line.
Production couldn’t keep pace with demand. Soon more staff were hired and the production lines expanded. For the shareholders of Alfa Paint the Chinese Miracle was real!
Admiring the success of the European brand, their Chinese counterparts got into the action too. One of them took a huge shortcut & decided that the best way to get a piece of the pie was to Copy Comform the packaging & brand while filling up the tins with a local brew of paint. Let’s call them Alfa Paynt
Since Alfa Paynt was only a local player, their products only got onto the shelfs in their home province. For their scale of operation they did a brisk business.
And with a discounted price of 50% compared to Alfa Paint, shops and distributors were happy to buy from Alfa Paynt.
But since Alfa Paint’s business was growing with leaps and bounds, their Fat Managers didn’t really care. The overseas shareholders, enboldened by the results were pushing them to take more market share, discover new venues to sell and make Alfa Paint an household name.
Basically there was no time to worry about Alfa Paynt & anyways it appeared to be a small player who didn’t have the financial arm to break into the whole market in a big way.
Some Alfa Paint managers considered them an annoyance, others were openly proud that their brand was being copied, Alfa Paint R&D managers had tested Alfa Paynt’s product & was found inferior.
They knew that a time would come where customer complaints would grow and Suppliers would not want to deal with the copy cat product & go for the real Alfa Paint. Nobody in Alfa Paint even made the effort to find out who was distributing or manufacturing the Alfa Paynt….
The Alfa Paint factory was running with a staff of around 500 when new government regulations came into effect on the content of the paint’s ingredients & which ones would be blacklisted by the end of the year.
For Alfa Paint this wasn’t too much of a problem as those were also in line with the components used in Europe. Alfa Paint was ready to switch at a moment’s notice . The company, always having been a proud proponent of protecting the environment adjusted the production, months before the government’s deadline.
Alfa Paynt however wasn’t so fortunate or were ignorant of the new guidelines, or….. Anyways, they just continued what they’d been doing. Why change the winning formula ?
A couple of months into the new year, shit hit the fan. A spot check was done in a large DIY shop & samples of the cans labeled with Alfa Paint were taken to an independent AQSIQ laboratory for testing of product quality. AQSIQ = Administration of Quality Supervision, Inspection and Quarantine).
Within days Alfa Paint’s General Manager was informed that their product was not conform with the new regulations & the factory was requested to close down. At the same time all products taken from the racks (all over China !) and a country wide announcement was made that Alfa Paint’s products were harmful to humans. Sales stopped immediately. The China dream turned into a nightmare for the Shareholders.
Now 1 year later the factory is still closed as Alfa Paint has to proof that Alfa Paynt is the culprit. And 500 staff are still temporarily unemployed.
Lesson of the day: If you know your product is being copied, act as quickly as possible. Inform Chinese authorities of the situation. But don’t be complacent. Don’t waste precious time. Know what is going on in the market, because sales figures are only part of the equation.
