By Liu Songbai

In recent years, many old brands have been coming back: the "Arctic Ocean Soda" has been put on the market again, the "Warrior" shoes are extremely popular in Europe, "VIVE" enters cosmetic market, and "Forever" bicycles are back on the street. In 2012, old automobile brands such as "Shanghai" and "Beijing" have also returned. 

The appearance of these old brands evokes memories in many people. The twists and turns in the history of these brands make people sigh. They were all on the top of the market once, whether in terms of market share, reputation, or influence. In the tide of market economy, many companies have tried to draw support from foreign capital, talents, and experience to boost the development of the companies and their brands, but, unexpectedly, many of those old brands fell into oblivion gradually after being acquired by foreign capital. For those lucky enough to survive, their market shares have shrunk considerably. Some examples include: "Power 28", which is now but yesterday's news; and the once glorious "Robust" is no longer as robust as it once was¡­

Foreign capital's entering China has been summarized as "three steps" in the industry: first, establishing a joint-venture; then purposely producing losses for several years in a row, making the Chinese shares profitless; and finally buying the Chinese shares at a low price. Examples include: After merging with Singapore's Western Electrics, Dalian Motor, which was once China's biggest motor producer, suffered losses for several consecutive years, and was acquired by the Singaporean in only three years' time; Jiamusi Combine Harvester, which was China's only company capable of manufacturing large combine harvesters and which took up 95 percent of the Chinese market with its products, was merged by an American company in 1997, and fully purchased by the American company 7 years later; Nanfu Battery, whose sales volume of alkaline batteries used to rank fifth globally, but after it was controlled, it was forced to exit from the overseas market in which it had been growing rapidly. Now, half of its production lines stand idle¡­ Some foreign capitals take such a strategy towards Chinese brands: buying the Chinese brands and freezing them, removing competitors quietly, and using the channels advantages and market resources of these Chinese brands to promote their own brands.

Now, as joint-venture contracts about to expire, some local brands are beginning to shake off the restriction. Past setbacks have aroused brand awareness in these companies, and they begin to attach importance to brand building. In 2007, Beijing Tea Corporation bought back the "Jing Hua Tea" brand; in April, 2011, the lease term of the "Arctic Ocean" trademark expired, and the brand came back to the Beijing market. However, these resurrected brands returned to the market only to find themselves in face with their past competitors who have grown much stronger.

It is persistent comebacks on one side, and boisterous mergers on the other. In the past 2 to 3 years, Coca Cola acquired Huiyuan Juice, Nestle acquired Hsufuchi, Danone acquired Wahaha, and Yum! Brands Inc. acquired Little Sheep¡­ There has never been lack of news about foreign capital buying Chinese brands. As economic globalization deepens, cooperation, competition, stock joining, and mergers between Chinese and foreign companies become very common in the market economy. Given previous lessons, however, such mergers can be worrisome.  

Diageo merged with Shujingfang. From both parties' expectations, Shuijinghfang hoped to draw support from Diageo to expand the international market, while Diageo hoped to draw help from Shuijingfang to get a spot in Chinese' foreign liquor market. As early as in 2008, Diageo has become Shuijingfang's second largest shareholder. If both parties had been operating in accordance with their expectations, their targets should have somewhat been achieved after three years' time. 

According to Shuijingfang's statistics, its performance has been barely satisfactory since Diageo took part in the management of the listed company. In 2010, Shuijingfang's profit slipped by 26.57 percent compared with the same period of the previous year, making it the only liquor company who aimed at the high-end market and suffered net profit slide in that year. With the liquor industry in good conditions as a whole, the company's performance is significantly lower than industrial level. Therefore, it still remains to be seemed whether Diageo would be able to help Shuijingfang to rise again in the Chinese market.

In overseas market, although the market boost was obvious after the first acquisition - Shuijingfang's export revenue was RMB 7.65 million Yuan in 2006, and it increased by more than 3 times to RMB 23 million Yuan in 2007; in 2010, export value doubled that of 2007 -, export still accounts for only about 2.5 percent of its main revenue. There is still a great distance from Shuijingfang's expectation of truly going international. Analysts point out that how can you expect consumers in the western world, where there is no Chinese wine culture and people don't understand China's wine culture, to consume liquor? If Diageo can promote Shuijingfang to the whole world, it would be a miracle for liquor.

Of course, analysis is not the same thing as fact. As a matter of fact, there have been cases of liquor brands making great success after being purchased and boosted by foreign liquor groups. In 2007, France's Hennessy Group purchased Wenjun, a subsidiary of JNC Group. After only two years, Wenjun evolved from a second-line brand into a luxury product of more than RMB 1,000 Yuan apiece. If Diageo would be able to do the same thing, the merger would benefit both Diageo and Shuijingfang, creating another luxury brand of China's liquor industry. In that case, the merger would be most welcomed. However, if Diageo has other agenda in the purchase, wishing only to expand the market shares and influence of its brands in the Chinese market, then Shuijingfang may become the next "Arctic Ocean".