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Unilever: No Zhonghua Buyout
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Despite media reports, Unilever China is not planning to acquire the popular toothpaste brand Zhonghua that it now makes and sells under license from a domestic company.


Instead it has been using its resources to further promote the brand for long-term growth, Wu Liang, senior corporate communications manager of Unilever China, told China Daily yesterday.


Wu's comments came in response to local reports that Unilever is planning to buy Zhonghua - owned by Shanghai Whitecat Shareholding Co Ltd, which licenses the brand to Unilever - or even acquire Whitecat itself.


"Zhonghua is a very strong toothpaste brand and Unilever expects to run the brand as long as possible. We absolutely have no idea about the so-called buyout and we are not in discussions with Whitecat on it," Wu said.


But "we would be one of those that hold the greatest interest if Whitecat intended to sell Zhonghua someday", she said. "But the possibility is almost zero."


Unilever has been producing Zhonghua through a licensing agreement that began in the late 1990s when Whitecat was formed.


"The business has been going very well, with annual sales generated from Zhonghua continuing to rise by double digits and the momentum is definitely expected to continue," said Wu.


Although she refused to disclose Zhonghua's market share, statistics from ACNielsen show that the top three brands in 2006 were P&G's Crest, with 23.2 percent of the market, Colgate with 21.6 percent share and Zhonghua, with 11.9 percent of total toothpaste sales.


The market for toothpaste has continued to show strong potential as the Chinese, particularly in rural areas, become more concerned about oral hygiene.


Both Zhonghua's growth and the upward trend of the domestic market were listed by local media as motivations pushing Unilever to an attempted buyout of Zhonghua.


"It is true that we could get more benefits if Unilever owned Zhonghua, but we now feel comfortable as Whitecat has provided us a free hand to grow Zhonghua without interference since 2000," Wu said.


"What concerns Unilever most is how to leverage through whatever means ways to strengthen the Zhonghua brand."


Unilever has its own toothpaste brand, Signal, but since 2000, Wu said the company has devoted 95 percent of its resources in research and development, marketing and advertising for toothpaste to the local brand.


Zhonghua generates about one-sixth of Unilever China's annual revenue and more than 95 percent of its toothpaste sales.


"Of all Unilever brands in China, Zhonghua has been given the most care," she said.


Huang Hai, general manager of Whitecat, was quoted by China Business News as saying that "Unilever's idea about the buyout, if really true, is but wishful thinking".


Wu said it is not likely that Whitecat would think of selling the Zhonghua brand.


While Whitecat's profit fell 8.79 percent in 2006, even on growing revenue, its licensing fees from Zhonghua reached about 17 million yuan.


As Zhonghua is the only domestic brand in the top three, the government would not easily agree to a buyout for fear of monopoly by foreign players, insiders said.


(China Daily July 11, 2007)



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