Big Name in Mooncakes Burned by Rival's Deceit

With two holidays falling at the same time, October 1 promised to be a highly profitable convergence of mooncake madness for the people who make this sweet and heavy confection.

Instead, one Shanghai baker is just plain mad as it finds itself with no other choice but to shut down production.

The reason: A company with the same name got caught stuffing this year's cakes with last year's leftovers, and now everyone who markets under the venerable Guanshengyuan brand is facing a crippling meltdown in consumer confidence.

Shanghai Guanshengyuan (Group) Co, which launched the trademark more than 80 years ago, appears to be the hardest hit. Some 50 percent of its customers canceled their orders, causing the company to shut down production on September 14 - more than two weeks early to the National Day.

It was the Nanjing Guanshengyuan Food Co that got the brand name in trouble.

Early this month, China Central Television Station aired a report in which an undercover journalist found the company was filling its mooncakes with leftovers from last year.

The company's general manager, Wu Zhengzhong, said that reliance on old stock is standard practice among China's mooncake producers.

"The use of old mooncake stuffing is not restricted as long as no quality problems are found," Wu said. "In fact, most small- and medium-sized companies have to do so in order to cut costs."

Authorities obviously disagreed. Health officials closed down the company the day after the report aired and began an inspection.

The reaction from consumers was strong and wide-reaching, despite protestations from other Guanshengyuan-brand producers that they used only fresh ingredients and that they have no connection to the Nanjing firm.

The company began in Shanghai in 1918, spread throughout the nation and eventually split into more than 30 separate businesses.

Now all those independent producers are reporting a drastic drop in sales, perhaps as much as 40 percent.

Guanshengyuan companies in Sichuan and Yunnan provinces say they're losing millions of yuan as a result.

Shanghai Guanshengyuan suspended marketing activities in all 20 of its outlets nationwide.

"We had no time to sell our mooncakes before the news broke," said Yu Yi, sales manager at Shanghai Guanshengyuan's Chengdu branch in Sichuan Province. "Our other products such as candy, biscuits and honey may also be affected."

Despite the damage done, Yu said his firm isn't calling for any joint legal action against the Nanjing firm.

"It's not necessary to make the matter more complicated. We will wait for consumer understanding to return," he said.

Shanghai Guanshengyuan has scheduled a news conference for today in an attempt to clarify what it says are misunderstandings about its products.

The cakes, fashioned in the shape of the harvest moon, are made from flour, sugar, oil, egg yolk, fruits, nuts and bean paste. They are given as gifts during the Mid-Autumn Festival, which falls on the first full moon of the eighth lunar month - October 1 this year.

The birth of the People's Republic of China is also celebrated on October 1 and is the beginning of a weeklong holiday, giving the nation's citizens plenty of time to visit friends and family - and buy them gifts.

Mooncake sales normally are 10 percent higher when the two holidays come close together.

Despite the negative news reports, this year will probably be no exception for the other makers.

"We're positive that sales this year will still increase by 10 percent to 10,000 tons in the city, for consumers won't easily give up the tradition," said Feng Fusheng of Shanghai Sugar, Cigarette & Wine (Group) Co

Shanghai Xing Hua Lou (Group) Co, which holds half the city's mooncake market, said its sales reached last year's total by the end of August.

"For us, this kind of incident will have the opposite effect and push more consumers toward companies with qualified products and good reputations," said the official.

( 09/18/2001)

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