Pepsi loses suit to Chinese partner over secret formula

16:54, December 08, 2010      

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The local court in Chongqing, the municipality in China's southwest, ruled that Pepsi stop using and return the secret formula and production techniques owned by its former Chinese partner Tianfu Cola.
Pepsi is supposed to enforce the ruling within 10 days.

But the court did not support Tianfu's claim for 1 million yuan in damages. Tianfu said the lawsuit over the business secret was only the first step. More legal actions will follow, and there is a plan to re-launch the brand.

Before it joined hands with soft drink giant Pepsi, Tianfu, which was established in Chongqing in 1981, held 75 percent of China's cola market for eight years until 1994 and had nearly 100 million yuan of total assets.

Under their agreement for the joint venture, Tianfu Cola should have accounted for at least 50 percent of the total production of the new company. However, as a result of the new company's strategy of focusing on the Pepsi brand, production and sales of Tianfu declined sharply year by year and the joint venture reported heavy losses.

In 2006, Tianfu sold its entire stake in the new company to Pepsi. After that, Pepsi controlled more than 94 percent of the shares, while Tianfu disappeared on the market.

In 2009, Tianfu filed the lawsuit against Pepsi in the local court in Chongqing, asking Pepsi to return the formula and other technical materials, which was not part of the joint venture agreement but were used by Pepsi for free.

Tianfu told the local media that more legal actions will be taken to reclaim their trademark from Pepsi, and Pepsi should compensate the company at least 200 million yuan for the loss of the Tianfu brand.

They are very confident that their brand will have a rebirth on the market once they have their core formulas back.

By Li Jia, People’s Daily Online


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