One of Yunnan province's most famous brands has had a bit of a tumultuous 2013. Pharmaceutical giant Yunnan Baiyao Group faced product recalls and a much-publicized lawsuit to begin the year. Despite such setbacks and the accompanying bad publicity, a recently released third-quarter report shows the company has posted record earnings.
In the first nine months of the year Yunnan Baiyao (云南白药) reported total sales of 11 billion yuan (US$1.8 billion). Net profits reached 1.8 billion yuan (US$300 million), up nearly 60 percent from the same three quarters of 2012. Analysts for the conglomerate are now predicting 2013 revenue could reach 2.5 billion yuan (US$410 million), making it one of the wealthiest companies in the province.
A brief summary included in the quarterly report credits an enlarged product line and increased sales overseas for its substantial gains. Yunnan Baiyao, once only a producer of traditional Chinese medicines, has recently moved into the hygiene and cosmetics markets. The company now has a reported 10 percent share of the mainland Chinese toothpaste market and it expects that number to grow by another five percent over the next three years.
Sales and earnings of this magnitude were most likely not on the minds of company executives when 2013 began. In January, the Sichuan Food and Drug Administration announced a province-wide recall of medicinal pills and capsules produced by Yunnan Baiyao.
National media dubbed the situation "Quality Gate" (质量门) in reference to issues with packaging that led to the recall. Hong Kong and Macau also temporarily banned imports of the medicine but they have since been reinstituted. After news of improper packaging surfaced, the company's stock value dropped ten percent in less than two weeks — equivalent to losses of 230 million yuan (US$38 million).
Shortly after the scandal in Sichuan, a man in Liaoning filed a lawsuit claiming pills produced by the company were improperly labeled and contained possibly poisonous ingredients including Aconitine. The company conceded limited levels of the toxin are present in its products but exist in such miniscule amounts — 3.5 parts per million — as to pose no danger to users.
Yunnan Baiyao was invented in 1902 by herbalist Qu Huanzhang (曲焕章) as a powder for use in the treatment of injuries and as a blood coagulant. The ingredients of Yunnan Baiyao had been a closely guarded trade secret, much like the confidential recipe for Coca-Cola, until three years ago. In 2010 both Amazon.com and the United States Food and Drug Administration published a list of the eight purported active ingredients found in the medicine Beijing has classified a "national level confidential product."
Today it can be bought in pill, aerosol and tincture formulations and is recommended by producers for treatment of everything from colds and flus to use in 'trauma' situations. It is now also being used in the aforementioned toothpaste as well as facial cleansers and skin-whitening products.