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Golden Throat (6896 HK — US$343 million) is an iconic Chinese brand of throat lozenges, used to deal with sore or dry throats.
The core product is similar to Strepsils, Halls, or Ricola, but is sold over-the-counter in pharmacies. The company sells 146 million boxes per year and has an estimated market share of 26% in China.
Founder Jiang Peizhen is a unique individual. Her mom passed away when she was only 13 years old. Forced to find a job, she ended up at the state-owned Liuzhou No. 2 Sweet Factory in Guangxi Province, China and quickly rose through the ranks.
At the age of 33, when China’s opening-up reform was starting to take shape, she somehow ended up becoming the sole owner of the factory. Jiang was travelling across the world to learn about the production techniques of foreign candy manufacturers, with the goal of eventually releasing jam and chocolate peanut candies for the domestic market.
The company's real breakthrough occurred in 1994. Jiang teamed up with Professor Wang Yaofa at East China Normal University to develop a lozenge product for sore and dry throats. The company submitted patents and became the sole owner of the product. Even though Professor Yang’s face was on each box, he never received any royalties from it.
Another master move by Jiang was inviting football star Ronaldo to a private meal when he was visiting China. When arriving at the table, Ronaldo found Golden Throat products laid out across the entire table. And then the photography session began. Ronaldo was made to wear a “Golden Throat” branded shirt, smiling into the camera and then ended up in a TV commercial, making Golden Throat into a nationwide phenomenon. Ronaldo sued Golden Throat, and Golden Throat eventually had to pay €12 million in compensation.
Today, Golden Throat lozenges (金嗓子喉片) are available over the counter in pharmacies across China. The company also sells candy-style lozenges known as the Golden Throat series lozenges (都乐含片), which directly compete with Halls and Strepsils in China.
There appears to be underlying growth in the industry, at a mid-single-digit level. Golden Throat has been able to raise prices by 6% annually, resulting in decent earnings growth. Thanks to this pricing power, it’s able to earn mid-30s operating margins, strong free cash flows, and a 20% return on equity.
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