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  1. Home
  2. / Markets
  3. / China

A New Brand of Protest Emerges in Hong Kong

A Japanese drink-maker, as well as Cigna and Yum! Brands' Pizza Hut, have been swept into the 'product politics' battle between pro-democracy demonstrators and pro-Mainland authorities.
By ALEX FREW MCMILLAN
Jul 15, 2019 | 12:06 PM EDT
Stocks quotes in this article: OTSKY, TVBCY, YUM, CI, YUMC, JMHLY, SUHJY, MTCPY

Protesting is thirsty work. And the pro-democracy demonstrators in Hong Kong have adopted the Japanese sports drink Pocari Sweat as their "official" beverage of choice.

This has led to a surge in sales here, and calls for consumers to boycott the Gatorade-like drink on the mainland. It's one of the complex pieces of product politics that are playing out this summer. Investors should pay heed, since the outcomes are unpredictable.

Pocari Sweat is made by the Japanese company Otsuka Pharmaceutical and parent Otsuka Holdings (OTSKY) , which has seen its shares rise 10.1% this month, ahead of the 1.6% rise in Otsuka's benchmark Topix index. It will be worth watching whether the favorable publicity that the drink has received here in Hong Kong outweighs any damage done to its reputation in the Chinese market.

The most-recent spat kicked off as a result of "biased" TV coverage of the recent protests by local Hong Kong broadcaster TVB, which has an American Depositary Receipt listed as Television Broadcasts (TVBCY) . As Hong Kong's largest television station, TVB has run reports that favored the police over the protesters, according to the "yellow ribbon" supporters of the democracy movement.

TVB says its footage has been fair. But advertisers have started pulling their commercials from the station, under pressure from, or in sympathy with, their customers. The broadcaster's share price is as yet unfazed, but a long-running commercial boycott would hurt.

Pocari Sweat, a so-called isotonic drink, is one of the most-popular sports drinks in Asia. That's even if its English name does conjure up images of little pocari animals (perhaps they are fuzzy and blue?) being made to run in hamster wheels to produce the necessary "sweat."

Otsuka's Hong Kong branch on July 9 said that "in view of the current situation," it decided to withdraw Pocari Sweat advertisements placed on TVB, and is pulling its ads from all TVB platforms, according to a note that was leaked. The drink company said it has "taken a proactive step to urge TVB broadcast station to respond to public concern."

The next day, it apologized that the leaked reply may "have led to inconvenience," but said the company always tries "our best to support the health of people from all over the world."

Response has been swift and vociferous on social media, as you'd expect, with messages of support "I love you Pocari" as well as "Will not drink Pocari again." In Hong Kong, the response has been generally very favorable.

I could see first-hand that bottles of Pocari were flying off the shelves yesterday as fast as stores could stock them, as yet another protest took place. This time the venue was, for the first time, the suburban neighborhood of Sha Tin.

The local branch of Pizza Hut -- a Yum! Brands (YUM) subsidiary -- has also pulled ads from TVB, as has the Hong Kong arm of the insurer Cigna (CI) and the Hong Kong-based condom maker Wonder Life.

In a sign of how confusing things can get, the operator of Pizza Hut in mainland China was spun off into the separately listed Yum China Holdings (YUMC) in 2016. Yum China had to issue a statement that it is not the owner of the Pizza Hut restaurants in Hong Kong Pizza Huts, which are franchised by Jardine Matheson (JMHLY) .

There are also intricate politics at work with the local operations of the restaurant chain Yoshinoya Holdings, famous for its budget Japanese-style beef bowls. It faces a boycott by some customers in Hong Kong because Marvin Hung, the CEO of Hop Hing Group that runs the Yoshinoya franchises here, is a member of parliament in mainland China. Hung has also participated in pro-police rallies.

Yet it appears there are subversive elements within Yoshinoya ... Protest "Lennon Walls" have cropped up around Hong Kong, with Post-It notes in support of the protesters. After police officers ripped down some of the notes in my home neighborhood, Tai Po, the officers got nicknamed "paper-ripping dogs," which sounds in Cantonese exactly like a Yoshinoya bowl nicknamed "lion dog."

Yoshinoya put up a Facebook post advising people to call the dish by its Japanese name, "chikuwa" -- and noted, archly, that "lion dog is not only available in Tai Po." In other words, where the Post-It notes got ripped down by the "paper ripping dogs."

Hung, the pro-China franchisee, was furious. He claims he has fired the public-relations agency responsible for the Facebook post, and got the staff member involved fired as well; Yoshinoya apologized for the social-media post, but says no one has been fired.

The point of the "he said, she said" over beef bowls is that any wrong foot or misspoken word is seized upon by the pro-democracy "yellow ribbons," or the pro-establishment "blue-ribbon" supporters.

Protesters have started to stage district-by-district demonstrations to appeal to different segments of society. Yesterday's site was Sha Tin, on the subway line that leads straight to Shenzhen, is an extremely popular shopping destination for mainland Chinese tourists.

Sunday's demonstration started at the subway stop before Sha Tin, and led past the Che Kung Temple and the Hong Kong Heritage Museum, two of the top tourist sights in the Sha Tin area, before concluding at the New Town Plaza shopping mall that's so popular with mainland visitors.

There were clashes between protesters and the police in the streets that proceeded into the shopping mall. Mall operator Sun Hung Kai Properties (SUHJY) says it did not call the police or request their help, but the cops chased protesters inside and clashed hand to hand, as well as on the subway system run by MTR Corp.  (MTCPY) .

Sun Hung Kai and MTR are doing their best to stay above the fray that took place in their properties, while Pocari Sweat, Cigna and Pizza Hut have taken a stance. We'll soon see if it's smart for sales to pick sides.

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At the time of publication, Alex Frew McMillan had no position in the securities mentioned.

TAGS: Markets | Politics | Food & Drink | Pharmaceuticals | China | Japan

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