China’s biggest wine influencer Lady Penguin is embroiled in a fresh scandal that exposed how the influencer-led wine company orchestrated a smear campaign mobilizing employees including head of HR department to leave damaging reviews on competitor’s products.

The court verdict released on Tuesday reveals just how far a company is willing to go to get a leg up in the cut-throat and fast-expanding low-alcohol drinks market.

According to court document, Beijing-based drinks company Luoyin filed a reputation dispute lawsuit against Beijing Lady Penguin Wine Company (北京醉鹅娘酒业有限公司) last year after it found the wine influencer’s company coordinated a smear campaign against its products.

The court ruling on July 12 handed Luoyin a win and ordered Lady Penguin’s company to delete all negative comments posted by her company staff on Luoyin’s products, and issue an apology to Luoyin within 10 days of the verdict, which should be displayed on the top of Lady Penguin’s flagship store on the country’s biggest online retailing platform Tmall.com for three consecutive days.

In addition, Lady Penguin’s company is also ordered to pay altogether RMB 120,000 (US$17,750) in damages to Luoyin. As of the date of publishing, there’s no apology published on her Tmall flagship store. It’s not now known either at the stage if Lady Penguin’s company is going to appeal.

Lady Penguin’s flagship store on Tmall.com (pic: screen grab)

SHOCKWAVES

The verdict sent shock waves to wine communities and tarnished the image of arguably the country’s most influential wine influencer who had built a multi-million dollar company through savvy social media marketing and relatable contents that particularly spoke to the country’s young consumers.

The case came to light after Luoyin found that between November 2020 and January 2021 its low-alcohol product was flooded with bad reviews. An internal investigation revealed 13 of the accounts are registered to employees working at Beijing Lady Penguin Wine Company, some of which belonging to the company’s department heads from HR and Hiring, as well as employees working in sourcing and e-commerce.

The most damaging evidence linking the accounts to her company apparently were purchase invoices that were raised to Lady Penguin’s company.

It’s not the first time that Luoyin and Lady Penguin’s company sparred over products though. In 2020, the KOL’s company filed a complaint to Tmall, China’s biggest retailing platform complaining that Luoyin’s low-alcohol product imitated her company product. The complaint was eventually rejected by the e-commerce platform.

Court verdict (pic: screen grab)

PROFITABLE LOW ALCOHOL DRINKS MARKET

Lady Penguin, whose real name is Wang Shenghan and a graduate from Brown University in the US, returned to China and founded her company in 2014. Through savvy social media contents, she boasts about 6 million followers across her social media platforms.

She initially found her success in wine, but has since expanded her influence into other alcoholic beverages from sake to cocktails, and in recent years particularly with low-alcohol drinks.

In 2021, it’s reported that she sold close to8 million bottlesof drinks through her social media platforms and e-commerce channels. Her self branded Chilean wine brand “Flamenco” was responsible for 1.8 million bottles of sales, but majority of sales came from her low-alcohol fruit wine brand 狮子歌歌, which generated 3.5 million bottles in sales.

The source of the legal battle incidentally rests on the two company’s flagship low-alcohol drinks, as both vie to get bigger market shares in the country’s lucrative LoNo drinks sector. According to estimates by Nomura Holdings, China’s low-alcohol drinks market is expected to reach RMB 250 billion (US$36.9 billion) by 2035.

But the scandal doesn’t seem to phase the influencer. Her company recently released a box-packaged mojito, as part of her daily drinking beverage series. In 2021, her company received close to RMB 10 million (US$1.47 million) in series A funding, the latest round of investment after RMB 15 million (US$2.2 million) raised in 2017.