Lao Gan Ma, known for its range of addicting chili condiments, is likely off the hook for failing to pay advertising fees to Tencent (HKG: 0700) after Guiyang police nabbed three suspects on July 1 accused of impersonating the company.
The news caps the strange saga of the Chinese tech giant and chili sauce purveyor, which came to a head on Tuesday when reports revealed a Shenzhen local court ruled to freeze RMB 16.24 million (USD 2.3 million) worth of Lao Gan Ma’s assets in April. The freeze happened after Tencent accused the notoriously old-school firm (known for shying away from advertising) of owing tens of millions of yuan from a collaboration agreement.
But the Guizhou-based company denied having ever signed any contracts with Tencent. After the spicy China favorite tipped off the police on Monday, an investigation led to three people now suspected of signing the agreement using a forged stamp (widely used in China to verify agreements) to receive virtual gifts on their end of the deal, which they could resell for cash. The Guiyang local police department, which announced the news on Wednesday on WeChat, has detained the trio.
The news prompted lots of banter on Chinese social media platforms and, on an internal company site, Tencent employees made fun of the matter. “If we win the lawsuit, we accept chili sauce for the debt,” wrote one.
Lao Gan Ma was founded by street vendor Tao Huabi in 1996 and grew to gain worldwide fame owing to its thick and crunchy chili sauce. The brand’s jar, which features Tao on the front, can be found in almost all overseas Chinese supermarkets.
The company is well-known for traditionally avoiding advertising and capital markets. Its founder, who is now 73, reportedly said “a public offering is swindling money from others.”
In recent years, however, the company has been evolving its old-school business strategy, like many other traditional “Made-in-China” brands. In 2018, Lao Gan Ma showed up at New York Fashion Week, in a collaboration with Alibaba’s Tmall, following along with sports brand Li-Ning. A hoodie with Tao’s face above the words “Sauces Queen” made a runway appearance.