‘A joint venture with Colgate was my biggest mistake’

By Phuong Dong   May 8, 2019 | 08:07 am GMT+7
Da Lan toothpaste founder says he was duped by Colgate into a venture that annihilated his brand instead of boosting it.

Trinh Thanh Nhon, in his sixties, is a man in a hurry.

Trinh Thanh Nhon created the Da Lan toothpaste. Photo by VnExpress/Anh Nguyen

Trinh Thanh Nhon created the Da Lan toothpaste. Photo by VnExpress/Anh Nguyen

Nhon, who created the Da Lan toothpaste, is now working hard to realize his dream of restoring the brand he lost two decades ago. At his factory in Binh Duong Province’s Dong An Industrial Park, he walks quickly between production zones, observing employees transport goods, adjust machinery and do other things.

How it began

The Da Lan toothpaste was created by Nhon's Sonhai Cosmetics Company in 1988. From his five-story factory in Ho Chi Minh City's District 6, the product quickly conquered the Vietnamese market and by the early 1990s, Da Lan had become a household name, earning significant profits for Nhon.

With a market share of 70 percent, Da Lan soon became a much-desired partner for the flood of foreign companies that were trying to enter Vietnam following the opening up of the country's economy at the time, including multinational giants like Colgate-Palmolive, Unilever and Procter & Gamble (P&G).

While initially apathetic to the idea of forming joint ventures, Nhon changed his mind after hearing from others in the business that no domestic brand could survive once P&G and Unilever entered Vietnam. 

Partnering with Colgate suddenly seemed like a great way for Da Lan to survive that storm. 

Colgate persuaded Nhon that if they were to form a joint venture, the Da Lan brand could develop even further and with U.S. technology, Da Lan toothpaste could be exported to Thailand and other neighboring countries.

Nhon and Colgate eventually formed a joint venture in 1995, which the latter valued at $3.2 million. Under the contract, Nhon held a 30 percent stake in the company and served as its deputy general director with his own office and an after-tax annual salary of $99,000.

The Da Lan toothpaste was created by Nhons Sonhai Cosmetics Company in 1988. Photo by VnExpress/Anh Nguyen

The Da Lan toothpaste was created by Nhon's Sonhai Cosmetics Company in 1988. Photo by VnExpress/Anh Nguyen

However, less than a year later, Colgate claimed that Da Lan products were causing the joint venture to lose money and needed to be replaced by their own brand of toothpaste, a decision Nhon unsuccessfully fought because he only held a minority stake in the company.

In 1998, after many stressful rounds of negotiations and with the threat of bankruptcy hanging over the joint venture, Nhon agreed to sell all of his shares in the company to Colgate for $5 million, withdraw from the company with all of his employees, and to not participate in the industry for the next five years.

A sad day

Nhon told VnExpress that the day he inked the deal to withdraw from the joint venture was a sad day in his life, as he witnessed the brand he had built go from a 70 percent market share down to zero.

While it was in fact a profitable decision to sell a brand for $5 million in 1998, his sadness came from having to abandon a brand that had accompanied him through years of hardship as a businessman.

"I can say that forming a joint venture with Colgate was the greatest mistake in my life. This mistake happened because of many things, including the fear of Vietnamese businesses when faced with waves of foreign investment and their ignorance and inability to know the tricks employed in the formation of joint ventures," he said.

"If I had known that they had so many tricks and would kick me out after three years, this joint venture would never have existed."

Out of sight, but not out of mind

Years after Da Lan toothpaste disappeared from the market, many people Nhon met still spoke fondly of the product. 

His survey of customers in the north also found that most people over 40 years old had used Da Lan toothpaste before, and even younger people knew of the brand through news articles on the brand's acquisition by Colgate.

Using this information, Nhon, now general director of the International Cosmetic Company (ICC), registered a trademark for Da Lan and reintroduced it to the market in 2009 with the dream of reviving his long lost creation.

After a decade, Da Lan has now climbed back up to become the fourth largest brand in Vietnam's toothpaste market, and with perseverance, it could even climb up to third thanks to having a wider distribution market than its direct competitor, Nhon said.

He admitted that the gap between Da Lan and Unilever's P/S, which is currently the leading toothpaste brand in Vietnam, was too large for him to hope to catch up, because toothpaste was a product that customers bought based on brand recognition rather than market price. 

Most people over 40 years old had used Da Lan toothpaste before. Photo by VnExpress/Anh Nguyen

Most people over 40 years old had used Da Lan toothpaste before. Photo by VnExpress/Anh Nguyen

This made it difficult to launch promotion programs that could effectively increase the product’s market share. 

But, asserted Nhon, the second place in the market, currently held by Colgate, is within Da Lan's reach as he understands how the brand works, thanks to the joint venture experience. Furthermore, both brands have similar sales in some markets.

"My target is to overtake [Colgate] in three years at the latest."

As of now, Da Lan still uses direct distribution channels to take its products to customers, with a network of 70 distributors and a sales team with hundreds of employees. 

The company also participates in programs to bring products to rural areas and in price stabilization schemes.

It’s all about the brand

In a market dominated heavily by Unilever and Colgate-Palmolive, ICC has not earned any profit from Da Lan since 2011. 

Nhon, however, insisted that his company could still hang on till the day he could make a turning point similar to the hugely successful northward market expansion he had made 30 years ago.

"In business, if you want to make profits immediately, there is only trade or real estate. I have invested in production, in building a brand that others had discarded, so you can't demand it to make profits overnight," he said.

Despite being in his sixties, Nhon stressed that he was still working hard to make Da Lan a success so that when he finally steps down, he would be handing over to his children a successful company rather than a struggling one. 

Most importantly, the Da Lan brand is more valuable than any profit, he said.

"After over 43 years in the industry, when money is no longer the top priority, I have one immovable wish - to not let the Da Lan brand be lost at any cost. Fate has given it to me and I will definitely be with it till the end of my life."

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