China: ripping off Wisconsin ginseng

PITTSBURGH — In the United States, Wisconsin is known as the cheese state. Dairy cows roam and license plates say “America’s Dairyland” — only fitting given that it produced 2.6 billion pounds of cheese last year.

But in the shadow of Big Cheese, there lies the lesser-known market for ginseng.

Though marketed as an exotic Asian root that can be used as a supplement to wake you up, whip you into shape, even woo the ladies — ginseng actually comes in many forms and has different properties, depending on what hemisphere it is grown in and if it is wild or cultivated.

Outside of Asia (particularly Korea, northern China and parts of Siberia), North America is the only place where the difficult crop, which thrives in cooler climes, has been able to grow. Hel-lo Wisconsin.

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Wisconsin accounts for 95 percent of the cultivated ginseng in America, which is about 10 percent of world production. It is estimated that some 700,000 dried pounds of ginseng are produced in Wisconsin annually.

But, like coals to Newcastle, most of the ginseng grown in Wisconsin is exported to China and Hong Kong, where the demand is strongest. Typically, according to Wisconsin growers, 85 percent of the crop is exported.

The reason is because American ginseng — both cultivated and wild — is prized in China and other Asian countries for its taste, potency, and ability to address conditions such as stress and fatigue. Buyers there insist American ginseng is superior for its ability to cool and soothe the body while Asian varieties are thought to be “hot” and stimulating.

For the past 100 years, Wisconsin growers have been catering to this market with cultivated ginseng, a crop that takes patience, the right growing conditions, and man-made shelter from harsh weather conditions. For their pains, Wisconsin’s exports have been valued at more than $13.6 million.

Faking It: "Made in Wisconsin"

But China isn't known for passing up a business opportunity. According to the Wisconsin Ginseng Board, which represents some 150 growers in the state, their hard-earned crops were being ripped off overseas. On trade expeditions overseas, Wisconsin growers suddenly were seeing foreign-produced ginseng labeled as “Made in Wisconsin.”

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And they aren't about to let that happen. Farmers who cultivate ginseng in Wisconsin now are taking aim at ginseng counterfeiting in China and other marketing problems with a little-noticed regulatory move at the U.S. Department of Agriculture.

The Wisconsin Ginseng Board is pushing U.S. regulators to revise a 2004 federal quality standard that now determines the grades and quality of its crop. By more clearly specifying the unique characteristics of their crop and grading it, much as fruits and meats are in the U.S., they hope to keep prices up and foreign counterfeiting down. The new standard should make it easier to spot pirated ginseng and protect the price premium that Wisconsin ginseng normally commands.

Butch Weege, who directs international marketing for the Wisconsin Ginseng Board, has grown and sold the root for 28 years. Every fall, Chinese buyers used to come to his farm in Marathon County, Wisc., to touch, taste and feel the roots before buying.

It was a good gig because the export market was so lucrative. A dozen years ago, before these problems cropped up, there were 1,400 Wisconsin farmers raising about 2.4 million pounds of the ginseng.

To hear Weege tell it, the bubble burst when Canada entered the market around 2000. That year, the root, which had once sold in the high $40-range per pound, dipped to $8 to $10 per pound.

The combination of too much supply and the counterfeiting of cultivated Wisconsin ginseng finally compelled growers to search for ways to protect their market.

On a trade mission in China in 2004, Weege spotted the Wisconsin ginseng trademark — red, white and blue flag — on bottles that clearly were not from Wisconsin. Just as Prada shoes and Louis Vuitton handbags get copied, imposter Wisconsin ginseng was being sold in China with alarming frequency.

Fighting Back Means Bouncing Back

It was time to fight back. The growers began filing lawsuits for trademark infringement. They established distributorships in China and Taiwan with reputable, well-known companies. To serve U.S. markets, distributors were also put in Los Angles and New York.

The growers, who went after some 40 retailers and pharmaceutical companies, said the objective was not to make a profit but to restore the credibility of their brand and clean up the market.

Weege said the Chinese government was “incredibly supportive” and officials from China’s State Administration for Industry and Commerce in Beijing met with growers, offering their help.

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On the home front, growers asked the U.S. government to set quality standards for cultivated Wisconsin ginseng so farmers would not be at the mercy of Chinese buyers who had their own standards and price points.

In 2007, the crop was designated Premium, Select, Medium or Standard. “Now when an Asian buyer walks through the door, the product is pre-graded to our standards. It has leveled the playing field,” said Weege.

Now the board decided it's time to upgrade the existing standard. The Asian market was making noises that it wanted more choices, and as a result, a new standard under consideration would expand the current four grades of ginseng to seven, based on quality of the roots and the percentage of defects. Taken into account will be size, color, texture, length and defects like decay.

Dave Horner, a standardization and training specialist for the USDA’s Agricultural Marketing Service, has been working with the industry since 2009. He said he doesn’t expect much in the way of objections to the proposal, meaning the new standard could be in place before the end of the year.

Already, Wegee said, the crop has bounced back from lows in 2000, and farmers have been fetching $40-$60 a pound.

Ginseng isn't likely to transform the cheese state, but with any luck, the herbaceous root may have another heyday in Wisconsin with higher prices and stronger trademark protection.

As for Wegee, he’s a believer in the Wisconsin brand alone. “I’ve taken a capsule day for 30 years,’ he said.