While investors in giant tech companies worry about the changing regulatory stance of the Chinese government, it's worth remembering that even small things can lead to big swings in both market value and brand image.
Such as a single cockroach.
That's the situation Nayuki, a milk tea brand, finds itself in today (August 3) following a report by a Xinhua reporter who went undercover to work in two of the brand's shops in Beijing. The reporter's account of the experience includes a cockroach sighting, as well as rotting fruit, unwashed rags and false expiration dates on products. The report states that a manager's response to the insect issue was "don't worry about it".
A Xinhua-branded video recounting the incident—set to ominous music—has gone viral on China's Twitter-like social network Weibo.
The brand's Hong Kong-listed China holding company, Nayuki Holdings Limited, lost as much as 9% of its value in trading this morning, which equates to nearly US$200 million in value, based on the company's market capitalisation.
The brand has issued a statement in response (translation by Campaign Asia-Pacific):
On August 2, the media reported that there were "cockroaches on the floor", "blackened mangoes" and "wrong production label" and other problems in the Nayuki Tea Beijing Xidan Joy City store and Chang'an Mall store. The company's management took the matter very seriously and set up a special task force overnight to investigate and rectify the problems at the stores involved.
Quality has always been our lifeline and we apologise for this incident! We are very sorry for disappointing all of you who love Nayuki! The most important thing for us now is to quickly find the problem, develop a solution and rectify it quickly. The two stores involved in this incident will be suspended today [Tuesday], while we will invite the Market Supervision Authority to inspect the stores and announce the results of the inspection as soon as possible.
The Shenzhen-based brand has had a rough ride over the last couple months. In June, the consensus was that its IPO "flopped".