Investment

Danone on the prowl for local water brands

By Qiu Quanlin (China Daily)
Updated: 2010-09-03 14:58

HUIZHOU, Guangdong - French food and beverage manufacturer Danone is on the lookout to acquire local water brands as it streamlines its focus on the mineral water segment to meet robust demand, said Jacques Ponty, general manager of Danone Waters China.

A customer chooses bottled water at a supermarket in Beijing. Sha Lang / for China Daily

"It is possible to buy local water brands if the sources are good enough for us to make safe and healthy water products," he said.

Ponty's remarks came following the start of two new production lines at Danone's plant in Longmen, Huizhou, Guangdong province, on Tuesday.

The plant, with a total investment of up to 500 million yuan ($73.4 million), produces mineral water under the Health brand. It's currently a market leader in southern China.

"We are very confident in the Chinese water market. If we have a very good performance of business after the operation of the Longmen plant, we will have more investment or acquire other brands to expand our business in China," Thomas Kunz, president of Danone Waters Worldwide, told China Daily.

The Longmen plant will become one of Danone's most important production bases of mineral water after the project is projected to be completed within the next three to five years. The plant is designed to have an annual production capacity of 550,000 tons of water, or twice the existing production volume.

In China alone, Danone has a diversified product portfolio that includes fresh dairy products, water, baby nutrition and medical nutrition.

Danone ended its working relationship with some of its Chinese counterparts when it set up its water division headquarters in Guangzhou in 1998. This was part of the company's strategy to shift its focus on water division, especially mineral water.

Guangzhou-based Danone Waters China has 23 plants in China, with its major brands including Health, Mizone, Robust and Aquarius.

Its sale revenue reached 2 billion yuan in the Chinese market last year, with the Health brand achieving a steady year-on-year growth of up to 30 percent, the company's sources said.

Following the operation of Longmen plant, Danone has forged a strategy to produce water mainly in southern China while making dairy products in northern China.

Danone reached an amicable settlement with Chinese drink-making giant Wahaha Group a year ago, with both sides agreeing to conclude their joint venture relationship.

The French company agreed to sell its 51 percent stake in the Danone-Wahaha joint venture to its Chinese partners, according to media reports.

Danone established its joint venture with the Hangzhou-based beverage giant in 1996 to produce bottled water, tea and juices under the Wahaha brand.

Danone also offered its 22.98 percent stake in China's Huiyuan Juice Group to Hong Kong-based SAIF Partners after the two finalized an agreement worth 200 million euros in July, media reports said.

China Daily