ASIA – The French food corporative, Danone has ended operations at its Danone-Yili Beverage Company factory located in Huizhou to cope up with the changing trading conditions in the market.
The company had ended the manufacturing and sales of its Yili bottled mineral water in China as a business restructuring strategy that will ensure its business remains profitable.
People working at the factory will be facing contract termination or would be reassigned to other vacancies available in Danone China, according to Danone-Yili Beverage Company.
It however stated that it continues with its gallon bottled water business in China.
“In order to adjust to the rapidly changing local market, materialise sustainable development for the company, Danone China Beverage has assessed its business development strategies, and has decided to restructure the business, ending the manufacturing and sales of bottled Yili mineral water,” said the company.
Market competition and saturation
Danone is feeling pressure in the Chinese market dominated by six bottled mineral water brands, including Nongfu Spring, Master Kong, Wahaha, Ganten, C’estbon, and Ice Dew from Coca-Cola.
According to Beijing Business Today, home-grown Ganten is the fastest growing brand, garnering 9.6% of the market share, trailing only hot-favourites Nongfu Spring (26.4%) and C’estbon (20.9%), as of June last year.
The market is already saturated, something in addition to increased competition, is impeding growth of mineral water business.
A Mintel report however suggests there are opportunities for growth especially in the premium product category.
“With more Chinese consumers drinking bottled water, brands are under pressure to differentiate themselves from rivals.
Despite a saturated market, innovation opportunities still exist, and premiumisation remains key for value market growth,” said the report.
In 2016, Danone scaled down China operations by selling Robust purified water brand and related operations to a local company.
The company said it was part of strategy to adopt a more-focused approach on natural mineral water.