Danone-Yili Beverage Company announced that its Longmen factory located in Huizhou formally ended its operation on Jan 16.
The halt in operation came as a result of business restructuring to adapt to the changing market conditions, the firm said.
“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,” the company said in a statement.
Affected workers would be facing contract termination or would be reassigned to other vacancies available in Danone China.
The company will continue its gallon bottled water business in China.
Three years ago, Danone also gave up mineral water brand “Robust” – a Chinese home-grown brand which it had acquired in 2000.
Market saturation
At present, the bottled mineral water market in China is dominated by six brands, including Nongfu Spring, Master Kong, Wahaha, Ganten, C’estbon, and Ice Dew from Coca-Cola.
As of June last year, 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%), according to Beijing Business Today.
This happened against the backdrop of a highly saturated bottled mineral water market.
A Mintel report found said that “it was only a matter of time before market saturation starts to inhibit growth potential for bottled water brands, especially amidst intensified competition in the wider beverage market.”
However, the report also stated that there are opportunities for growth, which is especially so 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.”
Chinese venture facing backlash
Ganten had faced backlash from Australians for becoming the “official water” of Australia Open, an tennis tournament that takes place in Melbourne during January each year.
The Australians have complained that a home-grown water brand should have been chosen as the “official water” instead, which is especially so when the country is well-known for high safety standards for its food and beverage.
For instance, AusBev CEO Geoff Parker had told The Australian that he would prefer the opportunity to be used for promoting local brands to an international audience.
“It’s perplexing and incongruous that such an iconic Australian sporting event chooses to source its ‘official water’ from China, when there is a plethora of great-tasting, high-quality, safe bottled water brands available here,” he said.
“From an environmental perspective, there must be a question mark over the carbon footprint of Chinese water being bottled and packaged in China and imported.”
In fact, Tennis Australia had signed a four-year contract with Ganten last year.
In response to public dismay, Tennis Australia said in a statement that Australia Open is a global event with “a long history of partnering with international brands.”
“Ganten water is a premium brand that is associated with other major tennis and sporting events.
“The Australian Open continues to expand its global reach and partnerships, which helps to grow the sport at all levels in Australia,” it added.
