Representing 7% of the business of Danone in 2014, China is ranked fourth among the countries where the group makes its biggest sales. Danone settled in China in 1987 and today it owns 18 factories and has more than 10 000 employees in the Empire of the Middle. Its main branches on the territory are in order of importance waters, child nutrition, medical nutrition and dairy products.
Adapt to the local market
Develop the product lines the Chinese consumers need
When one hears Danone, he thinks yogurt. And it is with its yogurt that Danone first launched its brand on the Chinese market in the 80’s. Even if the consumption of yogurts has been growing significantly since the 90’s, it’s a fact that dairy products are not part of the Asian tradition. Chinese people eat on average 25 times less yogurts per capita than French people. That’s why the brand decided to diversify its activity and to focus on three main branches:
– Child nutrition
First, water, because tap water in China is not drinkable. Then child nutrition because after the numerous food insecurity scandals concerning local products, Chinese parents were turning to foreign products to make sure that what they fed their child was safe. And finally biscuits because the demand for this kind of western product had been growing since the country opened up to the world in the late 80’s and even more recently with a growing middle class.
In every of its product ranges Danone worked diligently at adapting to a criteria that Chinese consumers are quite sensitive to: health benefits. The brand has been trying to improve the composition of the product aimed for Chinese market and the nutritional assets are always highlighted on the packaging. Though, the Prince biscuits has been enriched in iron and among its dairy products, Actimel and Activia are the most successful, with commercials emphasizing their benefits for the health.
Today, Evian, Badoit, Dumex, Nutrilon, Activia and Nutricia are as many brands owned by Danone and which have become very successful in China thanks to that strategy.
Extend the range of products
Danone also adopted a multi-brand strategy in order to meet the domestic demand. Indeed, multiplying the brands on the same range of products allows the group to conceal the different networks and to offer a wider range of prices.
Danone especially focused on child nutrition, a market on which it has become number one with Dumex, a brand it acquired in 2007. The group also develops its international brands such as Aptamil, Karicare, Cow & Gate and Nutrilion, in particular with Nutrilion Platinium which has been specially developed for the Chinese market.
Not only has the products to adapt to the need and habits of the local customers, but the image of the brand also has to and the marketing strategy should by decided according to the cultural sensibilities.
Developing an image for the brand is important in order for it to be distinguishable and acknowledged by the customers. Branding is a sticking point in China, and this aspect is vital when it comes to settling on the Chinese market.
For Danone, the identity of the brand first lies in its name, Da Non, which means “develop the abilities” in Chinese.
As said earlier, Chinese people are especially sensitive to the medical effects that some alimentary products can have. Though the branding of the group in China was developed around this idea that its products are good for the health，and the strategy is built on the idea that the mission of the brand is to provide people with healthy food. The group launched lobbying action and surveys were conducted to show that the population suffers from deficit in calcium and vitamins. Following this survey, the government insisted on the fact that Chinese citizens have to drink and eat more dairy products. Danone also benefited from a national campaign asking for women to feed their children from powder baby food instead of giving them their own milk. Concerning water, Chinese people barely drink it raw, boiling tap water to make the tea that they use to drink all day long. But Danone insisted on the fact that making tea from its bottled water would bring to it much more nutritional proprieties.
The green touch!
Danone is also using the growing awareness about the need for eco-friendly habits. Indeed, China is currently facing major environmental issues and pollution issues that the government is trying to solve with its new green policy. The brand is claiming its support to this efforts to protect the environment with the Eco Longmen Project. This projects aims to restore the hydrographic basin of Jiaquan in Longmen Country by…
If you want to know more about the Eco Longmen Project, click here.
The expanding strategy of the brand not only consists in acquisition of other brands, but also in the development of partnership with some influent local players.
First with Wahaha
The group established in the first place a key partnership with Wahaha. Back then the CEO of this very influent Chinese company was Zong Qinghou, leader on the Chinese beverage market. Danone bought 51% of Wahaha shares in 1996, promises to let Mr Zong lead it. This last was a member of the parliament of Beijing, with very good guanxis (professional network), as any good Chinese businessman, and largely contributed to the comprehension of Chinese market Danone. But the group finally sale its Wahah shares in 2009, after 2 years of legal dispute.
Today with Yahili
Recently Danone initiated a new major partnership with one of the main actors on the field of baby food: Yashili.
Once the agreement, Danone and Mengniu, the current majority shareholder of Yashili possess respectively 25 and 51% stake in the company. Danone brings its international expertise, Mengniu his knowledge of the Chinese market. This new partnership follows the agreement reached in 2013 between Mengniu and COFCO Danone, public company leading the food industry in China.
Yashili is unfortunately a victim like the others slowdown powdered milk market and it may take some time and work to achieve communication pushed back on track …
Online presence and online reputation
Chinese consumers are highly connected. They control everything online and use social networks daily surlesquels they share their opinions about the products they consume. In China more than any art also is on the Internet that makes the reputation done. Any brand which wishes to establish itself in the Chinese market should give special attention to its e-reputation and its marketing strategy to include in an effective e-marketing.
Danone has understood and intends to invest in this area to better reach Chinese consumers have a better control over its image and develop e-commerce that is booming in the Middle Kingdom. A better presence on Chinese networks like Weibo, QQ, and WeChat makes it possible to mitigate the impact of bad buzz prompted by scandals such as the one experienced in 2008 with the Fonterra deal …
Even if Danone had to face some difficulties when it launched on the Chinese market, it managed to overcome them and make its implantation in the Empire of the middle successful. And this success is the result of a good strategy based on 4 key aspects:
- An offer adapted to the demand of the Chinese market
- An image of the brand adapted to the sensibility of Chinese consumers
- Key partnerships with influential local players