Danone pushes water arm

Key brands affected by the shift are Aqua, Mizone and Yili. The former is the Indonesian market-leading mineral water that was previously handled by three-year incumbent Saatchi & Saatchi. Mizone, meanwhile, is a sports water brand available in both Indonesia and China; it launched in the mainland in 2003 and sold 270 million litres in its first year.

Meanwhile, Yili is a mainland water brand that Danone produces via a joint venture with Shenzhen Yili.

However, it seems unlikely that the alignment will include the water brands that fall under the embattled Danone-Wahaha joint venture, specifically the Wahaha Purified Water brand which is considered the market leader. The product has a 23 per cent market share.

Over the past 18 months, the Danone-Wahaha partnership, once held up as an example of a successful multinational company engagement in China, has unravelled; earlier this month a Chinese court rejected a key appeal by Danone, affirming that the French company did not own the Wahaha trademark.

Danone owns 51 per cent of a series of joint ventures with Wahaha, but has accused the Chinese company of setting up outside businesses to sell competing Wahaha-branded products. “The Wahaha water brand seems to be under the management of Wahaha now,” said a source familiar with the situation.

Accordingly, Y&R is expected to begin work on Yili and Mizone.

Danone’s other well-known water brand - Evian - remains with global incumbent Euro RSCG.

Danone also sells other bottled water brands in China via  ventures with Guangzhou’s Robust and Shanghai’s Aquarius, although these too do not fall under the scope of Y&R’s contract with Danone.

Market sources, meanwhile, have indicated that these joint ventures may now face resistance from the Chinese partners because of the Wahaha experience.

An editorial in China’s People’s Daily Online has called on all of Danone’s Chinese joint venture partners to “follow Wahaha’s example to sue the ‘hegemonic’ Danone before they are finally swallowed up by Danone.”

Further brands are expected to be added to Y&R’s portfolio from Japan. Other brands included as part of the realignment are Bonnafont in Mexico, Ser, Villa del Sur and Villavencio in Argentina, Lanjaron and Fontvella in Spain, Ziwiecz in Poland, and Hayet in Turkey, Algeria and Brazil.

It is understood that Y&R already services the firm’s Volvic account in Europe.

Danone’s first-half 2008 results revealed double-digit sales growth for its water business in Asia, thanks largely to Indonesia, offsetting weaker demand in other global regions. Total water sales rose by almost three per cent globally.