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People's Daily Online>>China Business

Quality issues haunt int'l brands

(Global Times)

08:44, December 15, 2011

High-end international brands should focus more on quality control and not just on revenue, in order to maintain their image and profitability in the rapidly growing Chinese market, an expert said on Wednesday.

"It's time for Fortune 500 companies to change their strategy for the Chinese market by paying more attention to the entire production chain including logistics and warehousing, rather than merely focusing on making profit," Gao Jianfeng, managing director of Shanghai-based BOGO Consultants, told the Global Times.

His remarks came in the wake of a string of food safety scandals involving large multinationals.

In the latest such incident, Evian bottled water was recently blacklisted by the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) for containing excessive amount of nitrite.

Evian brand is owned by Danone SA, France's largest food manufacturer.

The mineral water imported from France was destroyed after tests found too much nitrite content in the water, which Chinese officials said may increase the risk of cancer, AQSIQ said in a statement on its website.

This is not the first time that Evian bottled water was exposed to quality problems. In the last six years, the brand has failed quality tests by the Chinese authorities for five times.

In a statement e-mailed to the Global Times, Evian said, "All of the batches of Evian water that we have imported into China so far this year have passed the AQSIQ test."

The company said it is investigating into the issue to understand why the situation has occurred.

Evian bottled water is marketed as a high-end brand in China, and costs much more than the domestic brands.

One 500ml Evian bottled water, which costs no more than 0.5 euros ($0.65) in France, is sold in Chinese stores at around 10 yuan ($1.6), about 10 times higher than the price of local brands.

The success of Evian bottled water in China and the huge profit margin in this market segment have lured a number of local food companies to the market, including Alkaqua, Kunlunshan, and Alps.

The average profit margin of local ordinary brands is 3.85 percent but it is 20 percent for high-end brands, said Huang Zi'ai, a consultant at Shenzhen-based market researcher CI Consulting.

But the high-end mineral water has nothing unique in terms of production technique and its only selling point is the source of water.

"The contamination of the reported Evian water imports is probably caused by mishandling in packaging, warehousing or transportation. Such problems could be avoided if Evian tries to localize the process and make it easier to supervise," Gao said.

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