Chinese water company expands into new product lines

BEIJING (AP) - China's largest beverage company is venturing into the consumer goods market, expanding its brand into new areas such as children's clothing and personal-care products - and moving into other Asian countries as well. 

Hangzhou Wahaha Group Co. Chairman Zong Qinghou said Wahaha - one of China's most ubiquitous and intriguingly named brands of bottled water - is also planning to open drinks factories in Indonesia and Thailand, probably next year. 

"I want to make this company big and strong, and I see that the big companies in the world all have diversified operations,'' Zong said in a weekend meeting with reporters. 

Zong has been in Beijing to participate in the annual meeting of the National People's Congress, China's legislature. 

He is a member of the delegation from southern China's Zhejiang province, where Wahaha is based. 

"For fast-moving consumer goods, the sales channels and sales methods are all pretty much the same,'' he said. 

"There still isn't a strong brand of children's clothing in China,'' Zong said. 

While China is a major maker and exporter of textiles and clothing, he said, most of that is done under contract for foreign companies. 

Zong's strategy fits closely with Premier Zhu Rongji's exhortation to Chinese business leaders to create internationally known brands. 

Wahaha launched its children's clothing business in the second half of 2002, opening 800 stores under its own name. 

Zong said those outlets have already registered about 100 million yuan in sales. 

The privately held company made an after-tax profit of 1.2 billion yuan (US$145 million) last year, up 32 percent from 2001. 

By 2005, Wahaha hopes to make an annual after-tax profit of 2.7 billion yuan (US$327 million). 

Last year, the company produced 16 percent of China's total output. 

While the company's bottled water and other drinks are ubiquitous in China, Wahaha is probably best known outside the country as the local partner of French dairy-products company Groupe Danone. 

The two companies began their relationship in 1996, when Danone invested $43 million to take partial stakes in five Wahaha plants. 

Zong said Danone made back its investment in just over two years, and the two companies now have more than 20 jointly owned facilities. - AP 

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