COMMENT: Danone still in troubled waters
Danone's bottled water division emerged as the group's achilles heel in 2008, with some analysts suggesting the French giant would consider off-loading some of the business if it could.
A largely healthy set of full-year numbers for the French group in 2008, announced this week and spearheaded by a 15% rise in net profit, was spoiled by a poor performance in water across western Europe and North America.
Sales in Danone's bottled water division, which includes Evian and Volvic, fell by 1.5% in the fourth quarter, reported the firm, adding that the drop reflected "the trend for the year". Operating margins in water also declined during 2008, down nearly 1%.
Annual water sales are now in danger of being overtaken by Danone's infant nutrition business, in terms of their contribution to full-year revenue. Nutrition sales are also rising in double-digits and yield more profit.
It is these things, together with fears of a permanent bottled water market decline in France, that this week led one Paris-based analyst to suggest that Danone might want to get rid.
Cedric Lecable, at Kepler Capital Markets, said: "My perception is that if they could dispose of the Western European bottled water business they would probably do it."
He said he was sceptical about how feasible a disposal might be, however: "The problem is finding an acquirer. The big US guys would not want it in my view. They want to be in fast-growing niches to offset the structural decline of cola in the US."
Independent analyst James Amoroso also sees structural decline in France, plus serious problems with environmental groups damaging water sales in the UK and US.
However, he told just-drinks this week that Danone is not a company "to throw in the towel so quickly".
He said: "Danone is not averse to disposing of businesses that have been in the group for many, many years, as biscuits proves, as well as the major disposals when Franck Riboud came to power in the 90s. But it would be folly to sell water just because there have been a couple of difficult quarters.
"After all," he added, "bottled water is still pretty profitable and in many european countries per capita consumption still has a long way to go".
Instead of disposals, Danone may look to ramp up its presence in emerging markets, possibly at the expense of operations in mature countries like France. Danone said this week that emerging markets accounted for 51% of the group's water sales in 2008, with Indonesia, Mexico and Argentina the top performers.
The economic downturn could not have come at a worse time for the bottled water industry. Not only is the category battling to win the consumer's pennies and cents, but it has also had to battle again...
The US has Budweiser, the so-called King of Beers. Soon Japan may have a Godzilla. Kirin, the country's biggest maker of suds, is mulling a merger with family-owned drinks maker Suntory, according to ...
Today (15 July) is known as St Swithin's Day in the UK. According to folklore, if it rains on St Swithin's Day it will rain for the next 40 days in succession.* The British are, of course, fixated by ...
Environmental concerns have climbed steadily up the agenda for soft drinks producers in recent years. However, Annette Farr writes, progress has been faster in the UK than in the US....
Danone has reported rises in net sales and profits for the first half of 2009, with bottled water sales recovering some lost ground in the second quarter....
Nestle Waters has confirmed it is eyeing acquisitions in emerging markets in a bid to improve its sales performance....
Danone Waters is to open a distribution centre at the northwest German Port of Duisburg to handle its Volvic and Evian brands....
Frucor Beverages, the Australasian drinks group owned by Japan's Suntory, has signed a deal to acquire New Zealand fruit drinks firm Simply Squeezed Holdings....
- Spirits - Where does 'Craft' End and 'Mass' Begin?
- Brewers go Crazy over Flavoured Malt “Cocktails”
- Mike’s Hard Lemonade Could Be a Hard Sell
- just The Preview - Anheuser-Busch InBev's Q4 & FY
- Focus - Suntory Holdings' FY Performance
- Diageo "smart bottle" targets consumers at home
- Suntory whiskey seeks to "eclipse" Diageo, Pernod
- Tesco reinstates Dan Jago following suspension
- Diageo adds Dubai to Johnnie Walker skyline series
- Asahi Beverages CEO to step down - report
- Global non-Scotch whiskies insights - market forecasts, product innovation and consumer trends research
- Wine, 2014 and the future
- Spirits and RTDs, 2014 and the future
- Global RTD/RTS insights - market forecasts, product innovation and consumer trends research
- Beam Suntory Inc. - Strategy and SWOT Report