GLOBAL: Danone sees Wahaha hammer Q3 sales

Groupe Danone has seen the poor weather in Europe and its ongoing dispute in China take a huge chunk out of its third quarter sales.

The French company, which owns the Evian and Volvic water brands, said yesterday (16 October) that sales from its beverage unit in the three months to the end of September tumbled by 11.7% on the corresponding period a year earlier. This compared to a 0.9% lift in sales in the second quarter of this year.

Total group sales for the first nine months of 2007 rose by 4.4%, reaching EUR11.24bn (US$15.95bn). Beverage sales for the period were down by 1.1% to EUR3.1bn.

Franck Riboud, Danone's chairman and CEO, noted that the company's performance in the third quarter "was indeed impacted by the unusually poor weather conditions in Europe, and continues to be affected by our dispute with one of our partners at Wahaha".

The company has been in conflict with Hangzhou Wahaha Group in China for most of this year. The dispute dates back to April when Danone first alleged that Wahaha, led by the multimillionaire Zong Qinghou, had been illegally selling products identical to those sold by the companies' joint ventures. Danone filed a suit in Los Angeles seeking more than US$100m in compensation for the alleged illegal sales and has also filed for arbitration in Stockholm to help resolve the dispute.

The two sides remain locked in discussions to settle the row.

The French bottled water market declined by approximately 20% in value, Danone said, noting, however, that its brands had maintained share in the country. The rest of Western Europe saw similar trends with share gains in Spain, Belgium and Poland. Latin America maintained its superior sales growth achieving an uplift of 20%.

Quarter three sales results include EUR232m relating to the Wahaha business. "This figure is an estimate based on information available to the group," Danone said. "As a result of the dispute between the group and one of its partners in Wahaha, access by the group to financial information of this company remains constrained." Stripping Wahaha from this and last year's results still resulted in a slip in sales, by 3.3% for the beverage unit.

The company confirmed its full-year expectations of between 6% and 8% growth.