Insight - Danone Waters eyes growth in emerging markets

French beverage firm Danone Waters said it will leverage its position in emerging markets in 2010 as volume growth in 2009 was entirely driven by those countries.

The firm today (11 February) reported a drop in full-year sales to EUR2.58bn (US$3.54bn) for the 12 months to the end of December, from EUR2.87bn in the previous year. On a like-for-like basis, sales rose by 1% for the year.

The producer of Evian and Volvic bottled waters saw fourth quarter sales increase by 3.8% on a like-for-like basis. Growth in underlying volumes continued to be strong at 7.6% for the quarter, which were partly offset by a negative value effect of -3.8%.

Volume growth, however, continued to be entirely driven by the emerging markets - accounting for 52% of the division's sales - with continued strong performances in Indonesia, Mexico and Argentina.

Speaking with analysts at the firm’s earnings conference this morning, Franck Riboud, Danone's chairman and CEO, said: “Everybody was saying in the last two years that water is dead, except this year, good news, the seasonality was ok. Seasonality is part of the characteristic of the water business as with all beverage businesses.

“Obviously now we have a very nice vision because we just inverse the equation,” he added. “Margins are better in the emerging markets where we grew double digit.

“It means we just focus on emerging countries, and we have different tools. Obviously we have Mexico, we have Indonesia, we have China. In Brazil in the region of San Paulo we are now leading the market. We tested the same concept in Poland and we tested the same concept in China. So we are going to leverage this positioning in emerging countries, but every time we find a solution to stabilise in a major market, we increase the leverage on the growth we have in the emerging country. So we will continue to drive both emerging and major ones.”

For the whole group, Danone booked an increase in full-year profits but said it will continue to face a “challenging” financial and economic environment in 2010.

For the 12-month period, underlying net income reached EUR1.14bn (US$1.55bn), a 7.5% increase on 2008.

Sales however, dropped by 1.6% to EUR14.98bn. Excluding the impact of currency exchange, total sales increased by 3.2% on a like-for-like basis.

Riboud told analysts he was “confident” that if Danone continues what it is currently doing, 2010 will be a good year for the company.

“With huge pressure I’m not saying it is going to be easy, I think we controlled 2009 better than we expected. But I am confident on 2010,” he said.