just On Call: Danone to quench Brazil's thirst for bottled water
- Bonafont subsidiary to expand in Brazil
- Mexico showing strong growth
- Plans to grow dairy drinks sales in US
Danone's Bonafont sets sights on Brazil
Danone has identified Latin America as a strong emerging market for bottled water and is seeking to gain a greater foothold in Brazil.
Danone's subsidiary, Bonafont, has risen to lead the bottled water market in Sao Paulo only two-and-a-half years since launching there. After using the city as a testing ground, the firm is now ready to expand its reach in the country.
"We will go to the north-east [of Brazil] as soon as possible," Danone's CEO, Franck Riboud, told analysts at the Barclays Back-To-School Conference in Boston today (8 September).
Brazil is a key market in Danone's strategy to grow global sales of bottled water and compensate for saturated demand in much of Western Europe. Brazil's per capita consumption of bottled water was 42 litres in 2008, compared to 142 litres in Danone's native France, according to Zenith International figures.
Bonafont has already shown that it is capable of rapid expansion by rising to lead the bottled water sector in its home country of Mexico in the last two years.
The unit's domestic volume sales have risen by 22% per year since 2006 and it leads the market with a volume share of 26%. In value terms, Bonafont has a 35% share of Mexico's EUR1.4bn annual water sales, around 10% ahead of its nearest rival.
While Mexico has a high per capita mineral water consumption, of 145 litres, only 15% of market volume is bottled water, which presents an opportunity for international players like Danone.
Emerging markets have consistently driven sales growth for Danone's water division in recent years. Net sales at the business rose by 5% in the first half of 2010 and water has almost doubled its contribution to Danone's annual sales, from a contribution of one tenth in 1996 to 17% in 2009.
Riboud said that he was confident that Danone can continue to grow in all markets, despite the economic malaise. "If I look at Danone, I am 150% optimistic," he told analysts.
He added that the group will seek to grow its dairy drinks business, including drinkable yoghurt, in the US over the next year. He said that the firm would enter a "tactical" private-label deal with Wal-Mart in order to foster demand in the category as a whole.
"I'm sure that the situation will never arrive when the US population cannot afford to buy a yoghurt," he said.
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