The Russian fruit juice and dairy company, Wimm-Bill-Dann (WBD), says it is planning to make acquisitions in the bottled water sector this year because the company is suffering from severe competition in its core fruit juice market.
“We plan to buy one or several water companies, introduce another (mineral water) brand in a lower-end market and see positive returns by 2005,” said WBD’s CEO, Sergei Plastinin. “Profit margins are higher in water business than in juice or dairy.”
The company already operates in the bottled water sector and most recently invested some US$7m in a mineral water plant in the Novgorod region and launched the Sanctuary brand which is expected to reach volumes of around 80m litres by the year end.
The announcement of WBD’s plans for its water business follow the publication of its annual GAAP results which disappointed analysts. The company’s net profit rose from US$31.8m to US$35.7m but still came in considerably below the US$43.3m which analysts had been forecasting. The disappointing performance was attributed to competition in the juice sector.
“Net income was affected mostly by strong competitive pressures on juice pricing and increased selling and distribution expenses as the company continued to carry out its long-term regional expansion programme,” the company said. “The regional expansion programme has led to an increase in selling and distribution costs, particularly in advertising and personnel.”
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