Danone sticks with Evian

In early 2009, some industry analysts were calling for Danone to sell off its struggling bottled water brands due to a serious drop in sales in mature markets (ie, Western Europe, Canada and the United States). Fast forward one year, and Danone's bottled water sales in these markets are still down having been hit very hard by the bottled water backlash.

Reporting yesterday on Danone's, the Financial Times paints an optimistic picture of the company's bottled water division citing a slight increase in sales overall in the third quarter of 2009. The overall growth was made possible through sales of the company's water products in the Global South where bottled water sales are booming while they continue to drop in the United States.

Danone's experience of developing markets pulling up their bottled water bootstraps should be the norm for the other three big global bottled water producers Nestlé, Coca Cola and PepsiCo, who will most likely see some marginal growth in their water sectors based on growing sales in the Global South.

What this all means of course, is that that these multinational corporations will use their brands of privatized water to exploit the continued crisis of access to clean, potable and publicly delivered tap water in the new major bottled water markets like India, China and Mexico.


Danone plans to retain its water brands
Jenny Wiggins in London and Scheherazade Daneshkhu in Paris
January 11, 2010
Financial Times

Danone, the owner of the Evian and Volvic bottled water brands, plans to stick with its water business in developed markets amid calls to sell it as sales recover slowly from an environmental backlash.

A sharp drop in bottled water sales in developed markets in 2008 and early 2009 led some financial analysts to argue that Danone should sell its bottled water brands - which account for about 18 per cent of total company sales - and focus on yoghurts and baby foods.

But Franck Riboud, Danone's chief executive, is understood to be committed to bottled water in developed markets because it fits with the French group's strategy of owning products with health benefits.

Water will also play an important part in Danone's strategy of switching from sales growth to volume growth - a strategy other consumer goods companies such as Unilever are also pursuing as it becomes harder to push through price rises to retailers.

Danone, along with other big bottled water producers such as Nestlé (owner of the Vittel, Perrier and Poland Spring brands) and PepsiCo (owner of the Aquafina brand), was hit hard by an environmental backlash against water bottled in plastic last year in the US and Europe. Consumers ditched branded bottled water brands for private label brands, soft drinks and tap water.

However, companies have responded to consumers' concerns by using more recycled plastic in their bottles - Nestlé has been trialling a brand in the US called Re-Source made with 25 per cent recycled plastic - leading sales to recover in some markets.

After reporting quarterly declines in underlying water sales in late 2008 and the first half of 2009, Danone's third-quarter underlying water sales rose 4.6 per cent, while volumes jumped 9.8 per cent. Danone is expected to produce underlying water sales growth of about 3 per cent in the fourth quarter.

Although emerging markets such as Indonesia, Argentina and Mexico were the main drivers of growth, Danone's volumes have shown signs of structural recovery in west European markets such as France, Germany and the UK.

But in the US, where Evian competes with the Fiji brand in the premium end of the water category, Evian's sales volumes and sales revenues remain in sharp decline, according to specialist soft drinks newsletter Beverage Digest. Evian's volumes have dropped by 29 per cent this year, compared with a 10.5 per cent drop for Fiji and a 3 per cent drop for the overall water category.

Just over half of Danone's bottled water sales are in emerging markets.