Global Campaigns News

Danone Should Sell Bottled Water Unit, Analyst Says

Posted: August 19, 2009

Thomas Mulier, Aug. 18, 2009, Bloomberg - Groupe Danone SA, the maker of Evian bottled water, should sell its shrinking water business to fund acquisitions of baby food companies such as Mead Johnson Nutrition Co., said Andy Smith, an analyst at ICAP Plc.

Danone Chief Executive Officer Franck Riboud “ should get rid of that business sooner rather than later,” Smith said in a phone interview today. “People are starting to question the value of bottled water. Some premium mineral waters cost more than gasoline.”

The market for bottled water has shrunk as the credit crisis leads consumers and companies to rely more on tap water. First-half sales of bottled water at Nestle SA, the world’s leading bottler, and Danone declined following market growth of as much as 10 percent in past years. By focusing on baby food and dairy, Danone would become a stronger competitor against Vevey, Switzerland-based Nestle, Smith added.

Danone’s water brands include Evian and Volvic, and the business made up 18 percent of the Paris-based yogurt maker’s first-half sales.

Coca-Cola Co. and PepsiCo Inc. “would love to acquire those brands,” Smith said. “I’m speculating and it’s a bit naughty.”

Laurence Foucher, a spokeswoman for Danone, and Joel Morris, a spokesman for Coca-Cola Europe, declined to comment. PepsiCo’s media relations department didn’t immediately respond to an e- mail seeking comment.

To contact the reporter on this story: Thomas Mulier in Geneva at tmulier@bloomberg.net.