Danone hit by bottled water sales fall
Danone, already struggling with falling yoghurt sales as consumers shift to vegan alternatives, is getting hit by a decline in its bottled-water business.
Shares of the owner of Volvic and Evian water headed towards their biggest fall in more than a decade after it lowered its annual sales outlook. The cut deals a blow to chief executive Emmanuel Faber’s turnaround efforts, which have been built around diversifying the company’s product range away from dairy.
“Oh dear,” RBC analyst James Edwardes Jones wrote in a note to clients.
This was a miss in terms of both quality and quantity. Our confidence in the longer-term recovery story has been dented.
Danone’s update comes a day after Perrier-owner Nestlé announced plans to restructure its water unit, where sales are headed for a second annual decline. Like the yoghurt business, water bottlers face structural challenges, including a growing backlash against plastic packaging and a rise of discount competition.
The French company’s bottled-water sales fell 0.9% in the third quarter, which analysts at Sanford C Bernstein called the worst performance in a decade.
While a slowdown was largely anticipated and Danone said a cooler August weighed on consumption, investors didn’t expect an outright decline. Overall revenue will climb 2.5% to 3% on a comparable basis this year, the company said.
In his fifth year as CEO, Mr Faber is still struggling to achieve a sustainable rebound in the European dairy business, which just eked out growth in the quarter. Now weakness has spread to Danone’s US yoghurt arm, which lost market share, while Russian consumers switched to cheaper brands. Total volume across all product categories declined.
Chief financial officer Cecile Cabanis said Danone is confident growth will accelerate, and the company is keeping its 4% to 5% sales growth target for next year. The $10bn (€9bn) acquisition of WhiteWave started to pay off as plant-based alternatives grew. Revenue from Alpro rose more than 10%.
