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Group Danones Q1 Revenues Fall as Bottled Water Sales Take a Dive

French food and beverage company Group Danone saw its revenues decline for the first quarter of 2009, as the company’s bottled water and dairy sales slid 3.9% and 1.2% respectively. Total revenues dropped to 3.6 million Euro in Q1, a 2.3% decrease from the first quarter of 2008.

The company’s dairy division experienced positive growth in countries such as Brazil, Italy and the United Kingdom, while sales declined in Mexico and Russia. Danone’s Activia and Actimel brands remain the firm’s primary growth drivers in the dairy segment, according to a company press release. Emerging markets in Indonesia, Mexico and Argentina drove bottled water sales during the first quarter, whereas markets in France, Spain, the UK, Germany and Japan all continued to experience downward sales trends.

During the first quarter, Danone’s baby and medical nutrition divisions each turned in positive growth, which the company partially attributed to price increases implemented in 2008. Sales of baby nutrition products, including popular European brands such as Nutricia, Milupa and Dumex, were up 10.5% as Western Europe and Asia contributed to the above-average growth in the company’s Pediatric product line. Growth of 10.6% in the company’s medical nutrition division was fueled by strong performance in all regions, especially Southern and Eastern Europe.

The company expects its performance for the rest of 2009 to remain on par with first quarter results. “Our scenario for 2009 remains that current consumption patterns in our key emerging and developed markets will continue over the balance of the year, with no significant improvement or dramatic breakdown,” said Franck Riboud, Chairman and CEO of Group Danone in a prepared statement. “Our sales growth will, therefore, continue to be mainly driven by our leading brands, with a clear focus in all key markets on increasing their functional value for money to respond to the spending pattern of our consumers. As a result, we expect to gain further market share in our key geographies.”

Translation? Group Danone plans to implement a tried-and-true management strategy for a large consumer packaged goods (CPG) company operating in a down economy—play things close to the vest in terms of product development, focus on core brands and invest in markets that have a proven track record of success. The company now expects full-year sales growth to be a couple of points lower than the initially forecasted rate of 8%-10%. Still, even with forecasts being reigned in, 5%-7% growth seems somewhat optimistic for the company if the dairy division can’t improve upon its first quarter performance.

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