Danone eyeing solid Evian sales thanks to modernized plant

EVIAN-LES-BAINS, France (Reuters) - Danone DANO.PA, the world's third-largest bottled water company, unveiled the modernization of its sole plant producing the popular Evian brand on Tuesday, in a move to increase capacity and underpin Evian's solid growth.

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Danone CEO Emmanuel Faber, whose company is the latest European consumer goods group under pressure from investors calling for better returns, told Reuters Evian sales would continue growing at double-digit rates in the United States as more consumers opt for healthier diets.

The global market for bottled water is forecast to reach $230 billion by 2021 from around $198 billion this year according to Euromonitor, as consumers move away from carbonated drinks and governments urge less consumption of sugar.

Danone produces a range of bottled waters, including Badoit and Volvic, but Evian is its marquee brand.

“The growth of Evian will stay solid in 2017. Evian remains very strong in the United States and is also doing well in France and in Europe,” Faber said on Tuesday.

Sold in more than 140 countries, Evian sales grew 8 percent last year, beating the 6 percent growth of its global market and the 2.9 percent of Danone’s water division overall.

Faber was speaking at the inauguration of the modernized, carbon-neutral bottling plant in the spa town of Evian-Les-Bains close to Lake Geneva. The overhaul of the facility is expected to create 200 more jobs.

Danone is the world's third largest bottled water group after Swiss rival Nestle NESN.S, which owns Perrier, Vittel and San Pellegrino, and Coca-Cola KO.N, the owner of Dasani water, according to market research firm Euromonitor. The water unit accounted for 21 percent of Danone's group sales of 21.9 billion euros ($26 billion) in 2016.

Evian water was discovered by a French nobleman in 1789. It was first bottled in 1826 and has been owned by Danone since 1970, making it one of the biggest of Danone’s water units.

Sales growth within Danone’s water business as a whole has been slowing down, due to weakness in China, where sales of the Mizone energy drink were hurt by de-stocking, although Faber said Mizone “was really not up for sale”.

But Danone is hoping sales growth at the water division will rise above 5 percent by 2020, up from 2.9 percent last year, under a new group strategy plan.

The Evian arm will have spent 280 million euros on upgrading the bottling plant by 2020, lifting annual output capacity to 2 billion bottles, from 1.5 billion at present.

Danone has recently been touted as a potential target for suitors or shareholders seeking better returns, given that its profits and sales have disappointed some investors.

The fact that Danone has no large, controlling shareholder has also made it a target for those parties.

Last month, media reports said Corvex Management had bought a 0.8 percent stake in Danone, a move that followed similar steps seen at Nestle and Procter & Gamble PG.N.

Faber declined to comment on the Corvex situation.

Reporting by Dominique Vidalon; Editing by Sudip Kar-Gupta