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Danone juice JV with Chiquita dogged by ‘mismanagement’: Industry source

By Ben Bouckley+

25-Jan-2013
Last updated the 25-Jan-2013 at 15:34 GMT

With rumors emerging that Danone is selling its 51% stake in its fruit juice JV with Chuiquita Brands International, one industry source told BeverageDaily.com that the French firm was likely ‘glad to be rid’ of a business blighted by mismanagement.

Danone declined to comment on a report published by French business daily Les Echos yesterday, stating that it was selling its controlling stake in the Paris-based fruit juice concern.

In March 2010 Danone announced with some fanfare that it had bought a 51% stake in, and management control over the JV, from US giant Chiquita Brands International.

The JV was established in Paris, and distributed Chiquita Fruit in a Bottle, a €20m ($26.9m) brand in 2009, and Danone co-COO Bernard Hours, said at the time that his company was “excited” by a partnership designed to provide “healthy, fruit-based, fresh products”.

‘Didn’t really innovate…’

According to Les Echos, the buyer is reportedly German fruit formulation expert Gerbruder Bagusat, but company management refused to comment on the news when contacted by BeverageDaily.com.

But one industry source told this publication – under condition of anonymity – that Danone’s high hopes (announced in 2004/5) for a new division based around fruit products had likely foundered.

Three years of poor performance had most likely pushed Danone to divest its JV stake, he added, especially given a “significant downturn” in the former’s Southern European dairy division.

“The last thing they want on the balance sheet is another poor performer,” he said, before emphasizing that he believed fruit and vegetable still had immense global potential across multiple beverage categories.

“The problem is that, having decided to get into fruit, the only way they did it was with Chiquita via the JV. So if the only route to doing that [fruit] was this failure, that’s it – strategy over,” the source said.

He added: “There were management problems, put it that way. Because you had two different companies, and the JV’s management didn’t really innovate. It’s just a complete failure in terms of leadership and management.”

“They had a little fruit puree in a glass jar on the market in several countries. It’s had a lot of criticism, because it looks and tastes – most people say – like baby food. So the product development was wrong, the marketing was wrong, the positioning was wrong,” the source said.

“They never did anything right – straight from the start," the source said, adding that the JV's leadership had a hands-on attitude to the business and could have worked more effectively with other "very capable people" in Danone.

“Within the industry, it’s widely regarded that nothing that the JV has done has provided any point of difference, or had any good qualities in terms of NPD.”

Silver lining with Activia, ProViva?

Any venture backed by giants such as Danone and Chiquita Brands International “should have been romping to the finishing line,” the source said.

“But they completely failed to tap into anything to do with the superfruits trend, or even simply take high quality, commercially available fruit with a point of difference.”

Danone would probably still pursue fruit juice innovations, the source said, but more likely through the Activia brand – a successful juice version is on sale in Brazil and Spain – rather than new bolt-on acquisitions.

Meanwhile, probiotic juice brand ProViva was still hugely successful in Sweden, the source said –Danone took a 51% stake in a JV with Swedish dairy Skånemejerier – but had been run separately from Chiquita Fruits.

“I suspect they kept it separate due to frustrations as to how the JV was going,” he said.

“They’ll still probably do things with juice – but in Europe you have the health claims restrictions for probiotics, but these don’t apply elsewhere in the world.”

With ProViva I can imagine we’ll see Danone doing more with fruit juice, but it will be very discreet, it will be in all sorts of different markets, not necessarily in Europe. It could be sold in Italy for example – no restrictions on probiotic claims,” he added.

Core strength focus?

Another industry source, Adomas Pranevicius, CEO of beverage development company My Drink Beverages, told BeverageDaily.com: "The decision to sell, if they are doing so, seems a bit strange.

"But I admire the decision, because usually large multinationals are unwilling to admit their mistakes. Danone's main portfolio is dairy products, medical nutrition brands and bottled water," he added.

"So maybe they decided to sell their fruit juice business to focus more on nutraceuticals - using their knowledge and experience there. This is perhaps a more strategic decision."

Pranevicius added: "Also in 2011/12, I don't have the figures to hand, but Danone might have had a too optimistic sales prognosis for these years."

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