Thursday, October 02, 2003

Danone/Suntory water deal How this for multinationalism? The French Groupe Danone and Japanese Suntory recently announced the merger of their US water-delivery systems in a joint venture. The new company, a combination of Suntory Water Group and Danone Water North America becomes the #1 company in the US providing water for office and home water coolers, an $800 million dollar business. Each of the companies will have a 50% stake in the new venture. The new company will own the brands Crystal Springs, Sparkletts, Alhambra, Kentwood Springs, Hinckley Springs, Belmont Springs, Sierra Springs and others. Whereas both former operations have concentrated in regions (Suntory in the East and South, and Danone in the West), the new entity will have a national scope. The biggest competitor in delivered water is Swiss-based Nestle. Danone, which specializes in water, dairy products, and biscuits, is the number two overall supplier of both bottled water in the world (after Nestle) with brands like Evian and Volvic. In recent years, it has worked in North America with Coca Cola to distribute its bottled waters, which Coke sells and bottles along with its own Dasani. Suntory is a wide-ranging conglomerate. It is a major distributor of both alcoholic and non-alcoholic beverages in Japan. (Its whiskey is a plot device in the Bill Murray movie, Lost in Translation.) It's also involved in flowers, pharmaceuticals, health products and foods, sports, publishing, restaurants, resorts, and IT. Suntory has joint bottling operations with Pepsico in the US and Japan. The move may be in part to defend share in this lucrative, high-margin market, since it's a natural target for both Pepsico and Coca Cola. Nestle is also expanding its operations by buying smaller operations. They clearly want to be in a commanding position as this segment continues to concentrate. What's interesting here is the phenomenon of two companies from different countries joining forces to dominate in a market segment in a third country. That's common enough, but it's still a rare phenomenon when the market segment is in the United States, not in some "emerging" nation. Once again, being a solid #1 (or even part of #1) has a multiplier value in terms of market domination. 8:17:23 PM

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