BMI has revised upwards its 2009 and 2010 growth forecasts for France on the back of preliminaryQ209 data. Most impressive was the resilience of the consumer (where private consumption rose by0.3% quarter-on-quarter (q-o-q), up from 0.2% in Q109), combined with a dramatic turnaround inexports (from -7.1% q-o-q in Q1 to 1.0%). Our 2009 real GDP growth forecast now stands at -2.6%(previously -3.0%), while the 2010 projection is 0.5% (previously 0.0%).
However, the country’s food and drink operators have not emerged unscathed. During the quarter,France's fourth-largest Champagne house Laurent-Perrier reported a 45% drop in net profits for the12 months to the end of March on the back of a 27% decline in revenues to EUR181mn (US$257mn).The fall is in line with a widespread decline in demand for France's alcohol exports. Trade bodyFédération des Exportateurs de Vins et Spiritueux (FEVS) has announced that wine and spirit exportsfell by 30% in the first quarter of 2009, and that it expects exports over the year as a whole to be 20%lower than in 2008. Demand has fallen across nearly every market, with FEVS Deputy DirectorGeneral Renaud Gaillard revealing that China and Hong Kong were the only regions not to register adecline. Premium drinks have been particularly hard hit with Gaillard revealing that shipments ofChampagne, Bordeaux, Burgundy, Cotes du Rhone wines and Cognac all falling significantly.
At the end of July, Groupe Danone reported increased sales and profits for the first half of 2009.Sales to the end of June rose by 1.6% to come in at EUR7.5bn (US$10.7bn) while net profits were upby 3% to EUR722mn (US$1bn), if capital gains are excluded. Danone managed to reverse a declinein quarterly sales volumes at its dairy unit, which accounts for more than half of group profits. Upuntil the second quarter of 2009, volumes at Danone's dairy unit had declined for five successivequarters. Dairy accounts for 58% of its revenues and is the company's most important driver ofprofits. In addition to lowering prices of its core portfolio, which include brands such as Actimel andActivia, Danone has introduced lower cost products, such as 'Eco-Pack' in France, a strategy likely tocontinue.
The current market conditions are putting many dairy producers under strain and pushing companiesto consolidate. Indeed, French dairy group Lactalis is reportedly poised to strike for strugglingFrench rival Entremont Alliance. However, trade unions have suggested that the move could faceregulatory hurdles as it would give Lactalis a monopoly in the French market for emmental. Lactalishas been among the most active consolidators in the last 12 months with acquisitions in France,Croatia, Poland, Romania and Switzerland. The firm appears intent on maintaining this acquisitiondrive and in June, following the demise of UK-based Dairy Farmers of Britain (DFoB), Lactalissnapped up the firm's highly prized Lubborn Cheese dairy, which brought with it DfoB's best knownbrand, Seriously Strong Cheddar. Lactalis's move for the struggling Entremont would continue thisstrategy, adding weight to its portfolio of cheese brands for what can be expected to be a bargainprice. The current market conditions are likely to throw up similar opportunities in the next 12months, and BMI does not expect Lactalis to be the only opportunist in town, with all of the world'stop players likely to be pushing to expand so as to reap the benefits of a recovering global economyand an expanding dairy market.
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