The proposed sale, to privately owned Italian firm LGR Holdings, is a surprise because Italy is such a good place to sell bottled water. According to Euromonitor, total volume sales of 10.2 billion litres in 2003, make it the biggest bottled water consumer in western Europe with the highest consumption per person in the world.
The exceptionally hot summer of 2003 did boost sales but the market in Italy has been growing for some time. The Euromonitor report attributed this to an increasing trend towards healthy products: "Bottled water is perceived as a safer alternative to tap water; it has even become more usual for Italians to use it when cooking."
Although third in Italy, Danone's operation, Italaquae, had sales of €150 million in 2003 and growth of 8 per cent this year. Danone is used to sharing market domination only with its fellow giant Nestlé but in this region also contends with the Italian company San Benedetto.
Italaquae operates under three main brands: Ferrarelle, Boario and Vitasnella. The best known of these is Ferrarelle, whose naturally light sparkling water originates from volcanic springs 50 km from Mount Vesuvious. It is bottled in glass and does not contain a visible Danone logo on its label. It is the most popular carbonated water in Italy.
But, unfortunately, sparkling water accounts for only 35 per cent of Italian bottled water sales. Danone had hoped that Ferrarelle would emulate its Italian success in foreign markets but in spite of many attempts and much investment it never had the same success abroad as either of its rivals, San Pellegrino (Nestlé) or San Benedetto.
Perhaps as a result of this, Ferrarelle's growth figures in Italy have become a bit stagnant. But, insists Euromonitor analyst Hope Lee, there is still a strong future ahead of the brand in Italy: "Spring water, rather than purified water, is the becoming a huge area of growth for Italians."
Ferrarelle is famous for its naturally carbonated spring situated in the Napolitan Mountains. This sort of reputation and the rarity of naturally carbonated springs counts for a lot. The 1990 scandal that Perrier (now owned by Nestlé) had been adding CO2 to what was sold as a "naturally sparkling" product, hasn't been forgotten.
This advantage is one that Danone may have chosen to snub. Those who buy Ferrarelle in Italy do so for the taste and tradition; they are more likely to be in search of the good life than the healthy modern one. This does not easily co-exist with Danone's global, health-focused brand (hence the missing logo).
The second Italaquae brand, Boario, does display a large Danone logo. Boario is a spa town in Italy that has four springs, each with legendary medicinal properties. The Silia spring, where the still water product is sourced, is slightly mineralised and said to be ideal for treating urinary infections, although the company does not market this particular asset.
Over ten years Boario has been rebranded as Boario Silia, Boario Naturale Silia, Boario Naturale and Danone Activ Boario Naturale. Despite these efforts, sales are in decline. Despite high natural calcium, the water lacks the exceptional mineral content that could have been its market edge given the history of the spa.
The third big brand, Vitasnella, is growing fast - to the extent that it masks the lesser successes of its sister brands in the growth figures for Italaquae as a whole.
It is a still water from the Alps branded on an image of youth and health. Its label, which also carries the Danone logo, for many years depicted a slim, young lady in sports gear vivaciously throwing her hands in the air. The success of this brand adds further credence to Euromonitor's prediction that the image of health is what will sell in Italy.
Hope Lee, at Euromonitor, believes that Danone wishes to divert its resources in Italy to concentrate on something else:"I won't be surprised if we hear an announcement quite soon", she said.
She told BeverageDaily.com that Danone may focus on lifting sales in emerging dairy markets - in particular probiotic yoghurts. These contain increased levels of naturally occurring intestinal bacteria that are unaffected by stomach acid, passing to the intestine where they have a healing function.
Given the propensity of the Italian market towards health products, Danone's Italian marketing machine is probably being redeployed on what could be a more lucrative game.
The success of Vitasnella, and the strong market position that Ferrallele holds in naturally carbonated spring water, coupled with an already large market share, make it very likely that Danone could get a good price for Italaquae. Financial details of the deal, expected to go through in January, have not been disclosed but law firm Norton Rose, acting on behalf of the buyer's lender, revealed that it would be for an approximate €90 million.