Drinks and snacks group C&C said yesterday that it had lost the distribution rights for the Volvic and Evian mineral water brands in the Republic.

C&C said that it had received notice from the brands' owner, Danone, terminating the 20-year-old distribution agreement with effect from the end of November.

"While this termination will impact on the profitability of the soft drinks and snacks division, where the agreement accounts for turnover of approximately €12 million per annum, it is not expected to impact upon the group's overall financial performance for the full 2005/06 fiscal year," the company said.

The impact on group profits in subsequent years remains to be seen, although analysts believe that it should be small in the overall group context.

Shares in C&C lost seven cent, or 1.3 per cent, to €5.35 yesterday, although market sources put this down to profit-taking after their recent strong run rather than concerns about the loss of the contract.

Analysts said that the performance of the cider division, which now accounts for two-thirds of profits, remains the main driver of the stock rather than the struggling snacks and soft drinks business.

It is understood that the termination of the C&C contract follows a strategic review carried out by Danone of its international distribution agreements.

As part of this, the French food giant also terminated a small distribution agreement that it had with Kerry Group in relation to Actimel earlier this year.

While the termination of the contract came as a surprise to C&C, and is not good news for its already struggling soft drinks and snacks division, industry sources suggested that it will give the company a freer hand in promoting its own brand of bottled water, Ballygowan.