Business World

Thursday 21 June 2018

Infant formula sales in China drive Danone sales

Activia fat-free yoghurt
Activia fat-free yoghurt
Ellie Donnelly

Ellie Donnelly

Reported sales at French food company Danone increased 16.6pc year-on-year to €6.4bn in the three months to 30 September.

Like-for-like sales at the company increased 4.7pc, led by a price and mix growth.

The company experienced a very strong performance in its specialised nutrition business, where sales increased 17.8pc in the three months to 30 September, according to the groups third quarter sales update.

The strong performance reflected accelerating growth in infant formula sales in China, as well as progress in Danone’s strategic priorities, such as the expansion of tailored nutrition products, which grew at a mid-teen percentage in the three month period.

Essential Dairy and Plant-based (EDP) international reported sales were down 2.3pc to €2bn in the three month period on a "like- for-like new Danone" basis, reflecting a 7.4pc decrease in volumes and a 5.1pc increase in value.

The EDP performance was impacted primarily by a steep double-digit fall in sales in Brazil, which continues to be impacted by adverse market conditions in the economy.

Excluding Brazil, the EDP division’s sales were broadly flat.

In Europe - excluding Alpro, sales growth improved slightly compared to earlier this year, but remained negative.

Danone said that it continues to adjust its execution plans around the Activia brand, rolling out new packaging. New advertising campaigns were also unveiled in three countries —Spain, France and the UK— to support the distribution of recently launched new products.

The Alpro brand continued to deliver strong momentum for the company during the three month period, driven by robust growth in non-soy drinks and plant-based alternatives to yogurt, as well as further innovation to extend the brand.

The Alpro brand is growing in all nine countries where it is sold.

In Latin America, despite a good performance in Mexico, the overall performance was impacted by a steep decline in sales in Brazil, a market that remains fragile for the company.

In Brazil, Danone has entered into a major transformation program aimed at restructuring its product portfolio, its distribution networks, and its organization.

Looking forwards, Danone said that it expects to deliver “more than” 12pc recurring earnings per share growth in constant currency terms, and an expectation of moderate revenue growth remains.

"As expected, Danone has posted accelerated sales growth in the third quarter.

This reflects the strength of our portfolio of cohesive consumer health-focused brands and a solid execution against our strategy, with a step-up in innovation and activation plans," Emmanuel Faber, CEO of Danone, said.

In August Danone announced completion of the sale of Stonyfield, one of its US subsidiaries, to Lactalis, for a purchase price of $875m (€744m), representing 20 times its earnings before interest, taxation, depreciation, and amortisation in 2016.

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