Slow Dairy Sales Diminish Q1 Growth for Danone

15b92e89-7ed9-4d6e-8b2f-0e153c115220articleimage.jpg

21 Apr 2017 --- Hot off the heels of completing its acquisition of WhiteWave, Danone has posted its sales for the first quarter which show a slowdown in Europe and Brazil. The French multinational says it has been a “slow start to the year”, although this was in line with expectations.

Consolidated sales stood at €5.464 million (US$5.85 million), up 0.7% like-for-like, reflecting a -2.6% decline in volume and a +3.3% rise in value. Reported sales were up 3.0%, including changes in exchange rates (+2.8%) and in the scope of consolidation (-0.5%).

The exchange-rate effect reflects the positive impact of changes in the Russian ruble, Brazilian real and the US dollar. Changes in the scope of consolidation result primarily from the deconsolidation of Dumex China since May 31, 2016.

Danone, the largest yogurt maker in the world with brands like Actimel and Activia, was impacted by the Fresh Dairy Products division which reported sales that were down 2.3% like-for-like, including a 5.3% decline in volume and a 3.0% rise in value.

In Europe, sales continued to be impacted by difficult market conditions and Activia’s performance. Danone stressed that is is implementing “all necessary initiatives to reverse this trend.”

Local execution plans are being reworked (packaging, communication campaigns and activation) and will be rolled out gradually, country by country in the course of the second quarter. They will be complemented by new product launches in Activia’s range. In parallel, local brands such as Les deux vaches in France, Danio in Poland and in Italy as well as Oikos in Italy have continued to be successfully developed.

Meanwhile, Danone generated stable growth within the CIS and North America region, while in the US, slower category growth and price pressure from competitors weighed on first-quarter sales.

Backed by strong brands, market leadership and reinforced communication and innovation plans, Danone will continue to pursue its growth agenda as planned in 2017.

In Russia, Danone once again demonstrated its resilience, in a consumption context which remains difficult. The enhancement of its brand portfolio’s value through rising prices and very positive mix management continued to offset a decline in volumes in lower-end segments.

Early Life Nutrition

Early Life Nutrition sales rose 4.1% like-for-like, including a 0.1% rise in volume and a 4.0% increase in value.

According to the company, this reflected major gains in developing a direct distribution model in China, where “direct” sales rose by a very strong double-digit growth supported by its growing presence in specialized stores and direct e-commerce through successful initiatives, such as the recent launch of Aptamil Platinium on the ultrapremium segment.

In parallel, the transition of the “indirect” channel for China, induced by a fast-changing regulatory environment, continued and should last until the new regulations are fully enforced, creating volatility in the performance from one quarter to the other.

Danone also said it is pursuing its investments in Tailored Nutrition, a major growth driver in the short and medium term. This segment, which already represents around 10% of division revenue, rose strongly in the first quarter.

“Q1 has been an important time for all teams at Danone. As anticipated, sales are showing a slow start to the year. In a continued volatile environment, we have made progress on our key priorities across our categories,” says CEO Emmanuel Faber. 

“In particular, to address headwinds and sub-optimal execution in the Fresh Dairy category in Europe, which sequentially impacted our performance, we continue to adapt our plans. In addition, in a matter of only a few weeks, we simplified our global organization, and localized further our decision-making. This new organization allowed us to decouple the company’s growth & efficiency agenda, with the Protein program launched to support both our short term results and our growth journey.”

“At the same time we are entering into a new chapter with the acquisition of WhiteWave. With leading positions in some of the fastest-growing, health-focused global categories, this combination will drive our Alimentation Revolution, our business performance, and will accelerate our 2020 profitable growth journey.”

“I am particularly impressed with the performance of Alpro in Europe, which paves the way to a successful rollout across many more countries in the future. In the US, last week's closing ended a prolonged process which caused growing managerial and business disruptions in a low growth context for the food sector. The combined experience and capabilities of the DanoneWave management team and the extensive work done by the integration team since July will fully deliver our synergy plan from day 1, address the current business challenges, and capture the business opportunities ahead starting from H2.”

Related Articles

Business News

FrieslandCampina results: 10 percent revenue growth, but profits down in challenging 2017

22 Feb 2018 --- Revenues of Royal FrieslandCampina N.V. have increased by 10.1 percent to €12.1bn (US$14.8bn) in 2017, primarily due to higher sales prices and the inclusion of Engro Foods in Pakistan. Profit decreased by 37.3 percent to €227 million (US$278m) and in addition to negative currency translation effects, the profit was lower due to write-offs of assets in China and Germany and restructuring costs. The higher milk price was largely offset by increased revenues; this put the margins, particularly in consumer activities, under pressure.

Business News

Supply partnership: Univar and Cargill reach long-term agreement on ingredients

22 Feb 2018 --- Univar has entered into a strategic long-term agreement with Cargill's Food Ingredients & Bio Industrial business in the US and Canada. Customers will be able to enjoy the combined value of Cargill's respected product lines and Univar's extensive distribution network and access to food innovators.

Food Ingredients News

Hershey progressing on “innovative snacking powerhouse” journey

22 Feb 2018 --- US chocolate and confectionery giant The Hershey Company has detailed the progress the business is making towards its vision of becoming an innovative snacking powerhouse. In a presentation yesterday (Feb 21) at the 2018 Consumer Analyst Group of New York (CAGNY) conference, Michele G. Buck, President and Chief Executive Officer, of The Hershey Company and Patricia A. Little, Senior Vice President and Chief Financial Officer, went over the latest progress.

Business News

Glanbia revenues boosted by performance nutrition, Dairy Ireland sale

21 Feb 2018 --- Global nutrition group, Glanbia, has reported that its revenue from continuing operations rose by over 9 percent for the year for the financial year ended 30 December 2017. Revenues for the year rose to €2.387 billion (US$2.944bn) from €2.231 billion (US$2.751bn) in 2016, while the company also reported adjusted earnings per share growth of 10.2 percent to 87.11 cents. That was in line with guidance of 7-10 percent growth and marked Glanbia's eighth year of double-digit earnings growth.

Business News

Arla results benefit from Ingredients performance, higher dairy prices leads to sales spike

21 Feb 2018 --- Despite another year in the volatile global dairy market characterized by significant shifts in market prices, Arla Foods showed a strong performance as higher milk prices lifted sales and led to a hike in payments to the cooperative’s farmer-owners

More Articles