Danone plans to triple plant-based sales by 2025, sharpens focus on fast-growing health-related categories

24 Oct 2018 --- French food giant Danone will sharpen its focus on healthy eating, plant-based products, and popular dairy categories in the coming years as these trends show the most promise for growth. How the company will boost growth was at the center of Danone’s objectives during its recent investor seminar where it pledged to triple its worldwide plant-based sales from €1.7 billion (US$1.9 billion) to around €5 billion (US$5.7 billion) by 2025.

Emmanuel Faber, Danone Chairman and CEO says the company is “uniquely positioned” to embrace the food revolution and plans to accelerate its core plant-based beverages and yogurt categories, expanding into adjacencies, and unlocking opportunities in the dairy business and tapping further into the high potential for plant-based growth.

“We are developing our unique portfolio of health-focused and purpose-led Manifesto brands, acting as a catalyst for consumer reach. Our growth strategy focuses on valorized innovations to address some of the fastest-growing trends, notably among the younger generations. We continue to make our organizational model more efficient by empowering our people and fostering engagement,” he says.

“Our strategic priorities remain to accelerate growth, maximize efficiencies and allocate capital with discipline. Our progress to date gives us every confidence in our ability to navigate increasing global volatility and deliver superior sustainable, profitable growth, to create and share value.”

The French multinational completed the acquisition of organic producer Whitewave in April 2017. Under the merger agreement, the two combine activities in North America to operate under the name DanoneWave. The ambition is to produce healthful foods that “create economic and social value and nurture natural ecosystems through sustainable agriculture.”

This acquisition demonstrates how Danone and Whitewave were seen as an ideal match to build a global leader in leveraging consumer trends and expectations for healthier and sustainable eating and drinking choices. 

At the time Faber said: “With leading positions in some of the fast-growing, health-focused categories, this combination will drive our Alimentation Revolution, our business performance and will accelerate our 2020 growth journey.” 

Six months after Danone completed the acquisition of organic producer WhiteWave, the newly combined business unit DanoneWave announced that it was expanding its plant-based beverage manufacturing operations with an investment of up to US$60 million in a US facility located in Virginia.

Activity in plant-based dairy alternatives continues to develop 
In an article to be published in the October/November edition of The World of Food Ingredients, author, Moira Hilliam notes that activity in plant-based dairy alternatives continues to develop, reflecting growing consumer interest in health, sustainability and ethics.  

The dairy alternatives market has been a particular beneficiary of the interest in plant-based diets, with the growing availability and promotion of plant-based options to traditional lines, particularly dairy beverages, but also cultured products such as yogurt, frozen desserts and ice cream, creamers and cheese.

The dairy alternatives market was largely pioneered by and continues to be led by beverages, with alternative dairy drinks accounting for over 7 percent of global dairy launches in 2017. Spoonable non-dairy yogurt has also seen strongly rising levels of interest, but from a smaller base, with a 48 percent CAGR for the 2013-2017 period taking its share of dairy launches from less than 0.5 percent in 2012 to 1.5 percent in 2017. 

According to Innova Market Insights’ consumer research, one in three US consumers have increased their consumption of plant-based milk/yogurt in the two years to the end of 2017.

In the move to offer something new, we are also starting to see an increasing variety of non-soy plant-based ingredients, including cereals such as rice, oats and barley. We also see an increase in nuts, such as almonds, hazelnuts, cashews, walnuts and macadamias, as well as coconut and more unusual seed options such as lupin, hemp and flaxseed. 

An interesting development reflecting ongoing interest from the US dairy industry was the July 2018 announcement that Dean Foods of the US was to take a majority share in Good Karma Foods, known for its market-leading range of flaxseed-based milk and yogurt alternatives. Dean Foods entered the plant-based beverages market with its May 2017 minority investment and distribution deal with Good Karma, extending this to a majority investment only just over a year later.

Danone’s growth plans
Building on Danone’s balanced business model, the Investor Seminar provided updates on:

• Waters: profitable growth and circularity
• Leveraging unique leadership positions across the world, Danone is embedding its 100 percent packaging circularity vision in its Waters brands as a catalyst for consumer engagement, driving continued profitable growth, along with a reinforced focus on valorized innovations, notably in Aquadrinks.
• Specialized Nutrition in China: a strong and sustainable engine for growth

After 12 months of exceptional growth in China, sales are contracting in the short term, amid changes in infant milk formula market dynamics. 

Combining its global and local strengths, Danone is fundamentally ready to address in the mid-term new profitable growth opportunities, positioning its strategy towards the faster growth areas, including by seizing the growth opportunities emerging from evolving lifestyles and needs from an aging population.

Danone says it’s making solid progress towards its protein cost-saving program, targeting €1 billion (US$1.1 billion) savings by 2020.

Danone also has confirmed its objectives of accelerating like-for-like sales growth to 4 percent-5 percent by 2020, based on the following dynamics:

• Strong like-for-like sales growth above 5 percent in Specialized Nutrition;
• In Waters, also achieve strong like-for-like sales growth above 5 percent;
• Solid like-for-like sales growth of 4 percent to 5 percent in Essential Dairy & Plant-based.

Cécile Cabanis, CFO, added: “In an increasingly volatile environment, we are very pleased with the enhanced resilience of our operating model, delivering good results. Given short-term headwinds, including in our Early Life Nutrition business in China, the path to 2020 will not be linear.”

“We continue to strengthen our business model to accelerate throughout 2019 and 2020, towards our objectives, to deliver consistent EPS growth and create sustainable shareholder value.”

By Gaynor Selby