Danone plans to adjust pricing strategies as inflation eases throughout the financial year. The French dairy company increased prices by 8.7% in the second quarter, compared to a 10.3% rise in the previous three months. However, volumes declined by 2.3%, with a more significant 3.3% drop in the essential dairy and plant-based products (EDP) business. On average, price increases were at 9.4% for the first half of the year, with a 1.1% decrease in volumes. Danone CEO Antoine de Saint-Affrique mentioned that while inflation is expected to decrease, input-cost inflation will still be driven by labor costs, agricultural ingredients like sugar, and milk, particularly in Europe.
When asked about the possibility of price reductions in the context of private-label gaining market share, de Saint-Affrique stated that Danone’s pricing strategy is shifting towards individual stock-keeping units (SKUs) and using promotions instead of focusing solely on pricing. He highlighted that inflation persists, but is lower in some areas. CFO Juergen Esser added that while the pricing trend is gradually declining, positive pricing will continue as it normalizes. Danone reported a 6.4% increase in net sales for the second quarter, with Europe, North America, and China, North Asia, and Oceania regions experiencing growth in sales.
Portfolio “Sharpening”
Over the past few quarters, Danone has been focused on reestablishing category leadership by prioritizing key demand spaces, including health, indulgence, children, and everyday nutrition. The company has been sharpening its portfolios in these areas, reducing brand overlaps and creating more focused offerings. This strategic approach allows Danone to reinvest in advertising and promotion while ensuring visibility to consumers through superior shelf execution.
In terms of financial performance, Danone saw a decline in recurring operating profit margin in Europe but an improvement in other regions. European volumes also dropped, surpassing the overall decline for the company. CFO Esser mentioned that the transformation of Danone’s EDP portfolio temporarily affected margins but expects an inflection point with sequential volume improvement and increased investment.
Overall, Danone remains confident in the recovery of volumes and profitability, despite ongoing inflation challenges in the food and beverage industry.
