Food and Beverage Business
Finance

Danone’s Pursuit of “Competitive, Quality Growth” Yields Rewards

Danone's Pursuit of "Competitive, Quality Growth" Yields Rewards Danone Food and Beverage Business

Danone is optimistic about leveraging a fifth consecutive quarter of growth in volume-mix, as the company has reported positive results across nearly all regions. CEO Juergen Esser emphasized on October 24 that their approach is anchored in “competitive growth and quality growth,” despite acknowledging the “soft” consumer demand noted by various companies in the food and beverage industry.

This strategic focus has yielded significant returns in the third quarter, with the group’s volume-mix accelerating to 3.6%, up from 2.9% in the previous three months and rebounding from a decline of 0.3% in the same period last year. Excluding Latin America, where adverse weather conditions adversely affected bottled water volumes in Brazil, all other regions exhibited positive volume-mix growth for both the third quarter and the year overall.

Danone achieved positive like-for-like sales growth across all geographical areas and its three business sectors: essential dairy and plant-based products (EDP), specialized nutrition (including infant formula), and water. “We aim to invest in true category leadership. Our categories are significantly outperforming the average in the food and beverage market,” Esser remarked during the analysts’ call.

The company is committed to finding the right equilibrium between generating strong volume and improving mix. This involves maintaining appropriate pricing, leveraging volume, and enhancing productivity. Esser noted, “Our target is to continually improve our gross margins for Europe and the company overall, and we are on track.”

Regarding pricing, Danone’s third-quarter results indicated a 0.7% increase, suggesting a return to more normalized pricing levels, although selective pricing adjustments will continue. In Europe, where Danone has faced greater pricing pressure than in other regions, the company has implemented selective pricing strategies where necessary to ensure positive volume dynamics.

Despite reporting a 1.2% decline in overall sales to €6.8 billion ($7.3 billion), the company noted a 4.2% increase in like-for-like sales. Year to date, reported figures show a decline of 2.6%, while like-for-like sales have risen by 4.1%. Notably, Europe demonstrated a volume-mix performance of 2.4%, largely driven by strong growth in Danone’s high-protein yogurt line.

Esser noted that the volume-mix growth observed is the highest in quite some time, illustrating that investments in brand equity and selective pricing strategies have begun to bear fruit. In North America, a volume-mix increase of 4.9% reflected the robust performance of Danone’s coffee creation platform and a rapidly growing yogurt category.

With a volume-mix increase of 10.2% and 8.9% respectively in China and North Asia/Oceania, Danone’s diverse portfolio appears well-positioned for sustained performance. Esser reassured stakeholders, “What is encouraging for this region’s outlook is that we are not reliant on just a couple of growth engines; all areas are performing well.”

Recent observations indicate a revival in the infant milk formula sector, attributed to effective innovations driving market share gains. Extra local capacity in Japan is forthcoming to support ongoing growth in that market.

Esser concluded, “We remain confident in our ability to consistently deliver quality results.” This optimism is essential as the food and drink business navigates ongoing trends of consumer demand within the industry.

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