Dive Brief:
- Danone SA reported first-half earnings and quarterly revenue Friday, which included a 17% increase in adjusted operating profit to about $1.5 billion, beating analysts' estimates.
- After years of slowing consumption and increasing prices, lower milk prices in the U.S. and Europe boosted the recovery of Danone's dairy business. Just in the previous quarter, Danone's dairy segment, the company's largest, had still been the lagging market in Danone's portfolio, which had to be offset by other segments to keep the company's sales on the rise.
- "The company said economic conditions would 'remain difficult and unstable overall' but confirmed its 2015 target of delivering organic growth in sales of between 4% and 5%," The Wall Street Journal reported.
Dive Insight:
In the U.S., the milk industry is currently seeing a massive surplus, causing milk producers to go as far as dump overages. The surplus has also led to price decreases of 39% from February 2014's record high. These prices are now at their lowest in five years, which has boosted the bottom line for companies like Dean Foods Co., which earlier this year consolidated all of its milk brands into one, DairyPure, to combat the issues the milk industry had been facing.
Because of slowing demand over the past few years, the milk industry had begun to innovate, such as with products like A2 milk, which was introduced in California this spring. The New Zealand company that produces A2 milk had been approached by Dean Foods and Freedom Foods for a takeover, but a2 Milk turned down the companies recently in lieu of other potential offers. The milk industry also needed these prices to come down as dairy alternatives, such as almond milk and soy milk, had begun to take some of the dairy industry market share in the last few years.