Dive Brief:
- Danone, maker of Activia and Actimel yogurt products, said it expects lagging profit growth in 2017 and to compensate, will cut 1 billion euros ($1.1 billion) in costs by the end of the decade, according to Bloomberg.
- For the current year, the company is targeting earnings per share growth of a little over 5%, which would be the slowest rate in three years. As comparison, last year’s profit measure increased 9.3%.
- Danone’s like-for-like sales grew 2% in 2016, the slowest pace in approximately 20 years.
Dive Insight:
The yogurt industry has been hit hard lately, with many of the giants in the industry reporting weak sales. General Mills, for example, saw a 17% decline in yogurt in its most recent earnings report.
It’s not that yogurt products aren’t popular. In fact, Mintel’s latest study showed that sales of yogurt drinks grew by 62% between 2011 and 2016 to $893 million. However, factors such as rising milk costs and more companies fighting for market share are taking their toll on many of the companies.
France-based Danone aims to fix some of its problems with the anticipated $10 billion acquisition of WhiteWave Foods Co., which will bring a large supply of soy milk in house. As a smaller startup, WhiteWave is also more nimble and able to quickly change gears based on trends. With a more nimble category leader under its belt, it may be easier for Danone to figure out the best path to the future.
Additionally, the company has launched a new initiative called Protein, which is aimed at efficiency and will cut back on expenses including some of its marketing spend.