Dive Brief:
- Danone's first-quarter sales beat analysts' expectations with a 3.5% increase in like-for-like revenue to €5.31 billion ($6.04 billion), including a 0.8% uptick in volume and a 2.7% increase in value.
- Growth was fueled in part by sales in dairy products, which rose 2.3% for the quarter. Volumes declined but were offset by a 4.4% increase in prices.
- The company reaffirmed its 3% to 5% like-for-like revenue growth targets for the year.
Dive Insight:
In the U.S., Danone's dairy business grew in the mid-single digits, and Danone CFO Cecile Cabanis said on a call with analysts that the company expects growth to continue at that level in the coming quarters. The company sees potential for dairy, particularly yogurt, in the country and has supported growth with new products, such as Activia Fruit Fusion and Light & Fit Greek Crunch.
Still, dairy volumes are declining, in part due to a slowdown in developing markets like Brazil and Russia. Shipments fell 2.1%, as compared to a 0.6% dip in fourth quarter 2015. Danone plans to boost the segment in Europe to be near flat by the end of the year by relaunching the Danonino, Actimel, and Activia brands.
Baby food and water, including the Evian brand, were also important revenue drivers internationally this past quarter, with 4.8% and 3.9% growth respectively.
Danone is lagging two chief competitors. Unilever recently reported a 4.7% increase in sales, and Nestle, 3.9% sales growth. However, all three companies are struggling to adapt to slower economic growth across many global markets and evolving consumer preferences. Nestle's growth rate, while higher than Danone's, was the company's lowest since 2009, and Unilever's food sales are also lagging with 1.9% growth.