Danone sales rise 1.4% amid strong demand for yogurt and plant-based foods
- Danone said third-quarter sales reached 6.186 billion euros ($7.14 billion), a like-for-like increase of 1.4% — slightly above the 1.2% forecast of analysts. It was the weakest third-quarter sales growth in more than a decade.
- The yogurt company said its dairy and plant-based operation in North America posted its fifth consecutive quarter of growth, with sales up 2.7% on a like-for-like basis. Danone said yogurt delivered "solid sales growth and reinforced" the company's position in the fast-growing segment. Similar strength was exhibited in emerging segments, notably probiotics, kids and plant-based. In plant-based foods and beverages, Silk and So Delicious posted strong growth, benefiting from demand for nut-based drinks and successful expansion into adjacent segments, including mousses and ice creams.
- Still, the French company faces challenges in other segments, including its infant formula business, in which sales in China fell 20% as the birthrate slowed. A Moroccan boycott against Danone and other large companies over high prices, as well as currency devaluations, also weighed on sales. Despite these challenges, Danone reiterated its forecast for a double-digit increase in 2018 earnings per share.
Danone made a bold move to expand its stake in the fast-growing plant-based segment by spending $12.5 billion to acquire WhiteWave. So far, it has proven to be an astute business decision. More than a year after the deal closed, Danone is benefiting from surging demand, while using its expertise in the food space to expand beyond plant-based milk and yogurt into similar product categories like ice cream. While the company faces ongoing challenges in other parts of its operations, segments known to consumers in North America continue to perform well.
“In the latest quarter, we have seen an encouraging return to growth in essential dairy and plant-based, alongside strong momentum in waters," Emmanuel Faber, Danone's chairman and CEO, said in a statement. "This demonstrates how Danone is balancing growth across its businesses."
Not only is its plant-based business with brands such as Silk and So Delicious performing well, but yogurt was strong during the quarter — a sharp contrast to competitor General Mills, which has continued to struggle in the segment with its Yoplait brand, despite the introduction of new products meant to stoke growth. Danone said trends in premium dairy improved, contributing to a slight decrease in sales but positive volumes in the third quarter. In addition, the company said its water division in North America posted "steep double-digit growth" due to expanded distribution of Evian and a new marketing campaign.
One ongoing challenge domestically was in its fresh division, in which sales declined for the quarter. While it's uncertain what was responsible for the drop, it follows similar difficulties being faced by Campbell Soup in its fresh operations. Campbell Soup is looking to sell its Fresh unit, which has been riddled with challenges since it was created. The company has already written down the division's value by $1 billion.
Danone has focused on making itself a leader in the sustainable space, and in April became a certified B Corp — a business that balances purpose and profit. These entities are required by law to report the impact of their decisions on workers, customers, the environment, among other groups.
While Danone faces challenges in baby formula and volatile currency fluctuations, it appears that its presence in plant-based foods, yogurt and water in North America, along with its social initiatives, place it on a strong financial footing going forward.
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