Danone's sales surge amid strong yogurt demand, social responsibility push
- Danone delivered another strong quarter of growth, with sales up 3.3% in the second quarter — bringing the French yogurt giant to 4% sales growth in the first half of the year, according to its most recent earnings report. Global sales for the first half of the year were nearly €12.5 billion ($14.6 billion).
- In North America, sales were up 1.4% compared to the last quarter. The company posted an increase in volume of 2.9% during the latest period.
- Emmanuel Faber, Danone's Chairman and CEO, said he was pleased with the quarter's results, which showed growth almost everywhere worldwide. "Essential Dairy and Plant-Based returned to growth, reflecting benefits from the WhiteWave acquisition and organic improvements in fresh dairy in key regions," Faber said in the report.
As time passes, one thing about Danone becomes more clear: The $12.5 billion spent to acquire plant-based food company WhiteWave was one of the savviest investments the company could have made. Former WhiteWave products have again delivered strong growth for a company known for its namesake yogurt and water.
In North America, the plant-based portfolio delivered high single-digit growth, the report said. The results were buoyed by interest in former WhiteWave nut-based products, as well as the Silk brand. But Danone's namesake dairy products also did well.
According to the report, innovations and value-adds, better distribution and marketing partnerships — including a tie-in with the Pixar "Incredibles" movie franchise — helped Danone's yogurt outpace the rest of the market. In the same way, Danone's value-added milk helped premium dairy post growth, despite problems in the segment due to an oversupply of organic milk. It's recent success is a far cry from its competitor in the yogurt space, General Mills, which continues to struggle despite a bevy of initiatives to reinvigorate the category.
In addition to this sales growth, Danone has plans to keep active in the spaces where consumer trends are moving. The company announced that it wants to buy 20 to 25 startups by 2020 through its Manifesto Ventures investment arm. Acquisitions make it simple for a big company that may not be so nimble to try new things out and get into trendy spaces. While Danone has traditionally stayed in its general area of comfort in acquisitions, there is no guarantee that the company wouldn't branch out into a new segment — like meats or snacking.
Danone also is making itself a leader in sustainable business, which is a trend becoming more popular with consumers. Sustainability pledges are no longer ways that manufacturers differentiate themselves. They are more of a requirement. And Danone has gone past just pledging environmental care. It's one of the four founding members of the Sustainable Food Policy Alliance — along with Mars, Nestlé USA and Unilever USA. The new alliance is "focused on driving progress in public policies that shape what people eat and how it impacts their health, communities, and the planet."
The company became a certified B Corp in April. This means that Danone is committed to "using business as a force for good through their commitment to social and environmental performance, accountability and transparency." This coveted status, which Faber said was a lot of work, may help inspire other food and beverage companies to work for the certification. The company claims it is the world's largest to attain this status.
Currently, Danone is starting to work on its 2030 goals. Faber said in the earnings release that these goals are forward-thinking, placing equal importance on employee input and environmental and public health outcomes. They literally start out by giving employees a stake in the company — at least one share apiece — and further stock-based financial incentives. The goals call on employees to help chart Danone's course toward changing the food system for the better.
Adding all of these things up, Danone is positioning itself to be a force for the right kind of social change. And while marketing tie-ins, unique products and trendy items like nut-based yogurts will get consumers in the door, the rich background of social and environmental goals will play just as much of a role in getting them to return.
In late 2015, Nielsen found 66% of consumers would pay more for products from a company bringing positive social and environmental change. As the yogurt and plant-based dairy spaces become more competitive, Danone's competitive edge may just be its business practices — a smart way to ensure company growth for 2030 and beyond.
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