Danone's first-quarter revenue was up nearly 5% over the year-ago period to about $7.53 billion, the France-based company announced. Growth for the quarter was above analyst expectations, Bloomberg reported, and was aided by yogurt and other dairy sales, plus a more than 50% jump in infant formula sales in China.
Overall North American sales dropped 0.2%, mainly due to an oversupply of organic milk. On the plus side, probiotics, organic, kids and plant-based products performed well, the company said, with Silk almond and cashew milks and So Delicious organic almond milk driving both innovation and growth. In water, Evian was a strong performer during the first quarter and spurred double-digit growth in the American segment.
Danone said it expects additional sales growth and improved operating margins for the rest of 2018. The company also sees double-digit recurring growth in earnings per share.
After posting its fastest Q1 sales growth in five years, Danone seems to be regaining its footing. And while this progress was mainly driven by soaring baby formula sales in China, yogurt, plant-based items and other dairy products all showed improved performance.
Some of the turnaround has to be credited to its $12.5-billion WhiteWave Foods acquisition, which closed about a year ago and brought a desirable portfolio of soy products and organic food and beverage items. The deal has helped the company's DanoneWave U.S. subsidiary position itself front and center in the increasingly crowded plant-based segment.
In the past year, DanoneWave — now renamed Danone North America — has integrated the WhiteWave acquisition, sold its Stonyfield organic yogurt brand, and received certification as a B Corporation. The company also just sold its two-thirds share in Japanese probiotic drink maker Yakult for $1.6 billion and plans to use that money to pay down debt and speed up organic growth.
Danone has managed to compete in the U.S. yogurt market thanks to steady consumer demand for Greek yogurts and increased sales of its health-smart options. It has initiated Non-GMO Project verification for its Danone, Danimals and Oikos brands and expects to have the certification on all of its major yogurt brands by the end of this year. These value-adds could help differentiate the company's products in the crowded dairy space, especially as health-conscious shoppers place growing importance on transparency, clean label products and environmental sustainability.
Though this quarter has certainly been a bright spot for the company, Danone has a challenging road ahead to prove that this success is sustainable and not merely a one-off. The French manufacturer still has to meet the 2020 sales growth targets it outlined last year, including a 16% operating margin, and will need to prove that its WhiteWave acquisition can deliver long-term growth for years to come.
It may be wise for the company to further invest in product innovation in both its U.S. and European yogurt segments, as Chinese baby formula sales are expected to slow.