- Danone, the global leader in yogurt, announced last week that full-year sales growth would miss its 3% to 5% target after a revamp of the Activia brand didn't meet expectations, Bloomberg Gadfly reported.
- Danone raised prices on brands like Activia, but possibly too aggressively, as volumes on fresh dairy products fell in step with pricing increases.
- Fresh dairy accounted for nearly half of Danone's 2015 sales, which makes improving this category's performance — through innovation or acquisitions like WhiteWave — of utmost importance to the company.
Major food and beverage manufacturers struggling to improve annual sales growth tend to turn to three primary strategies: innovation, marketing and acquisitions. In the case of the Activia brand overhaul, Danone attempted to rebrand it as a premium "lifestyle brand." That came with higher price tags, so volumes ended up dipping to the point where it couldn't tip the scales in favor of an Activia turnaround.
If product development and marketing didn't bode well for Danone, that leaves acquisitions as a way to strengthen the company's yogurt portfolio and top-line growth. Luckily, Danone has a massive acquisition in the pipeline, WhiteWave Foods, which received conditional approval from the European Commission Friday. The Commission has ordered Danone to divest part of its "growing-up milk" business in Belgium, which could otherwise jeopardize competition in that area.
The main issue here is that Danone attempted to internally devise a solution to its sales growth woes without the right innovation to support its efforts. Major manufacturers aren't necessarily built for innovation or to keep up with fast-paced changes in food, beverage and nutrition trends. Acquiring more limber companies — such as startups or natural foods producers like WhiteWave — may end up being more effort for Danone and similar major manufacturers in the long run.