Danone increases purchases of whey in Asia
Source: The DairyNews
Danone, the French multinational known for brands like Activia, Aptamil, and Evian, is shifting its sourcing strategy for raw materials amid rising costs in Europe.
As disclosed by a senior executive to Reuters, Danone is increasingly turning to Asia for whey and aluminum, a move aimed at mitigating expenses but potentially straining relationships with European suppliers.
The global dairy giant has traditionally relied heavily on European markets for its raw materials. However, the surge in cost inflation triggered by pandemic-related disruptions, compounded by the ongoing Ukraine conflict, has prompted Danone to diversify its sourcing. Vikram Agarwal, Danone's Chief Operations Officer, noted that this strategic shift began before the Ukraine conflict but has gained momentum in response to escalating supply risks and costs in Europe.
Danone's expansion into Asian markets, including India, China, and Southeast Asia, encompasses sourcing various materials such as aluminum packaging, plastic, paper packaging, and crucial ingredients like whey and maltodextrin.
While this move could potentially lower costs, analysts caution that it may strain Danone's relationships with European dairy farmers, particularly regarding whey sourcing. Whey is a vital ingredient in infant formula and nutritional products, and sourcing it from outside Europe may unsettle domestic suppliers.
Despite Danone's relatively strong rapport with European dairy farmers, tensions within the industry remain high, with concerns over pricing and market competition. Analysts highlight potential challenges in maintaining smooth relations, especially considering past protests by French dairy farmers over pricing policies and regulatory changes in the livestock sector.
Danone's efforts to enhance sustainability and energy efficiency are also notable. The company aims to improve energy efficiency by 30% by 2025 and is actively assessing energy usage in 20 of its factories through independent consultants. Additionally, it's adapting product recipes and formulations to navigate supply disruptions and inflation, as part of its broader sustainability and cost-management initiatives.
The global dairy giant has traditionally relied heavily on European markets for its raw materials. However, the surge in cost inflation triggered by pandemic-related disruptions, compounded by the ongoing Ukraine conflict, has prompted Danone to diversify its sourcing. Vikram Agarwal, Danone's Chief Operations Officer, noted that this strategic shift began before the Ukraine conflict but has gained momentum in response to escalating supply risks and costs in Europe.
Danone's expansion into Asian markets, including India, China, and Southeast Asia, encompasses sourcing various materials such as aluminum packaging, plastic, paper packaging, and crucial ingredients like whey and maltodextrin.
While this move could potentially lower costs, analysts caution that it may strain Danone's relationships with European dairy farmers, particularly regarding whey sourcing. Whey is a vital ingredient in infant formula and nutritional products, and sourcing it from outside Europe may unsettle domestic suppliers.
Despite Danone's relatively strong rapport with European dairy farmers, tensions within the industry remain high, with concerns over pricing and market competition. Analysts highlight potential challenges in maintaining smooth relations, especially considering past protests by French dairy farmers over pricing policies and regulatory changes in the livestock sector.
Danone's efforts to enhance sustainability and energy efficiency are also notable. The company aims to improve energy efficiency by 30% by 2025 and is actively assessing energy usage in 20 of its factories through independent consultants. Additionally, it's adapting product recipes and formulations to navigate supply disruptions and inflation, as part of its broader sustainability and cost-management initiatives.
