Danone Thrives Amid Cost-of-Living Crisis, Outperforming Consumer Rival
Source: The DairyNews
Danone SA has successfully navigated the cost-of-living pressures affecting many of its competitors, driven by health-conscious consumers increasing demand for its products. The French yogurt maker reported a 4% increase in comparable sales for the second quarter, surpassing the 3.8% expected by analysts. This growth was primarily due to higher volumes and a consumer shift to more expensive product formats, rather than price hikes.
In response to this positive performance, Danone's shares rose by as much as 4.8% in morning trading in Paris, marking an 11% increase over the past 12 months.
Unlike rivals Nestle SA, PepsiCo Inc., and Unilever Plc, which missed revenue estimates due to weak consumer demand in certain markets, Danone saw a stronger performance. "People choose mineral water over a sugary drink," explained Juergen Esser, Danone's Deputy Chief Executive Officer in charge of finance. He noted that products like high-protein yogurts, vitamin water, and hospital nutrition are experiencing higher growth as consumers move away fr om high-sugar, ultra-processed foods and drinks.
Esser highlighted that this health-conscious trend, intensified by the Covid-19 pandemic, is a long-term dynamic contributing to the pressure on rival products like confectionery and chips.
Danone reaffirmed its guidance for like-for-like sales growth of between 3% and 5% for the year, anticipating a moderate improvement in operating margin. Although the quarterly growth rate was the lowest since 2021 due to easing price increases, the company remains optimistic.
According to Bloomberg Intelligence, Danone's volume-mix improvement to 2.9% in the second quarter (2.1% for the half-year) demonstrates progress from brand focus and investment. However, the lack of an upgraded organic sales growth target suggests that recent disposals may have impacted performance more than expected, indicating a need for further innovation and investment.
Danone experienced particularly strong growth in China, Japan, Australia, and New Zealand, with over an 8% increase in comparable sales despite price reductions. High demand for yogurt in Japan and the recovery of Mizone vitamin drink sales in China, along with medical nutrition, drove regional growth.
Overall, specialized nutrition, including ranges for cancer patients wh ere Danone is expanding, was the fastest-growing unit. This business is set to play a crucial role in the company's recovery efforts under CEO Antoine De Saint-Affrique, who aims to leverage aging populations and drive growth through strategic mergers and acquisitions.
Danone is one of many global branded goods companies working to win back customers after a period of high inflation and lending rates that forced households to switch to cheaper supermarket labels.
Unlike rivals Nestle SA, PepsiCo Inc., and Unilever Plc, which missed revenue estimates due to weak consumer demand in certain markets, Danone saw a stronger performance. "People choose mineral water over a sugary drink," explained Juergen Esser, Danone's Deputy Chief Executive Officer in charge of finance. He noted that products like high-protein yogurts, vitamin water, and hospital nutrition are experiencing higher growth as consumers move away fr om high-sugar, ultra-processed foods and drinks.
Esser highlighted that this health-conscious trend, intensified by the Covid-19 pandemic, is a long-term dynamic contributing to the pressure on rival products like confectionery and chips.
Danone reaffirmed its guidance for like-for-like sales growth of between 3% and 5% for the year, anticipating a moderate improvement in operating margin. Although the quarterly growth rate was the lowest since 2021 due to easing price increases, the company remains optimistic.
According to Bloomberg Intelligence, Danone's volume-mix improvement to 2.9% in the second quarter (2.1% for the half-year) demonstrates progress from brand focus and investment. However, the lack of an upgraded organic sales growth target suggests that recent disposals may have impacted performance more than expected, indicating a need for further innovation and investment.
Danone experienced particularly strong growth in China, Japan, Australia, and New Zealand, with over an 8% increase in comparable sales despite price reductions. High demand for yogurt in Japan and the recovery of Mizone vitamin drink sales in China, along with medical nutrition, drove regional growth.
Overall, specialized nutrition, including ranges for cancer patients wh ere Danone is expanding, was the fastest-growing unit. This business is set to play a crucial role in the company's recovery efforts under CEO Antoine De Saint-Affrique, who aims to leverage aging populations and drive growth through strategic mergers and acquisitions.
Danone is one of many global branded goods companies working to win back customers after a period of high inflation and lending rates that forced households to switch to cheaper supermarket labels.
