Danone CEO Franck Riboud admits his company is ‘quite nothing in Asian dairy’, but says the French giant is not prioritising that category within the region, and will take time developing its business there.
Riboud was speaking at an investor conference on Wednesday where he announced the company’s Q4 and full-year results for a “tough and positive” 2011 that saw the Danone turnover €19.3bn (+13.6% on 2010).
The firm posted like-for-like sales growth of 4.6% in dairy overall: 20.1% in Asia, 13.3% in the rest of the world and 2.4% in Europe, although the firm stressed that flat Russian sales pointed to better performance elsewhere in that region.
Noting that per capita consumption of dairy products was very high in countries such as France and Spain at 32-33kg, Riboud said that in countries such as Russia [where Danone merged with Unimilk in 2011] Danone was either “recovering or building a platform for the future”.
He said: “We’re not going to ask the French to eat 60kg per year [to spur growth], but when you know that the US is eating 4-5kg per year per capita – and it’s a country that really recovering [economically] at the time being – then the opportunity for us is huge.”
Yoplait missed Greek boat...
Riboud said Danone believed it would soon overtake Yoplait in terms of US dairy market share (where its Oikos brand has been hugely successful) for the first time, “because Yoplait missed the launch of their Greek, so they are out of the segment”.
But after welcoming stable growth in Europe, and double-digit growth in Latin America, Riboud said: “We are not so strong in Asia, which is something we have to think about in dairy.”
He said: “The performance of dairy is really impacted by the fact that it is more European than Asiatic. We are booming in Latin America, we are nothing, quite nothing in Asia.”
Nonetheless, Riboud said Danone was relaxed about building its Asian dairy presence: “Do we have to do that now? No. Not the way we take care of the global economic context.
“Because we are doing things in baby food in China and Indonesia where we will get a better return much faster, than to spend money to create and develop dairy in Asia.
“So we consider dairy in Asia as a pocket for growth in the next 10-15 years. But the priority is how to develop drinks in Indonesia, infant formula in some other countries.”
Discussing Danone’s tactics more generally, Riboud said: “Everything talks about the strength of brands, but within Danone the first step of the model is to talk about the category.
“Where we are, we want to be locally number one with a big gap to two and three – due to retail and consumer pressures.”
“Before that we work on the category, this means developing differentiation, consumption per capita, have the right advertising campaign for the category.”
Riboud gave the example of baby nutrition in China, “where we are just claiming Chinese mothers need a specific food, not for two months, three months, but for three years”.
“So we build the category, because it’s impossible to develop top-line growth with our brands, if the category is not growing itself. Our job as a leader is to build a category.