Added value boost for Danone
revenues for the first quarter of 2004, boosted in particular by
strong sales of 'healthy' dairy products such as its probiotic
range. Like all European dairy companies with activities in the US,
Danone was hit by adverse currency movements during the quarter,
but its positive underlying performance is a clear indication of
the potential of added value products in a competitive market,
writes Danny Vincent.
Danone reported a 9.8 per cent increase in underlying sales to €3.4 billion, although the currency effect meant that reported growth was 5.7 per cent.
The world's largest yoghurt producer said its dairy business witnessed the largest growth in the first quarter. It saw a 12.8 per cent increase in like-for-like sales for the first three months of the year, and the growth helped the company to achieve its best quarterly results in the last five years, Danone claimed.On a reported basis, dairy division sales were €1.75 billion, up 14 per cent. The company's probiotic yoghurt brand, Actimel, witnessed a 40 per cent sales increase for the quarter.
Danone's other units also performed well, with a 10.4 per cent increase in underlying sales from the bottled water unit, which includes brands such as Volvic and Evian. Danone's recent push into the home and office delivery (HOD) sector in the US was the main reason for the underlying sales growth, but the weakness of the dollar also contributed to a 3 per cent drop in reported sales to €854 million.
The biscuit arm, which includes the LU brand, lifted its sales by 3.8 per cent to €83 million during the quarter, a unexpected improvement from what has perennially been the company's weakest division.
In terms of regional performances, Danone shrugged off the weak consumer spending levels in Europe to post a 6.8 per cent increase in underlying sales. Asia, another region where exchange rates have impacted business in recent years, showed a marked recovery, with sales up 3.8 per cent (or 12.8 per cent on a like-for-like basis).
But a 21 per cent improvement in like-for-like sales from the rest of the world was seriously impacted by currency movements, resulting in reported sales remaining virtually unchanged compared to the previous year.
The company said it would now focus on maintaining this strong performance throughout the rest of the year, with its health-based products likely to feature strongly once again. The company said it aimed to end the year with organic growth of between 5 and 7 per cent.
