Danone cashing in on new products, markets

By Chris Mercer

- Last updated on GMT

Related tags Danone Bottled water Groupe danone

Emerging markets and new 'health products' helped Danone to
continue its strong sales growth in the second quarter of 2006,
though the group has struggled to turn around losses on its home
French market.

Dairy, water and biscuits group Danone said like-for-like sales were up nine per cent in the second quarter of 2006, helping it to a similar rise for the first six months.

Success was largely driven by high double-digit growth across emerging markets in Asia, Eastern Europe and Latin America.

The results have persuaded Danone to raise its forecast for full-year sales growth from seven to eight per cent.

The group said it was encouraged by good performances from 'blocbuster brands', led by probiotic yoghurt Activia, and also various newly launched products.

Many of these had a health or functional theme.

In beverages these included the 'V' functional drink launched in Argentina and the Nutri-Express smoothie in China. On the dairy side, the firm praise several new products, including its functional '7 Benefits' yoghurt launched in Eastern Europe and Danacol, a cholesterol-lowering product.

"Sales [of Danacol] are starting to grow very significantly in some European markets,"​ said Antoine d'Estaing, Danone's chief financial officer, at the group's results conference Wednesday.

France remained the trouble spot for Danone, although d'Estaing said fresh dairy sales were starting to back in the right direction. "The second quarter was quite better than the first quarter, which means we are gaining market share and our strategy of refocusing the range behind big blockbusters is paying off."

The story was slightly different in beverages, however, where Danone recorded another sale drop across France in the first half.

Bottled water sales have been stagnating in France generally, and Danone's iconic Evian and Volvic brands have faced stiffer competition.

Third quarter sales are likely to be hoisted up a notch or two by the summer heatwave that has gripped France, as well as other European countries, over the last few weeks.

That aside, Danone's d'Estaing said the group had put a lot of resources into innovation this year and that this was starting to pay off. New products include mini Evian bottles and a functional tea drink under the Taillefine brand.

There was little talk of the takeover rumours that have plagued Danone over the last year. And there was no unveiling of newly retired French footballer Zinedine Zidane as a prospective Danone board member.

The firm's operating income rose 13.5 per cent in the first half to €988m, with operating margins up across dairy and biscuits but down in beverages.

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