Report stresses price importance for Danone sales strategy

By Neil Merrett

- Last updated on GMT

Related tags Danone

Danone’s financial outlook implies tough times may be ahead for dairy producers, with the company facing stagnant organic sales value growth despite some resurgent demand, suggest analysts.

Finance group Bernstein predicts that although Danone has posted improving dairy sales volumes since in its European operations since last May, which had fell due to price increases, organic profit will continue to suffer if the group reduces product shelf value.

In a report on Danone’s fiscal prospects, the finance group said that even from its position as a powerhouse in European food production, the France-based dairy manufacturer would have to wait until 2010 before sales value increased for its products.

“We consider fears that Danone’s long term growth trajectory has been permanently damaged are unfounded…and that Danone’s organic growth will remain top-of-class in the European Food group,” ​stated the group.

Citing data supplied by market analyst Nielsen, Bernstein said that January saw Danone post its second highest amount of sales volume growth since 2007. However, the group added that over the same timeline, the findings indicated that the month was the fourth worst period for organic value growth.

The difficulties were seen as best reflected in the company’s domestic French operations. In this market, the report said Nielsen found sales volume growth increased in January by 6.4 per cent, but the value of the company’s sales on a like-for-like basis was down by 5.8 per cent.

Bernstein predicted that a stabilised price for the company’s products would be key to pushing further growth for sales value.

“If the improved volumes in 2009 are matched by deteriorating price and [product] mix, then organic growth is unlikely to recover,”​ surmised Bernstein’s analysis.

Data use

Bernstein says that the information supplied by Nielsen related to market developments over the last 18 months in Danone’s five big European markets. These are France, Germany, Italy, Spain, and the UK. According to the report, the aforementioned markets account for 45 per cent of the company’s dairy business.

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