Probiotics sector forced to swallow the EU’s bitter health claims pill
And in my headphones? The latest Foxygen album who happen to be playing Brussels this week?
Nope – I am a health claims sad case so it is an analyst – let’s call him/her a healthy food marketing guru – absolutely ripping apart the contemporary retail strategy of Europe’s probiotic leader Danone in response to the whole sorry probiotic health claims affair.
It’s getting frostier as the train speeds north, as for EU probiotic prospects…
The guru preferred to remain anonymous for the moment but he/she had some pretty damning things to say about the French dairy giant.
Here’s how the straight lead runs on that…
Probiotic fail: Does Danone have a plan B for Activia?
Danone has failed to respond to regulatory and price-driven changes in the European yoghurt market and needs a management makeover if it is to spoon fresh life into its probiotic division, an industry analyst told us the other day.
A rampant 1990s and first half of the 2000s saw its marquee probiotic brands – Activia spoonable yoghurt and Actimel drinking yoghurt – dominate entire yoghurt markets despite hefty premiums.
Now regulatory and recessionary developments are hitting the firm hard in Europe even as global sales of Activia continue to rise and have pushed through €4.2bn.
And what is becoming clear, the analyst says, is that Danone is massively under-prepared, especially for the long-time-coming, yet industry-shocking probiotic health claim prohibition that kicked in across the EU as of December 14, 2012.
And the analyst thinks heads should roll for that, or at least fresh blood given the opportunity to rethink strategy in a division that accounts for something like a quarter of all Danone's global sales.
A change in management culture means the entrepreneurial spirit in the company has shifted to something altogether more risk-averse; something the current crisis has highlighted all too sharply.
Place for ‘Promium’?
The ban is affecting the whole sector in the European Union and beyond, but premium-priced Activia and Actimel as category leaders were always going to be the most exposed once the EU health claim assessment process rightly or wrongly stripped away its gut health and immunity marketing credentials.
“And they’ve not prepared for that,” the analyst said, noting a simultaneous rise in the popularity of various supermarket “home brands” offering the same premise – live probiotic cultures although since the ban usually known by other names like ‘bioactives’ – but at significantly reduced retail prices.
Some of those brands have surged 20-25% on home markets in the past year or two, according to market analysts.
Upper management at the firm need to be held to account for the lack of response, the observer said, as it gave the impression it has rested on its laurels for five or more years.
Danone did however remove its gut and immunity claims from Activia and Actimel in most European countries before the EU nutrition and health claims regulation (NHCR) ban came into play, and has also experimented with probiotic juice via brand extensions and partnerships with the likes of Chiquita and Swedish dairy, Skanemejerier, but with varying levels of success.
It has also reformulated in some markets with claim-winning nutrients like vitamins which permit it to continue its claim-making unabated. Where that is not occurring, advertising and marketing campaigns have been modified to emphasise ‘well-being’ rather than anything more specific and potentially troublesome with regulators.
So there has been some response.
But the analyst said Danone needed to implement an incremental premium price-reduction plan to have any chance of retaining market share in the new landscape, a landscape that will shrink by a couple of percentage points across Europe in the next five years according to Euromonitor.
“They deluded themselves that it would carry on growing forever,” the analyst said of Danone.
Danone was wrong on that; question is what can and will it do about it now?
It may need to look back a decade or two before it can move forward.