Danone growth slows in Q3 due to Morocco and China issues

By Jim Cornall contact

- Last updated on GMT

The company says it continues to face the consequences of a consumer boycott in Morocco.
The company says it continues to face the consequences of a consumer boycott in Morocco.

Related tags: Danone, Nutrition

For the three months ending September 30, 2018, Danone has announced consolidated sales of €6.2bn, up 1.4% on a like-for-like basis, with a 3.3% rise in value and a 1.9% decline in volume.

Excluding Morocco where the company said it continues to face the consequences of a consumer boycott, sales were up 2.2% on a like-for-like basis in the third-quarter and up 3.8% for the nine months.

Reported sales were down 4.4% vs. the third quarter of 2017, including a negative currency impact (-5.2%) driven mainly by the appreciation of the euro against the Argentinian peso, Turkish lira and Brazilian real, which all depreciated by more than 20% in the quarter against last year; and changes in scope of consolidation (-0.5%), resulting from the disposal of Stonyfield in August 2017.

Emmanuel Faber, chairman and CEO of Danone, said, “In the latest quarter, we have seen an encouraging return to growth in Essential Dairy and Plant-Based, alongside strong momentum in Waters. This demonstrates how Danone is balancing growth across its businesses.

“Our performance in EDP and Waters compensated for challenging conditions in China where Early Life Nutrition shows changes in market dynamics following a period of exceptional growth. We also have the foundations in place to navigate current emerging market volatility and currency headwinds, which will enable us to continue to deliver sustainable profitable growth. As a result, we have today reaffirmed our guidance for the full-year.”

Essential Dairy and Plant-Based (EDP) International

EDP International registered another quarter of progress in its third quarter performance, with flat sales on a like-for-like basis, including a 5.9% decline in volumes and a 5.9% rise in value. This represents a 2.6% rise excluding Morocco, with growth in all regions having improved.

Europe delivered an important step towards stabilization with an improving sales profile, according to the company. While growth continued to be solid in Northern Europe, Southern Europe showed good signs of improvement.

Activia’s recovery is on track, returning to growth in many countries. Alpro, the company’s second largest EDP brand in Europe, continued to grow at a double-digit rate and started to expand into Eastern Europe. CIS delivered another quarter of strong sales growth, in a category driven by valorized yogurts.

Latin America posted mid-single-digit sales growth, showing progress in the Brazilian turnaround while volumes deteriorated in Argentina. Sales continued to decline in Morocco, around 35%, affected by the consequences of a consumer boycott.

EDP Noram

EDP Noram delivered its fifth consecutive quarter of growth acceleration with sales up 2.7% on a like-for-like basis (+3.5% excluding Fresh Foods), including a 3.4% increase in volume and 0.7% decline in value.

Yogurt delivered solid sales growth in emerging segments, notably probiotics, kids and plant-based. In plant-based foods and beverages, Silk and So Delicious posted strong growth, benefitting from demand for nut-based beverages and successful expansion in adjacent segments (e.g. mousses and ice creams) and formats. Coffee creamers also posted strong growth. Trends in Premium Dairy improved, posting slightly decreasing sales but positive volumes in the third quarter. In Fresh Foods, where sales declined for the quarter, the company remains focused on the business turnaround.

Specialized nutrition

After 12 months of growth in China (more than 40% in H1 2018 compared to H1 2017), Specialized Nutrition posted a sales decline of 1.5% in the third-quarter on a like-for-like basis, including a 3.9% decline in volume and a 2.4% rise in value.

Advanced medical nutrition delivered growth in the third quarter, driven by both pediatrics and adult care segments. Early life nutrition posted negative growth in the third quarter, as sales in China contracted by around 20%, reversing several quarters of growth, against an unfavorable year-on-year comparison and amid signs of changes in market dynamics in China.

Danone’s growth and year-on-year market share gains in direct channels, notably through Aptamil Platinum ultra-premium offering, did not fully offset the decline in the indirect channel. Outside China, Early Life Nutrition posted quarterly growth, especially in Indonesia, Africa and the US, while Europe was affected by adverse publicity in the UK following formula upgrade introduction.

Following the announcement, Danone shares fell, but recovered slightly by the end of the day (October 17) to show an overall drop of 4.34%.

Related news

comments

Post your comment

We will not publish your email address on the website

These comments have not been moderated. You are encouraged to participate with comments that are relevant to our news stories. You should not post comments that are abusive, threatening, defamatory, misleading or invasive of privacy. For the full terms and conditions for commenting see clause 7 of our Terms and Conditions ‘Participating in Online Communities’. These terms may be updated from time to time, so please read them before posting a comment. Any comment that violates these terms may be removed in its entirety as we do not edit comments. If you wish to complain about a comment please use the "REPORT ABUSE" button or contact the editors.