Dairy at Danone down in volume, but up in value
To start off the year, Danone targeted 3% like-for-like sales growth across its global business. In its third quarter results, it announced that its current expectations are lower, between 2.5% and 3%. The first nine months of 2019 saw an average of 2.1% growth.
The Essential Dairy and Plant-based sector of Danone had mostly stagnant sales, up just 0.7%. But the total category saw a 3.4% increase in value, and a 2.7% decline in volumes. Danone said its North American business is facing a ‘challenging consumer environment’ for dairy at the moment.
Coffee creamers and plant-based posted solid growth and yogurts held market share in a declining category in North America in Q3. Premium dairy sales declined despite the good performance of the core business under Horizon brand, according to Danone.
But the rest of the world is still seeing positive momentum. The plant-based Danone brands are delivering consistent strong growth, including a double-digit growth of Alpro. In Europe, Danone is transforming its dairy business to appeal to new generations and bring in plant-based.
Emmanuel Faber, chairman and CEO of Danone, said, “Across Danone, many of our initiatives aimed at quality of growth, product innovation, price-mix enhancement and revenue management discipline are gaining further traction with positive outcomes for our consumers and customers.
“Mindful of growing geopolitical uncertainties and softness in some markets, we continue to transform our business at pace so that it is well-positioned to respond to market needs. This keeps on track to deliver sales growth acceleration, steady improvement in recurring operating margin and strong recurring EPS expansion.”
Danone’s Essential Dairy and Plant-based posted slight increases: in the first quarter sales increased from €3.296m ($3.68m) in 2018 to €3.308m ($3.69m) in 2019, the second quarter rose from €3.257m ($3.64m) in 2018 to €3.283m ($3.67m) in 2019, and the third quarter jumped from €3.214m ($3.59m) in 2018 to €3.240m ($3.62m) in 2019.
During the third quarter, Danone also announced the hiring of Nigyar Makhmudova as executive VP of growth and innovation. She is responsible for overseeing the company’s global marketing, innovation, R&D, digital and sales functions, and joins as a member of Danone’s executive committee. She was appointed on August 20.
“In 2019, Danone expects further cost inflation with a mid-to-high single digit inflation in the costs of raw and packaging materials, including: milk price inflation high-single digit overall, on the back of a rebalancing supply and demand dynamic, continued inflation in PET cost driven by sustained market demand,” Danone said.
