Danone sales up in third quarter

By Jim Cornall

- Last updated on GMT

Danone's plant in Brazil. Pic: Danone
Danone's plant in Brazil. Pic: Danone

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Danone saw third quarter sales of €6.158bn ($7.18bn), up 5.8% on the previous year’s third quarter.

Reported sales also benefited from a 0.7% rise in the organic contribution of hyperinflation geographies to growth, as well as a slightly positive scope effect of 0.3%, mainly resulting from the combined effects of the integration of Harmless Harvest and Follow Your Heart and the disposal of Vega.

Europe and North America sales were up 3.9% on a like-for-like basis, driven by the sustained momentum in the Essential Dairy and Plant-Based division (EDP) and the recovery of Waters in Europe. Sales in the rest of the world increased by 3.7% on a like-for-like basis, led by the performance of Specialized Nutrition in China.

EDP posted sales growth of 4.1% in Q3 2021 on a like-for-like basis, reflecting a 0.6% increase in volume and 3.5% in value.

By geographical area, EDP in Europe and Noram was up 4.3% on a like-for-like basis during the period. In Europe, Essential Dairy performance was driven by the probiotics and protein platforms, led by Actimel and YoPro, which registered double-digit growth, and Activia, with momentum in the UK and Germany. Alpro delivered another quarter of double-digit growth, led by the recently relaunched Oat range. In Noram, growth was led by the Yogurt and Coffee Creations segments, with Oikos, Two Good and Activia showing strong growth and market share gains, and International Delight and Stok delivering double-digit growth.

The performance of the plant-based portfolio was impacted this quarter by supply and logistic disruptions hampering Danone’s ability to produce and serve customer demand.

Specialized Nutrition sales increased by 2.9% in Q3 2021 on a like-for-like basis, with a decrease of 5.3% in volume and an increase of 8.2% in value. Adult Nutrition delivered mid-single-digit growth, led by China and other emerging platforms, growing double-digits, while Europe delivered another quarter of growth.

By segment, both the Oral and Tube feeding platforms continue to grow, while the Healthy Ageing platform pursued its roll-out in South-East Asia and Africa. Infant Nutrition delivered moderate growth this quarter. As expected, growth was led by China, which grew double digits with a broad-based contribution from all channels. Channels distributing domestic labels delivered another quarter of mid to high single-digit growth while International labels sold in cross-border e-commerce platforms kept posting steep double-digit growth.

Cross-border indirect channels, which include Daigous and Friends & Family, were back to growth after having declined by approximately 60% in the same period last year. In Europe, sales were flat in a declining market, while in other regions, dynamics were soft due to phasing effects.

Despite short-term uncertainties, Danone said it assumes a gradual reopening of economies will continue as vaccination programs are rolled out. Meanwhile, a broad-based acceleration of inflation in milk, ingredients, packaging and logistics is expected.

Danone expects to return to profitable growth in H2, and FY recurring operating margin is expected to be broadly in line with 2020.

On July 29, 2021, Danone announced the launch a share buyback program of up to €800m ($932m) worth of shares in the second half of 2021. As of October 15, 2021, the company had repurchased an aggregate market value of €673m ($784m).

Juergen Esser, chief financial officer, said, “Today’s results further underscore our progress to profitable growth. Our actions and focused delivery across all parts of the company ensured that all categories contributed to a solid performance this quarter.

“We see clear evidence of our brands’ strengths and relevance to the global health and wellness agenda. Our Essential Dairy and Plant-based business continued its strong momentum, particularly in Europe and North America, with market share gains on key platforms. Our Waters business, led by a strong performance in Europe, benefited from the improved out of home mobility. And our Specialized Nutrition business also saw good dynamics driven by Adult Nutrition and the return to growth of Infant Milk Formula in China.

“Like just about everyone across the sector and beyond, we see inflationary pressures across the board. What started as increased inflation on material costs evolved into widespread constraints impacting our supply chain in many parts of the world. That said, we are putting even greater focus on productivity and pricing actions to mitigate the impact on our performance, thus re-iterating our FY 2021 guidance.”

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