High-protein innovation may be the talk of the food and beverage industry, but for Oikos owner Danone, another segment has been fuelling group sales in recent years.
Specialized nutrition has delivered the highest like-for-like growth in each quarter of FY2025 so far and was trumped by other categories only twice (in Q4 and Q1 FY2024) in FY2024.
The category unites Danone’s portfolio of infant, early-life, medical and adult nutrition solutions. Of those, medical nutrition has been the group’s star performer.
“For us, this is ‘the jewel’, and it’s one of our growth engines today, €3 billion of net sales growing double digit quarter by quarter,” CFO Juergen Esser told Barclays analyst Warren Ackerman in 2024. “And we happen to be the number-one in Europe, and number one in China.”
A year on, Danone has also gained a foothold in North America by adding tube feeding company Kate Farms to its Nutricia division, already bolstered by earlier acquisitions (more on this later).
“With Kate Farms, for the first time we have a sizeable platform in the US that will help us to accelerate on this very important category moving forward,” Esser told investors in the company’s Q3 FY2025 update.
“We want that to become a powerhouse of growth for North America.”
A €30bn market
Danone estimates the value of the global medical nutrition space will skyrocket to €30bn by 2030 – a 50% increase – with the Chinese market doubling in the same period. Demographics, advancements in diagnostics, and a growing understanding of the role of medical nutrition products to aid recovery are the three main category drivers. Today, the medical nutrition market “is growing double digits everywhere in the niches where we play”, Esser said.
Being a major player in Europe and China, Danone has been expanding its presence in the largest medical nutrition market: North America. The company has carved out a niche with specialized nutrition products for infants, children, and adults with specific health conditions, but more recently, the strategy has shifted towards bolstering its tube feeding and oral nutrition offering.
Acquisitions have been critical in the process: Danone acquired tube feeding companies Real Food Blends (in 2020), Functional Formularies (in 2024) and Kate Farms (in 2025).
Why focus on tube feeding? It’s a fast-growing segment (CAGR of around 6%) and investment provides a fast ROI for Danone, as Esser explains. “Returns on these investments are very immediate, when we come to tube feeding. And you saw it in our numbers in H1, very, very impressive growth numbers. Oral medical nutrition is a bit of a slow burn: it will take one or two years until we get size and scale, but we are very, very confident that we can.”
With Kate Farms onboard - a company that majors on organic, plant-based products - Danone is “playing with a portfolio which is addressing baby medical nutrition and adult medical nutrition and [for the] first time, we can access the healthcare system and the hospital system of the US,” according to Esser.
“We have asked the management of Kate Farms to take care of the totality of the businesses we have now in the US,” the CFO said. “We are more than doubling suddenly the size in the US, and we are very ambitious. We want that to be a multi-billion platform at some point. And we will be investing into this because it’s the moment to do so.”
Oral medical nutrition may be delivering slower ROI, but it’s a sizeable growth opportunity nonetheless. Around 50% of Danone’s medical nutrition offering in Europe is in the oral category - but in China, the category is yet to truly take off.
“This is a category which hardly exists in China,” Esser said. “And so, we are investing a lot in order to build awareness about the need to treat also the patient at home, and we believe that this is the next growth engine for us in China.”
Tube feeding is also growing in China, as the country’s market is shifting from parenteral (intravenous) feeding to enteral. Enteral tube feeding is now widespread in tier 1 hospitals according to Esser, but not so much in the largest, more advanced tier 2 and 3. “We have been investing a lot into medical sales force to make sure that we can also address this opportunity, which goes beyond tier one,” he explained.
Specialized nutrition powers Danone’s sales
Essential Dairy and Plant-based (EDP) continues to deliver the largest chunk of sales for Danone group-wide, but Specialized Nutrition has become increasingly important.
In FY2023, Specialized Nutrition sales amounted to 30.7% of group sales. That proportion rose to 32.6% in FY2024; and in Q1 to Q3 FY2025, the category’s sales form more than a third (33.5%) of Danone’s group sales to date.
Specialized Nutrition was the best performer in China, North Asia and Oceania, where Danone recorded impressive double-digit growth in Q3, with like for like sales up 13.8% (+15.1% volume/mix, -1.3% price).
Specialized nutrition recorded 17% LFL growth in the quarter, with infant formula and medical nutrition key to this performance. In the last three quarters, category sales have risen 14.2% in China et al, and 7.5% in terms of global sales.
That’s twice as much as EDP (+3.4%) and more than four times the LFL sales growth achieved by Waters.
Both Waters and EDP show major promise for the food and beverage company in the region, thanks to Oikos’ expanding presence in Japan and Mizone’s growth within the healthy hydration category. But in the less saturated medical nutrition space, particularly in China, it’s clear where the really big opportunity lies for the company.