Farming & Food

Food group Danone eyes sales growth from healthy eating trends

French company enjoys ‘solid’ revenues despite lower Chinese demand for formula

Containers of Silk soy milk on display in a Californian supermarket. Danone is eyeing higher margins from its purchase of US organic food producer WhiteWave. Photograph: Justin Sullivan/Getty Images

Tue Feb 19 2019 - 11:54

French food group Danone vowed to accelerate sales growth and profits this year, thanks to cost cuts and its push into healthy eating trends.

Danone, which bought US organic food group WhiteWave in 2017, made the forecasts after delivering higher 2018 earnings and stronger-than-expected fourth quarter sales despite a consumer boycott in Morocco and weaker demand for infant formula products in China.

Danone, which is the world’s largest yoghurt maker, said it was targeting like-for-like sales growth of around 3 per cent in 2019 and an operating margin above 15 per cent. The company added this meant it was on track to deliver on its 2020 goals.

"In 2018 we delivered a solid performance and continued to successfully transform Danone for the future. We are well on track to reach our objectives and will continue to drive positive change towards superior sustainable profitable growth," chief financial officer Cecile Cabanis said.

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The takeover in 2017 of WhiteWave, which makes almond milk and organic products, is intended to boost Danone’s profit margins, given WhiteWave’s generally affluent clientele, while Danone has also been cutting costs.

Fourth quarter sales growth alone accelerated to 2.4 per cent from 1.4 per cent in the third quarter, beating analysts’ expectations of 1.5 per cent growth.

Chinese decline

Sales of Danone’s early-life nutrition products in China fell around 10 per cent in the quarter due to a lower birth rate in that country and a tough annual comparison, but this was less than the 20 per cent decline suffered in the third quarter.

China is a key growth engine for Danone, contributing to about 30 per cent of sales of its early-life nutrition unit.

Danone has warned the slowdown in China would last several quarters. It reiterated on Tuesday that it expected the early-life nutrition business in China to return to positive growth in the second half of 2019.

While there were relatively fewer births in China, Danone has said it would continue to benefit from demand for its ultra-premium infant formula products such as Aptamil Platinum and for its medical nutrition products. - Reuters

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