PARIS (Reuters) – Danone (DANO.PA) is banking on its expansion into the lucrative healthy eating business to produce sales growth that will beat the French food company’s rivals over the coming decade.
FILE PHOTO: The logo of French food group Danone is seen at the company’s headquarters in Paris, France, December 20, 2017. REUTERS/Charles Platiau/File Photo
The world’s biggest yoghurt maker told an Investor Seminar in London on Monday that it was relying on its fast-growing food categories such as probiotics, organic food and water to deliver “superior sustainable profitable growth” by 2030.
The maker of Evian water and Activia yoghurt also said it was on track to deliver 1 billion euros in cost savings by 2020 and stuck to its 2020 targets of higher sales growth and profit margins.
As more consumers opt for healthier diets they are prepared to pay a premium for trying to pursue a more socially responsible lifestyle. Danone – along with rivals such as Nestle (NESN.S) – has been seeking to rebuild consumers’ trust in big food companies.
Last year, for example, Danone bought U.S. organic food producer WhiteWave in a $12.5 billion deal, to boost growth and bring the company closer to current healthier eating trends.
Francisco Camacho, executive vice president for Danone’s ‘Essential Dairy and Plant Based’ business told the investor meeting he expected to triple the size of the plant-based business to 5 billion euros ($5.75 billion) by 2025 from 1.7 billion euros in 2018.
Danone has been stepping up efforts to attract young consumers with products featuring probiotics, protein and plant-based ingredients, all fast-growing product categories.
For example, the company has introduced Activia shots in the United States and has been looking to launch the product in other markets.
Strong growth in China has helped Danone to outperform rivals’ growth in recent quarters.
But last week, Danone reported a 1.5 percent fall in third-quarter sales at its specialised nutrition arm, as sales in China dropped 20 percent due to a lower birth rate and tougher year-ago comparables. It has said the slowdown in China would last for several quarters.
Bridgette Heller, executive vice president for Danone’s ‘Specialized Nutrition’ division, said on Monday at the investor meeting she expected the specialised nutrition business would return to “strong positive” sales growth in China in the second half of next year.
Heller also expected the Chinese infant formula market to grow by low-to-mid-single digits in coming years, and that Danone would outperform the market.
While there were fewer births in China, Danone would continue to benefit from demand for its ultra-premium infant formula products such as Aptamil Platinum and for its medical nutrition products.
“China will be volatile over the next quarters but it will continue to big a big value creator for Danone,” CEO Emmanuel Faber said at the meeting.
For 2020, the Danone group continue to target an operating margin above 16 percent and like-for-like sales growth of 4-5 percent. This compares with sales growth of 2.5 percent and an operating margin of 14.36 percent achieved in 2017.
Danone pushed back its target for Return On Invested Capital (ROIC) of 12 percent to 2022 from 2020 due to currency evolution and new accounting rules.
Reporting by Dominique Vidalon; Editing by Ingrid Melander/Sudip Kar-Gupta/Jane Merriman