Blog: CAGE blog: Danone sees easing of input price pressure

Michelle Russell | 21 March 2012

With 2011 proving a tough year for manufacturers battling ever increasing commodity prices, Danone has told analysts it is likely to see some relief for the group in 2012.

Speaking at the Consumer Analyst Group of Europe conference in London yesterday (21 March), Danone's co-chief operating officer Emmanuel Faber told investors and analysts that it faced "significant" commodity headwinds last year, despite having "fought" and "resisted" against them.

Faber said Danone achieved EUR258m in savings from a "very strong" productivity programme last year and it will look to do the same again this year to absorb input inflation.

However, Faber said sugar prices remain "significantly higher" than a year ago, it sees more or less stable market prices for inputs.

"[Input prices] have grown in the second half but are not at the same level overall, which means that we should have less input price inflation this year. Last year it was about 10% last year, it will be mid-single this year," Faber said.

"Sugar is still significantly higher than a year ago, and milk, which is our biggest input overall, we are going to have inflation in first half of year, but we expect we should be neutral at least on the second half, which means there won't be price increases this year compared to what happened last year. Most of the ones needed were passed last year."

After a year in which commodity prices soared, many manufacturers expected costs to ease in 2012. 

However, the issue remains a fierce subject of debate within the industry, with raw material prices, in many cases, not falling to the extent that some had hoped.

Indeed, CAGE heard from two key food ingredient suppliers, International Flavors and Fragrances and Givaudan, which said they were confident they could push through price increases to their customers this year. 

In the face of continued low consumer confidence and some embattled major retail customers (Tesco and Carrefour being two examples), food manufacturers were hoping an easing in commodity costs would help boost margins.

Danone may be sanguine about commodity cost pressure this year but, elsewhere in the sector, others remained concerned.


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