Blog: Dean BestDanone looks to milk emerging markets

Dean Best | 24 July 2009

Despite posting an increase in profits and sales this morning (24 July), Danone CFO Pierre-Andre Terisse admitted that the company has “seen difficulties” in some emerging markets, particularly Russia.

Danone’s sales have been hit by the Russian economic slump, which has prompted a decline in consumption and caused consumers to trade down to cheaper products.

Nevertheless, Terisse remained confident. “The ball is very much in our camp… we are going to react in an appropriate manner,” he told analysts during a conference call.

Indeed, across its portfolio Danone has responded to the recession by slashing prices in an attempt to reposition itself and meet increasingly price conscious consumers’ demand for value.

While the recession has resulted in sluggish sales in Eastern Europe, the story was considerably different in China, where Danone relaunched its dairy operations in the first quarter.

“We have reached now approximately 5% market share, in fact we are higher than 5% market share in China after only a few months. The first target was to come back to the modern distribution in Shanghai. That’s done. We are now focusing on the southern cities, Guangzhou and Shenzhen. And again things are doing very well. The team is really doing very, very good work on the field.”

China’s dairy industry was wracked by last year’s melamine scandal, when it emerged that the industrial chemical had been used to artificially boost the protein content of milk.

Confidence in domestic dairies plummeted and, with consumption now returning, analysts have suggested that the market presents a considerable opportunity for international players.

This is clearly an opportunity that Danone is working to exploit.

Katy Humphries, Deputy Editor


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