Blog: Southern Europe remains uphill struggle for Danone

Michelle Russell | 17 October 2012

Europe remained the focus of Danone's results this morning (17 October) as the French food giant revealed its sales figures for the third quarter.

Group sales were up in the three month period, but Danone continues to struggle in Southern Europe, where consumers are turning to cheaper brands in the poor economic climate.

Chairman Franck Riboud said pressure on consumer spending is affecting sales for the business lines most exposed to this region, namely fresh dairy.

The results may come a little surprise to many in the industry. Most food companies have been suffering amid the Euro-zone's debt crisis as consumers are forced to tighten their belts, particularly in Southern Europe and most notably in Spain where a VAT increase has weighed heavily on many firms.

In June, Danone issued a warning that its profits would be hit by weaker margins during fiscal 2012. The company has had to invest heavily in brand support and price positioning to shore-up its top line, hitting profitability.

The company also appears to be struggling to manage input costs, despite a softening commodities environment as dairy commodity prices retreat from last year's highs.

On today's conference call, however, CFO Pierre-Andre Terisse sounded an upbeat note on Southern Europe where he said things are "getting better", and in particular Spain where he noted "we are going in the right direction and we are doing the right things".

Rival Nestle is set to release its third-quarter results tomorrow, followed by Unilever on 25 October.


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