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March 22, 2012

CAGE: Danone keeps eye firmly on Russia and US growth

Danone has reaffirmed that the US and Russia are the "two key geographies" for the group this year.

Danone has reaffirmed that the US and Russia are the “two key geographies” for the group this year.

Russia was one of three markets, including southern Europe and the US, in which Danone’s fresh dairy business struggled in 2011. But since its merge with Unimilk in 2010, the firm has been busy reshaping the business, including a portfolio revamp, new management and the disposal of unprofitable lines.

Co-chief operating officer Emmanuel Faber told the Consumer Analyst Group of Europe conference in London yesterday (21 March) that Danone was “delivering against our targets” in Russia.

“You will see more growth coming from Russia in 2012,” Faber said. “Unimilk will continue to contribute to the expansion of our margin in 2012. We expect Russia this year to deliver both in terms of top-line and margin expansion, well into the plan of 400 to 500 basis point improvement. If I go to the shorter term, 100 basis points this year. So things are moving it the right direction and according to plan.”

Earlier this month, Danone-Unimilk also increased its stake in two local dairies.

The venture, formed in 2010 when Danone merged its Russian operations with Unimilk, is now the sole shareholder in OJSC Yekaterinburgskiy Gorodskoy Molochny Zavod no.1, a dairy in the central city of Ekaterinburg. The JV also upped its stake in Kingisepp Dairy, a plant based in north-western Russia, from 23.3% to 65.6%.

In the US, Danone is looking to tap into the country’s buoyant Greek yoghurt sector. The US arm of the French group, Dannon, has made a number of yoghurt launches in the country in recent years, extending its Activia range only recently with the launch of French, Greek and Parfait Selects.

In August, Dannon launched an offensive in the US Greek yoghurt category with a brand relaunch and an advertising campaign targeting market leader Chobani. A month later, the firm opened a research and development facility to accelerate the company’s growth across the Atlantic.

Faber said Danone’s Greek yoghurt business in the US is a “work in progress” but insisted the company gaining share.

Speaking to analysts yesterday, Faber said: “As we speak, we already have 15% market share in this [Greek yoghurt] segment, so we are catching up as quickly as we can, we are adding more this year and more [will be] added in the middle of the year. We continue to expect to win our fair share of that segment.”

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