The Dominion Bond Rating Service Limited (DBRS) has commented that the Danone Group “remains at a major transition point, as above-average growth could be achieved through aggressively seeking acquisitions in emerging markets in its three core categories of businesses.”

According to the DBRS, the French group has been “repositioning itself by reducing its reliance on France (now accounting for only 27% of total sales) with a strategy of international expansion through acquisition that has led non-European sales to grow to 42% of its total sales in 2000, as compared to less than 15% in 1995.”

Danone is one of the world’s leading food companies, and DBRS points out that “the strong portfolio of leading brands and the company’s greater emphasis on health-oriented products are its greatest strengths.

“On a worldwide basis, Danone holds the number one position in fresh dairy products (15% of global market share) and is ranked second in bottled water (11% share) and biscuits (9% share). Over 70% of sales are generated from brands that hold the number one position in their local markets.”

DBRS pointed out the “the company has consistently generated sufficient operating cash flows for internal needs [however] Danone funded recent acquisitions through additional debt, which weakened its balance sheet.”

In terms of challenges for the company, DBRS highlighted “the successful integration of the large number of recently completed small acquisitions”. Over the last three years, Danone has acquired or increased its ownership interest in over 35 businesses worldwide.