Danone said it has “no concerns” over the growth of its dairy division in the coming quarters as it posted a 0.6% increase in sales for the division this morning (23 October).
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Speaking at the group’s earnings call today, chairman and CEO Franck Riboud told analysts that although the company’s innovation in dairy may not be as “spectacular” as people would like it to be, in terms of effectiveness, “they work well”.
Riboud (pictured) said: “One of the good news is that we have been seeing consistency throughout the quarters on health-benefit products. With Actimel we have seen a real improvement in the performance, which is not where we want to be but it is moving in the right direction.”
Referring to the recent ban on its UK television advert for Actimel over false claims that the product provides health benefits to children, Riboud said that it was something Danone was taking “very seriously”.
“We at Danone do support the principal of EU regulations,” Riboud told analysts. “While we support [them], we also recognise that these new regulations are new and are complex. Therefore, they need to be adapted with time and with care. So we take that very seriously.”
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By GlobalDataHe added: “We use these claims and we communicate on these benefits to the consumer because we have a lot of research behind it and because we have been building this research through trials and a lot of research for the benefits. When we look at the results, we have been consistently producing and delivering on the benefits of the goods to the consumer.”
Riboud said the company had “confidence” in its products and that “the name of the game” is to understand the new regulations in order to strengthen its position.
He added that the growth of Activia is “accelerating and clearly improving”, Danacol remains in double-digit growth and that Actimel has been moving “in the right direction”.
Danone reported a 2.1% fall in turnover, on a reported basis, for the first nine months of 2009 to EUR11.3bn (US$16.9m).
However, excluding currency fluctuation and the sale of juice business Frucor, sales rose 2.4% on a like-for-like basis. The like-for-like growth was driven by a 3.9% rise in volume and came despite a 1.5% drop in value.
Riboud told analysts that Danone’s performance in the company’s food markets was slowing down but was still “positive”.
“Performance is more or less in line [with guidance]. From country to country the situation is different. There are some countries in which we gain and some countries in which we lose a bit of market share, it is all dependent on the country.”
Riboud added that the company has a strategy for accelerating its growth in “a few markets” and that it is looking at and working “as we speak, on small- or medium-sized acquisitions”.
Andrew Wood, senior research analyst at Sanford Bernstein, was upbeat about the French food giant’s performance.
“Danone is clearly starting to get its business moving in the right direction and management’s bullishness in recent public interactions with the market certainly proved well-founded. While Danone experienced a period of subdued growth in H2 2008/H1 2009, we believe that the trajectory for the business is now positive,” Wood said.
