Danone goes beyond Greek

by Jeff Gelski
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PARIS – The boost that Greek yogurt gave to the North American market for Groupe Danone may be losing steam, which has the company trying other yogurt innovations.

“There’s no doubt now the (North American) market has become soft, soft to weak,” said Pierre-Andre Terisse, chief financial officer for the Paris-based company, in a July 25 call to discuss results for the fiscal year’s first half. “It’s growing low single digit, very low single digit in value now, slightly negative in volumes. The Greek is not driving the market as strong as it used to be.”

Danone has reinforced its market share in Greek yogurt in North America, but the company is “trying to reinvent or reopen category innovation,” Mr. Terisse said.

Recent launches include a frozen version of Oikos Greek yogurt and the Dannon Creamery brand of dairy desserts, which the company hopes will expand the North American yogurt category through the indulgent segment, he said. Through the Stonyfield Farm brand, Danone plans to put new formats on YoBaby yogurts, he said.

The CIS and North America geographical area of Groupe Danone had sales of sales of €2,330 million ($3,130 million) in the first half, which was down from €2,360 million in the first half of the previous year.

Companywide in the first half, Groupe Danone had underlying net income of €683 million ($918 million), or €1.16 per share, which was down from €873 million ($1,173 million), or €1.48 per share, in the first half of the previous year. Sales of €10,467 million were down from €11,058 million. Unfavorable trends in currencies included the Argentine peso, the Russian ruble and the Indonesian rupah.

Inflation in milk prices put pressure on margins in Danone’s fresh dairy products business line, which had sales of €5,640 million, down from €6,023 million in the first half of the previous year.

A false safely alert triggered by supplier Fonterra in August of 2013 affected Danone’s Early Life Nutrition business line, mostly in China. Sales of €2,071 million in Early Life Nutrition were down from €2,383 million in the first half of the previous year. Groupe Danone has switched to other supply sources and away from Fonterra.

“This has created some disruption on the supply chain within (the business line) during the first semester, but this is behind us now,” Mr. Terisse said.

In the Waters business line, first-half sales of €2,074 million were up from €1,991 million. In the Medical Nutrition business line, first-half sales of €682 million were up from €661 million.
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