Danone’s robust half-year results fueled by formula exports and Specialized Nutrition in Europe, Asia and North America

27 Jul 2022 --- Danone’s Specialized Nutrition division drove a 3.3% sales increase in China, North Asia and Oceania, while the COVID-19 pandemic-related restrictions and lockdowns penalized Mizone – the company’s China-based vitamin drink brand.

“There was good brand performance across the board, with Aptamil gaining market shares and strong growth in the specialized pediatric range. The Waters category continues its recovery post-Covid,” a Danone spokesperson tells NutritionInsight.

Regarding the current environment and energy crisis, the spokesperson adds: “Inflation and supply chain issues are two of many facets that make up a complex, volatile and challenging market. That said, we always knew 2022 is a specific year of high inflation and one of the outcomes is price-driven growth.”

“Strong first half”
Overall, Danone achieved net sales of €13.3million (US$13.5 million) in the first half of 2022, up 7.4% on a like-for-like (LFL) basis and 12.6% on a reported basis. The company marked a 12.3% sales growth in Q2 outside of China, North Asia and Oceania, with contributions from all categories.

“This strong first half, with broad based progress despite an unprecedented external environment, is a testimony to the resilience, the focus and the engagement of Danone. We show good momentum across many facets of the business from Aptamil to Waters or North America, to name a few,” explains Antoine de Saint-Affrique, CEO at Danone.

Sales increased by double digits in Indonesia, driven by solid momentum in Specialized Nutrition (Credit: Danone). Sales increased by double digits in Indonesia, driven by solid momentum in Specialized Nutrition and robust growth in Aqua in all forms with steady market shares. All categories led to double-digit sales growth in Latin America, while operating conditions in Russia and Ukraine were constrained.

China strategic for infant formula
To deal with infant formula shortages in the US, Danone increased the shipments of Neocate specialty formula and Aptamil infant formula. NutritionInsight previously reported on the US Food and Drug Administration’s approval of 16.5 million full-size, 8 oz bottles of infant formula from the New Zealand-based Danone.

Infant milk formula saw mid-to-high single-digit growth in China, with steadfast market share gains on both domestic and foreign labels. With indirect channels (Daigous, Friends and Family) now accounting for less than 15% of the segment’s revenues in Q2, Chinese labels had double-digit growth while international labels continued to expand.

In May, Danone sold Mengniu its 25% stake Danone holds in Yashili and its 20% stake it has within the Inner Mongolia Dairy Joint Venture. In turn, Danone will purchase Dumex Baby Food Co, a Chinese producer of infant milk formula products, in total from Yashili.

China is still particularly strategic for Danone, and the disclosure will enable the firm to increase its capacity to produce infant milk formula products locally.

The anticipated proceeds will be used to reduce the company’s debt further.

Europe and China’s Specialized Nutrition
In the first half of 2022, Europe experienced sales growth of 5.4% on an LFL basis, and its recurring operating margin was 13.1%, demonstrating a decrease of 199 basis points from the previous year. Sales climbed by 5.1% on an LFL basis in the second quarter, thanks to pricing growth of 4.9% and volume/mix growth of 0.2%.

The company notes a +5.1% increase in Europe, driven by Specialized Nutrition and Waters (Credit: Danone).The performance ranged from country to country, with the UK, Spain and Poland taking the lead. By category, Specialized Nutrition, headed by Aptamil and Font Vella, saw considerable growth. Actimel, Alpro, and YoPro drove the low single-digit increase in EDP sales.

Sales growth in China, North Asia, and Oceania was 8.3 % on an LFL basis in the first half of 2022, while recurring operating margin increased by 240 bps to 32%. Sales rose by 3.3 % on an LFL basis in the second quarter, with volume/mix up 4.4% and pricing down 1.0%.

While Special Pediatric Solutions and Adult Nutrition kept up their upward progress, Waters’ Mizone fell into the mid-teens range due to China’s widespread lockdowns and mobility restrictions.

Beyond China, Activia, Danone and Oikos led Japan’s double-digit growth, and Oceanian platforms showed significant progress in the Specialized Nutrition sector.

Plant-based foods and North America
On an LFL basis, North America’s first half of 2022 sales increased 7.2%, but its recurring operating margin shrank by 235 basis points to 8.1%.

Danone’s sales climbed by 8.9% on an LFL basis in the second quarter, thanks to price growth of 6.8% and volume/mix growth of 2%. This robust growth in the US was fueled by a general uptick in popularity across all brands and categories.

EDP saw high single-digit competitive growth in coffee creamers, yogurts and plant-based foods, driven by International Delight, Oikos, Activia, Danimals and Silk.

“We started deploying our Renew Danone agenda with discipline and consistency, further accelerating our growth in Q2: we show good momentum across many facets of the business from Aptamil to Waters or North America,” says de Saint-Affrique.

“While the quality of our first half delivery is encouraging and leads us to now expect a 5% to 6% LFL sales growth for the full year, this is only the start of our Renew journey: we believe there is still much we can do to bring Danone where we want it to be and deliver on both our purpose and our business ambition.”

Meanwhile, the company’s growth in Canada was driven by Activia, Silk and Oikos brands.

By Nicole Kerr