Danone saw its shares slide this morning, despite a profit increase

Danone saw its shares slide this morning, despite a profit increase

Danone has said that emerging markets will be its key focus for the remainder of the year, as it seeks to capitalise on consumer health trends in soft drinks.

Speaking on the firm's first-half earnings call today (28 July), Danone's co-COO, Emmanuel Faber, told analysts that it has identified six markets to focus on, known as MICRUBS - Mexico, Indonesia, China, Russia, US and Brazil. Faber said that all of these markets have shown double-digit growth for the first half of this year.

"All of these have been contributing positively to the growth of our business and no doubt with emerging countries now accounting for around 50% of total sales in the first half of this year, there will be continued positive impact on the growth due to these very important countries for us," he said.

Danone saw its share price slide this morning, despite an increase in half-year profits and rebounding bottled water sales.

Sales from Danone's waters division, however, rose by 16.6% to EUR1.45bn (US$2.07bn), driven by favourable weather conditions in Western Europe and Latin America, and a surge in demand following the Japan earthquake.

In particular, Faber pointed to Aquadrinks in emerging markets as boosting sales in the firm's waters division.

"We had an improved performance in Western Europe and the success of Aquadrinks in Latin America and Asia. So we were running at about 5 points of growth from a year ago on water," Faber said.

"There are a few different points [that helped drive growth]. One is that, we have been clearer and probably much more consistent and stringent with ourselves on the way in which we use the brand equity itself, and the brand positioning of our water brand, to expand it into Acquadrinks than we did before.

"Second, there is now a growing trend for indulgence and that is true in both dairy and water for us.

"The third aspect is that there is now a clear view that the share of business for Acquadrinks is actually coming even more from soft drinks than from water. We are eating in somebody else's space and that is on the back of recognition by most consumers that, yes, indulgence is good, but there are significant health concerns by over-consuming products that are too sweet."

Danone share price was down 0.85% to EUR50.24 at 16.40pm BST today.