Danone has upped its 2023 revenue guidance, claiming the Renew turnaround strategy is bearing fruit.
The Actimel and Volvic brand owner’s third-quarter sales growth figure beat analysts’ estimates, linked to higher prices but with an accompanied decline in volumes.
Danone now expects like-for-like sales growth to reach 6-7% this year, compared to a previous estimate of 4-6%.
The company pointed to its turnaround strategy as the reason for the improved performance.
CEO Antoine de Saint-Affrique said: “Eighteen months after the launch of Renew Danone, the benefits of our strategy are starting to show. This quarter is the seventh consecutive quarter of delivery, with sales up 6.2% on a like-for-like basis, notably supported by the sequential improvement in volume/mix.
“We maintain our focus on addressing our underperformers and investing with discipline behind our winners.”
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He added: “We continue to view our future with confidence, despite a challenging environment…we will also keep deploying consistently our business model and will further increase our reinvestments behind brands and innovation.”
Danone launched its turnaround strategy in March last year, soon after de Saint-Affrique was appointed CEO.
The company adopted a ‘fix it or flog it’ approach to breathe new life into parts of its portfolio.
Laying out the path for organic growth and margin accretion at the time, the former Barry Callebaut chief said 10% of Danone’s portfolio could be up for “rotation”.
The 6.2% rise in third quarter like-for-like sales de Saint-Affrique referred to today (26 October), saw Danone post three-month revenue of €6.9bn ($7.3bn). Analyst consensus had predicted a 4.7% increase.
Danone increased its prices by 6.6% during the quarter.
Revenues were up in all territories, with sales in Europe increasing by 5.1% year-on-year, North America seeing a 3.9% rise and China, North Asia and Oceania climbing by 8.4%.
UK investment bank Barclays was impressed with the results.
In a research note, it said: “In EDP [Essential Dairy & Plant-based], the portfolio transformation started delivering results, with notably a solid performance of Actimel, Danone, YoPro and Alpro brands.”
It added: “We believe that Danone is one of the most-compelling turnaround stories in staples and is well positioned and ‘set up’ for 2024, with volume/mix acceleration underpinned by an inflection in the gross margin.
“Clearly there is still plenty of work to do but the 18 months of reinvestment is starting to pay real dividends.”
Meanwhile, Danone CFO Juergen Esser told analysts in a post-results call today that it could benefit from the emergence of anti-obesity drugs.
The food industry is currently assessing the impact that GLP-1 weight-loss drugs, used by millions of Americans and increasingly gaining a foothold in the rest of the world, could have on their product sales.
But it is thought manufacturers with product ranges perceived to be healthier than their peers could be beneficiaries of a consumer base made more health-conscious after seeing weight losses.
“If anything it will benefit our business,” News agency Reuters reported Esser as saying.
Barclays has previously said Danone could be one to benefit from its product range in this regard with high-protein yogurt and drinks being conducive to GLP-1 muscle wastage recovery.
It said “The notable point about Danone’s portfolio is that 90% of its portfolio can be consumed daily which for us is evidence of its ‘relative’ health credentials.”
Last month, Danone launched a “global strategic partnerships programme” in a bid to forge a closer relationship with suppliers, start-ups and institutions.
In an attempt to move away from what it sees as transactional relationships with suppliers, the company suggested the Partner for Growth initiative will help it “seize consumer trends to unlock growth opportunities for both Danone and its partners”.