Danone “Back in the Game” with market-share-boosting investments

FRANCE – Danone is positioning itself for a significant market-share boost and volume-led sales growth, focusing on improved margins, according to CEO Antoine de Saint-Affrique.

During Danone’s annual capital markets day, de Saint-Affrique underscored the company’s commitment to regaining market share and solidifying its role as a leader in the dairy category.

“We are progressively back in the game” on investment, he stated. “If you are, as we are, category leaders, you invest in the growth in your category. You don’t wait for your category to grow; you shape the category, take the leadership of your category, and drive the penetration of your category.”

However, investors were disappointed as the company maintained its “mid-term” like-for-like sales growth target at 3-5%.

Despite this, Danone’s long-term ambition to achieve US$$3.2 billion in free cash flow was well-received, with de Saint-Affrique emphasizing that reaching this milestone would significantly enhance the company’s value-creation potential.

Health and nutrition are central to Danone’s strategy, particularly gut health and protein.

The company’s Specialised Nutrition division, especially medical nutrition, will play a crucial role. De Saint-Affrique highlighted the importance of embracing health-focused initiatives, warning that companies risk falling behind if they do not adapt to this trend.

“We are right at the heart of where we think food is going, which indeed increases the company’s resilience,” he noted, particularly in light of global pressures from countries imposing “tax” measures on unhealthy products.

Finance chief Juergen Esser indicated that Danone’s growth would be primarily driven by volume and mix, stressing the importance of reinvestment to reclaim market shares and drive category growth.

He explained that the pace of gross margin expansion would depend on volume and mix growth, with pricing to neutralize net inflation in costs of goods sold (COGs).

Industry analysts at Barclays expressed confidence in Danone’s strategy, describing it as a “relative winner” in the food industry.

They noted that achieving US$3.2 billion in free cash flow would mark a 50% increase from Danone’s previous US$2.1 billion, enhancing the company’s cash-flow power and deleveraging benefits.

Danone is also open to mergers and acquisitions (M&A), with de Saint-Affrique suggesting that an improved return on investment and positive volume/mix performance opens the door to potential acquisitions.

Medical nutrition was highlighted as a key strategic focus, with de Saint-Affrique describing it as a “fantastic opportunity” amid pressures on health systems, particularly in Europe.

“We will see a rebalancing between medical nutrition, on the one hand, and early life nutrition. It doesn’t mean we want to slow down in early life nutrition,” he concluded.

“It’s segmenting the market, it’s bringing innovation, it’s driving penetration, it’s extending the journey. If you look at the macro picture, medical nutrition should go faster than our early life nutrition.”

Danone’s forward-looking approach aims to ensure sustained growth and profitability by leading category innovation and responding to evolving health and nutrition trends in the global food and beverage industry.

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