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Danone Sticks To 2021 Guidance Amid Inflation Pressures

French food group Danone has maintained its guidance that it will return to profitable growth in the second half of 2021, despite seeing sales growth slowed in the third quarter, highlighting the challenges facing its new chief executive.

The consumer goods giant, owner of Evian and Badoit water and Activia yoghurt, reiterated it expected its full year 2021 recurring operating margin to be broadly in line with the 14% achieved last year, as it banked on productivity gains and pricing actions to mitigate inflationary pressures.

Danone posted a 3.8% rise in third quarter underlying sales to €6.16 billion, slightly above analysts' expectations for a 3.6% rise.

This, however, marked a sequential slowdown from the 6.6% sales growth achieved in the second quarter and reflected a slower recovery in its waters business, where strong restrictions tied to COVID-19 measures weighed on sales in Indonesia.

Divisional Performance

In China, Mizone water sales growth declined to the low single digits, contrasting with a strong performance of Evian, Volvic and Font Vella waters in Europe.

Overall Essential Dairy and plant-based products delivered sales growth of 4.1% but the performance of the plant-based portfolio in North America was hit by supply and logistics disruptions hampering Danone's ability to produce and serve customer demand.

Sales And Margins

The main task for Antoine de Saint-Affrique, the former boss of chocolate company Barry Callebaut who took the reins at Danone in September, will be to boost lagging sales and margins.

The COVID-19 pandemic has further complicated matters for Danone by hitting sales of bottled water sold in bars and restaurants, while pushing up costs for transport to raw materials.

Finance chief Juergen Esser told journalists that overall Danone faced inflation costs of around 9% in the second half of the year and that the new CEO would detail its strategic roadmap for the group at a Capital market day on 8 March 2022.

News by Reuters, edited by ESM. For more A-Brands stores, click here. Click subscribe to sign up to ESM: European Supermarket Magazine.

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