Transformation Underway at Danone
Danone has delivered a 4.4% organic rise in sales to €22.41 billion for 2015 with trading operating income up 5.7% to €2.89 billion with operating margin improving by 17 bps on a like-for-like basis for 2015.
The results mark the start of a recovery for the French food group following a tough year in 2014, when it reported a fall in sales and trading margins. Danone has been restructuring its European Fresh Dairy Products business to regain its competitive edge and to adjust to the new trading environment and also reviewing its business model in China.
“Over the past 18 months, we have been making the changes necessary to take up the challenges of a new and ever changing world, as we pursue our purpose to provide pleasurable, healthier, sustainable hydration and eating options to our consumers each and every day,” says Emmanuel Faber, who became chief executive in October 2014, with a mission of returning Danone to “strong profitable and sustainable growth” by 2020. “With organic growth of +4.4% and trading operating margin up +17 basis points like-for-like, our results are very solid and perfectly aligned with our objectives. They confirm that we have taken this mission to a new level, paving the way for strong, profitable and sustainable growth by 2020.”
Emmanuel Faber, CEO of Danone.
Danone’s Fresh Dairy Products business, which accounts for almost half of total sales, increased sales on a like-for-like basis by 0.6% to €11.057 billion in 2015 and started to reap the rewards of the restructuring with trading operating margin improving by 24 bps to 9.95%. Benefiting from the popularity of its international brands Aptamil and Nutrilon and strong demand in China, the Early Life Nutrition business increased like-for-like sale by 9.8% to €4.99 billion as trading operating margin rose 142 bps to 19.32%.
In China, Danone is pushing ahead with efforts to build a sustainable model of growth by continuing to invest in the Aptamil and Nutrilon brands, and by forging a structure for its local internet offering using a direct distribution model, while developing sales through specialized stores.
He adds: “In 2016, in a global context that remains volatile, Danone will continue to invest behind its brands and will mark a further important step to develop a balanced model of strong, profitable and sustainable growth.”
Danone is projecting organic sales growth of 3% to 5% and a further solid improvement in trading operating margin for 2016 as it benefits from further cost reduction, continuing improvement in its European dairy business and rising baby food sales in Asia.
Danone’s goal for 2020 is to generate strong, profitable and sustainable growth, more specifically overall growth equal to or higher than 5%.
