China Food

Danone’s performance in the second half of the year has to take these factors into account. The CEO also commented on Nestle’s drinking water adjustment

Danone’s CEO believes that the food giant with brands such as altamix, pulsation and Evian should “do enough homework” to adapt to the new normal of the epidemic.

Yesterday, Danone’s second quarter report showed that its revenue fell 5.7% to 5.954 billion euro. At the subsequent performance meeting, Emmanuel Faber, Danone’s chief executive, attributed this to the impact of market blockade measures in other countries.

In addition, Danone executives attending the meeting also mentioned the expectations of milk powder business in the second half of the year, pulsating sales growth and views on Nestle’s adjustment of drinking water. Let’s have a look.

Emmanuel Faber, Danone’s chief executive

Sales of mother and baby stores soared

Let’s first look at the special nutrition business where milk powder is located.

According to C é cile Cabanis, Danone’s chief financial officer, at the meeting, the sales of professional special nutrition business increased by 2.7% in the first half of the year, thanks to the joint promotion of sales volume and price. Among them, sales in the second quarter fell by 2.2% year-on-year, due to the impact of destocking.

Although the overall decline in the second quarter, but the Chinese market still has something to be worth noting.

C é cile Cabanis said sales of specialty nutrition in China grew roughly flat in the quarter. “Among them, medical nutrition products continue to perform well, and the overall market demand for nutrition products in early life is still strong. In addition, altamic’s market share also showed good performance. “

Sales of Danone milk powder have rebounded significantly since the mother and baby stores were gradually restarted under control of the epidemic. “We saw a 50% increase in mom and baby store sales in the second quarter.” C é cile Cabanis said. But she also said milk powder sales were affected by the closure of ports in Hong Kong and travel restrictions on the epidemic.

During the period, continued high-end is still the main theme of Danone China milk powder. C é cile Cabanis said that in the second quarter, Danone launched the altamic essensis super high end series in China through cross-border channels, with the main selling points including HMO formula and organic. Xiaoshidai has introduced that this series is the first super high-end series of aitami.

In addition to introducing more new products, Danone announced this month an investment of nearly 800 million yuan in China’s specialized special nutrition business, including the establishment of a new scientific research center in Shanghai, the acquisition of Maigao Qingdao milk powder factory and the expansion of the special medical food production capacity of Wuxi factory.

At the meeting, C é cile Cabanis also specifically mentioned the investment and said: “we believe that infant formula and medical nutrition products have long-term growth potential in China, which is a crucial market for Danone.”

Looking ahead to the second half of the year, C é cile Cabanis expects the underlying trend to be “similar to what we saw in the first half.”.

“We need to be reminded that we will face a higher base of comparison in the third quarter of last year, especially in the Chinese market. Our quarterly performance is likely to fluctuate, which will depend on further destocking in the Chinese market. ” C é cile Cabanis said the market environment in Hong Kong, China and travel restrictions to and from the mainland of China are also expected to have an impact.

Drinking water strategy

According to Danone’s performance meeting yesterday, compared with the drinking water and beverage business in the first quarter, China was the “only market with improvement” in all regions in the second quarter, although the performance was still weak.

Xiaoshidai noticed that Danone senior management talked more specifically about the performance of pulsation at the meeting. C é cile Cabanis said pulsating sales were still affected by the limited rebound in outbound traffic. It is reported that pulsation fell by 25% in the second quarter, but it has been greatly improved compared with the first quarter.

Fan Yimou further revealed that in the second quarter, 20% of the channels in China’s drinking water and beverage sector were still closed. “We (overall drinking water and beverages) are still some way from returning to normal levels, but we have seen an improvement in performance in June.”.

Xiaoshidai also noted that at the meeting, some analysts asked Danone how to view Nestle’s adjustment of drinking water business, and Danone’s views on its own drinking water product portfolio.

In response to the above question, fan Yimou said that in the global drinking water market, each large player’s category combination is not the same. “Nestle, Coca Cola and Pepsi have different combinations. Danone has businesses in areas they have not yet set foot in, and these enterprises also have businesses that Danone has not yet deployed.”.

He also stressed that drinking water is mostly operated in the “local mode”, so the research must be based on the advantages of each market. “Of course, we will provide global expertise to enable our brands to win in the market.”.

In fan Yimou’s opinion, Danone should also evaluate and adjust its brand portfolio, supply chain efficiency and digitalization according to the new market situation and target. He also mentioned at the meeting that he was optimistic about the future prospects of natural mineral water and other categories.

Just last month, when Danone China confirmed that it had reached an agreement on the sale of Yili mineral water brand, Danone said that the drinking water and beverage “will adopt the mode of more focusing on the overall development of the national market in the future, so as to realize the efficient operation of sales and production”. It also pointed out that the future development of the imported mineral water business, including Evian and fulvic, in the Chinese market is “full of confidence” 。

Adaptability plan

Summing up the second quarter, Mr. Fan believes it will be “the most difficult quarter of the year.”.

He predicted at the meeting that growth in the third quarter would improve to some extent. However, there is also a risk that the second wave of the epidemic will affect consumer confidence in the second half of the year.

“This is a very important moment for Danone.” Fan Yimou said that at this stage, in addition to continuing to ensure employee safety and cash flow, it is also necessary to find out which consumption habits changed due to the epidemic will continue, so as to prepare for the future.

According to fan Yimou, after Danone “does its homework,” the company will implement an adaptation plan, including determining which brands and product portfolios want to retain and expand, formulating channel strategies, and reallocating funds and resources.

“We started in the second half of the year, but we want to take this up to a strategic level.” Fan Yimou said.

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