For Danone, a French food giant with brands such as etamey, pulse and Evian, the performance in 2020 and the recovery idea in 2021 are crucial.
According to the 2020 performance report released by Danone this afternoon, its annual net sales were 23.62 billion euros (about 184.775 billion yuan, 25.29 billion euros in 2019), and the year-on-year decline rate of sales in the fourth quarter further narrowed to 1.4%. In addition, the company’s recurrent operating profit margin in 2020 is 14%, and its free cash flow is 2.1 billion euro.
In terms of sub sectors, basic dairy products and plant-based products resumed steady growth, with a year-on-year growth of 3.4%, the highest growth rate since 2012. The special nutrition, drinking water and beverage sectors were affected by the channel interference related to the epidemic. In the fourth quarter of last year, the specialty nutrition business continued to improve in all regions.
By region, the Chinese market has been praised. Danone reported that in the fourth quarter, sales in other global markets (excluding Europe and North America) narrowed from 4.1% to 1.9% year-on-year, mainly due to better performance in China.
“COVID-19 has brought us short-term challenges in many key categories and regions, but it is clear that we have also identified significant long-term opportunities. These opportunities exist in Danone’s strategic framework and in our portfolio of selected categories over the past few years. ” Emmanuel Faber, Danone’s chairman and chief executive, said in the circular.
Xiaoshidai noted that at the subsequent analysts’ meeting, fan Yimou and Juergen Esser, the new chief financial officer of Danone, who appeared at the same meeting for the first time, talked in more detail about China’s milk powder business scale, milk powder market competition and other issues. Let’s have a look.
Milk powder business
Let’s take a look at the nutrition business where the milk powder is.
According to Danone’s report today, the sales volume of its specialized special nutrition business (Note: including early life nutrition and medical nutrition where infant milk powder is located) in 2020 decreased by 0.9% year-on-year to 7.192 billion euros (about 56.229 billion yuan), and the recurrent operating profit margin decreased by 74 basis points to 24.5%. “This mainly reflects the decline of infant nutrition in China and the impact of epidemic related costs last year.” According to the circular.
As for medical nutrition, Juergen Esser revealed at the meeting that the business will grow in 2020, and the Chinese market will grow again in the fourth quarter.
Specific to the fourth quarter, the circular pointed out that due to the improvement of business momentum in all regions, the year-on-year decline of special nutrition sales had narrowed to 3.1%, while the decline in the third quarter was 5.7%.
Let’s look at the details of the Chinese market. Xiaoshidai noticed that at today’s meeting, fan Yimou disclosed that Danone China’s infant formula is close to US $2 billion (now about RMB 12.921 billion).
Danone said in the notice that in the fourth quarter, China’s professional special nutrition business still declined year-on-year, but has improved compared with the third quarter. In terms of sub channels, the business of cross-border sales channels of special nutrition in China has improved on a month on month basis, while the domestic sales channels have resumed growth, with a low single digit growth rate.
Turning to cross-border sales channels, Juergen Esser said at the meeting that these channels include indirect channels (such as purchasing on behalf of others) and cross-border business in Hong Kong, China. Due to the continued closure of Hong Kong ports and travel restrictions, there was still a large decline in the fourth quarter, but it was improved by 60% compared with the same period in the third quarter.
As for domestic sales channels, Juergen Esser revealed that “the sales of mother and baby stores, modern trade and direct e-commerce channels achieved low single digit growth in the current quarter.” He also said that the growth was mainly due to the “brilliant performance” of Atami and its leading sales during the “double 11” period.
According to Juergen Esser, Danone’s three brands, Atami, nuoyonen and kerikon, have gained more market share in Chinese and English label products. According to the conference materials read by xiaoshidai, Danone calls etamet the first foreign brand in China’s infant formula market share.
Looking forward to China’s professional special nutrition business in 2021, fan Yimou said at the meeting that as the epidemic related costs are one-time expenses, and Danone’s Chinese label and English label products have successfully stabilized and won market share, he is confident in the development of this business this year.
Xiaoshidai also noted that at the meeting, some analysts asked Danone how to view the increasing competition caused by the rise of China’s domestic milk powder brands.
In this regard, fan Yimou said that most of the local manufacturers whose market share has increased come from other local brands and a few foreign brands, but Danone’s share has not been lost.
He also pointed out that in addition to preparing for the recovery of cross-border channels, Danone is also rapidly promoting the development of domestic production capacity in China, and the Qingdao factory is now ready for production. In addition, Danone will continue to register new formula for milk powder.
“You need to go step by step and achieve success at every step to unleash the potential of our innovative product line for the Chinese market.” Fan Yimou said at the meeting.
In 2020, Danone has invested heavily in China’s milk powder market. According to xiaoshidai, Danone has announced that it will invest nearly 800 million yuan to increase its special nutrition business in China, including the establishment of a new scientific research center in Shanghai, the acquisition of Maigao Qingdao milk powder factory and the expansion of special medical food.
In addition, the company continued to make innovations in China, successively introducing the world’s first super high-end infant formula series, etamex essensis, special products “new Tsuen star plus” and “new Comte 1 +”, and officially entering China’s children’s growth milk powder market through the launch of etamex aptagrow.
Xiaoshidai also noticed that in 2020, another major brand of Danone China, pulse, will finally record a positive growth. Danone reported today that pulsation achieved growth in the fourth quarter, which was “encouraging” given that China’s travel indicators have not yet returned to pre epidemic levels.
Last year, pulse launched the largest brand upgrade in recent years. The new pulse will not only launch the brand new manifesto “pulse by me”, but also upgrade the product formula, carry out taste innovation, and appear with new packaging design.
Key points at present
Looking ahead to 2021, fan Yimou expects Danone to return to growth as soon as the second quarter.
He pointed out in the circular that the first quarter of 2021 will face the challenge of a high comparative base, especially the special nutrition business in China. In addition, as the global government health strategy will continue to bring uncertainty to the speed of recovery, this will lead to longer pressure on the drinking water and beverage business.
“So 2021 will be a year of recovery. Our focus at this stage is to strive to resume the growth of sales revenue as soon as possible in the second quarter of this year. We are fully confident to create appropriate conditions, grasp the positive momentum of development, and return to the track of achieving the goal of profitable growth in the second half of the year as soon as possible. ” Fan Yimou said.
According to the data of Danone’s meeting today, the company’s target in 2022 is that the recurrent operating profit margin will be higher than 15%, and the medium-term target is that the sales will grow by 3% ~ 5% year on year, and the recurrent operating profit margin will remain in double digits.
In terms of products, the company plans to cut its SKU by 20% by the end of 2021 to enable more selective and meaningful product innovation. At the same time, Danone will make a reinforcement acquisition. Just today, Danone announced that it has reached an agreement on a wholly-owned acquisition of a small US plant-based food manufacturer named Earth Island, which has yet to obtain the necessary regulatory approval. The company has follow your heart, vegenaise and other brands. Danone hopes to contribute 5 billion euros in sales of plant-based products by 2025.
Xiaoshidai also noted that fan Yimou admitted in the notice: “in this case, we are fully aware that the stock price is not the level we want.” Shares of Danone fell 27 per cent last year and have risen 3.8 per cent so far this year, according to the company yesterday.
“I realize that this is not an easy time for our shareholders,” Mr Fan said in an interview, the Financial Times reported today According to the report, Danone’s performance last year was roughly in line with expectations, but its share price was at a seven-year low.
“We attach great importance to the decline of stock prices. I have been talking to all shareholders over the past few months and will continue to do so. ” Fan Yimou told the financial times today. He also countered the doubts of radical investors, saying that 70% of the company’s business gained or increased market share during his term of office.
Xiaoshidai said that since the end of last year, radical investors in three institutions have called for Danone to change. Among them, the proposal of separating CEO and chairman posts has aroused great concern. In the above interview, fan Yimou declined to comment on the proposal or whether he is the right person to lead Danone through its transformation plan.
“It’s not about me, it’s about the company and how it operates.” He said. “I’m leading this [transformation] now, and we are very clear that this is the agenda for restoring growth in the future.”
Xiaoshidai introduced that in order to adapt to the “new world of epidemic situation” and return to the growth track as soon as possible, Danone announced three major decisions in October last year, including reshaping the organization, strengthening the executive power and reviewing the product portfolio strategy. Subsequently, Danone released a new “local priority” strategic plan.
Fan Yimou once said in a circular that it is predicted that the “local priority” plan will help Danone regain its profitable growth in the second half of 2021 at the earliest, and will help realize the recurrent operating profit margin to return to the pre epidemic level of more than 15% by 2022.
After Danone released its full year results, radical investor bluebell again called for the separation of CEO and chairman positions, Reuters said today.
However, according to the French media echo, Danone’s board of directors held a meeting yesterday, but only focused on the financial report released today. The news points out that the relevant departments are not responsible.