Dairy manufacturer Danone has witnessed its weakest quarter in the past decade. Lower baby food sales, normally one of the fastest growing branches, had a huge impact on the company’s results.
New rules in China
Danone’s total turnover dropped to 5.54 billion euro in the third quarter, mainly because of lower sales volumes. There was still a 2.1 % like-for-like turnover growth, but analysts had expected at least 2.4 %.
Several changes in legislation in China, including increased tax on imported baby food, had a severe impact on Danone. Retailers prefer to sell their existing stock first, as they wait for the new legislation to come into effect. Danone will have to wait to see whether the market reignites once the dust settles on the legislation.
For a long time, the dairy company took full advantage of all of China’s food scandals, because local consumers hesitated to buy local items and shopped abroad. Over the course of the third quarter, baby food sales only grew 1.7 % compared to a 6 % growth in the first 6 months of 2016.
