Danone fares well under the current confinement: in March, sales increased by 5 to 10 % thanks to consumer stockpiling. In its first quarter, the group recorded a 3.7 % sales increase on a comparable basis. Belgian subsidiary Alpro is even struggling to meet demand.
Stockpiling (soy) yoghurt
In the past quarter, Danone’s turnover reached 6.24 billion euros: its growth mainly comes courtesy of the wave of consumer stockpiling that occurred in March, at the beginning of the corona confinement period. Sales increased by 5 to 10 % that month. Customers purchased 4.6 % more dairy products (including plant-based products) and sales of speciality food products increased by 7.9 %.
According to the Belgian newspaper De Tijd, Alpro grew exceptionally fast: the Belgian producer of plant-based dairy alternatives saw its sales increase by 20 % in the first quarter. The growth in demand is such that factories cannot keep producing the entire range, partly because of a smaller workforce and the fact that employees have to keep their distance. Alpro has therefore chosen to focus temporarily on its best-selling products.
The closure of restaurants and cafés, on the other hand, led to a 6.8 % decline in Danone water sales. Approximately 40 % of the division's sales normally come from the out-of-home channel. In China, where the relaunch of the Mizone brand was postponed to the second quarter, water sales fell by approximately 40 %.
2020 is unpredictable
At Danone's French head office, management warns for the flip side of the coin: CEO Emmanuel Faber no longer dares to issue an annual forecast and withdraws earlier ones. In February, he had forecast comparable sales growth of 2 to 4 % and an operating margin of more than 15 %, which was already a correction downwards.
Faber warned that first quarter growth will not be repeated: stockpiling by consumers is now over and supermarkets will try to get rid of their accumulated stocks. Moreover, additional costs weigh on the margins: safety measures in the factories, extra days off and bonuses for employees as well as more expensive transport to the stores all cause a significant cost increase.
Danone nonetheless remains confident in its strategy and objectives for 2030. The dairy manufacturer wants to focus on "healthier" products containing probiotics, proteins and plant-based ingredients. "We absolutely believe that the trust in brands’ health, ethos and fairness is going to be very important, (and) increasingly important in the future, both through and after the COVID crisis", the CEO said according to Reuters.