In the last quarter of 2021, Danone recorded the strongest sales growth in seven years. This is no coincidence, as it has been that long since prices rose as sharply.
Prices will rise even further
Antoine De Saint-Affrique, Danone’s CEO as of last year, is getting good marks on his first report: in the fourth quarter of last year, total turnover rose 10.9 per cent, the fastest sales growth in seven years. This was also when the world’s largest yoghurt producer implemented the most substantial price increases since 2014.
For the full year, sales grew by 2.8 per cent to 24.28 billion euros. Water brands (Evian and Volvic) performed particularly well with sales growth of 7.2 per cent, but dairy and plant-based products also grew by 3.7 per cent. Net profit came to 1.92 billion euros, slightly lower than the 1.96 billion euros a year earlier.
However, the threat of inflation continues in 2022: costs will rise between 10 and 15 per cent this year, making further price increases inevitable, CFO Jürgen Esser told Bloomberg. The milk, packaging, and shipping costs have been rising for months, and that will only accelerate this year.
Finding a balance
For Danone, however, it means a tricky balancing act, as, since 2015, growth in shpments has dropped every year. Higher prices could cause a further drop in volumes. In 2021, the company also had to reorganise significantly: no fewer than 2,000 management positions were scrapped, and the yoghurt maker promised to save one billion euros by 2023.
Nevertheless, there are hopeful signs: in the fourth quarter, deliveries increased again, including in North America. That is good news because that is where Danone has already made most of its products more expensive. Also in developing countries, prices have gone up already, Europe will follow. “We’ll do what it takes on pricing within reason“, promises De Saint-Affrique, who wants even more productivity. “We’ll have to manage the balance between competitiveness and pricing.”
