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Danone records sales growth despite European demand deterioration

By Mark Astley, 27-Jul-2012

Related topics: Dairy-based ingredients, Business

Danone has warned of continued “rapid deteriation” in consumer demand in Southern Europe, despite reporting global sales growth of 5.9% for H1 2012.

The French dairy giant recorded global sales of €10.475bn for the first half of the year – a 5.9% increase on the €9.7bn achieved in H1 2011.

Weak dairy product consumer demand in Spain and other Southern European countries resulted in flat growth in Western Europe region, which recorded sales of €5.548bn.

The firm’s results were, however, bolstered by double digit sales growth in Asia and the rest of the world – regions that now account for 65% of Danone’s turnover.

Sales in the fast emerging Asian market (€1.762bn) increased by 18.2% compared with H1 2011. While sales from the rest of the world hit €3.165bn for the first half of the year - an 11.7% increase

Tough consumer environment

“The consumer environment definitely got tougher in Europe, particularly Southern Europe in the first half of this year,” said the firm’s H1 results statement.

Last month, the firm issued a profit warning for 2012 – reducing its operating margin target to account for the collapse of dairy consumption in Spain and other Southern European countries.

Danone has attributed the fall in consumption to the growing rate of unemployment in the country caused by the current Eurozone crisis.

“At Danone we moved quickly to manage this new situation in line with our strategic priorities: strengthening our brands and pursuing sustainable, profitable growth. Our first-half organic growth in sales stands at nearly 6%, in line with our full-year objectives,” said the statement.

“In the United States and Russia, our Oikos and Prostokvashino brands are continuing to expand rapidly.”

Emerging market growth

The firm has also pushed on with efforts to increase its presence in emerging markets such as China, India and North Africa. Some have labelled this an effort to prop up weak European demand.

“In emerging markets, we are continuing to grow at a very brisk pace and are expanding our presence, as we did recently in Morocco and India,” the statement added.

Danone entered into an agreement last month, which if completed, will see it become the majority shareholder in Morocco’s leading dairy firm – Centrale Latiére. And yesterday, it completed its acquisition of Wockhardt Group’s nutrition business – marking its entry into the Indian baby food and adult nutrition market.