Innovation and geographical expansion to boost Danone’s plant-based businesses

By Katy Askew

- Last updated on GMT

Danone plans to launch Alpro in more markets, including Russia
Danone plans to launch Alpro in more markets, including Russia
French dairy giant Danone’s plant-based business, which includes the Alpro brand in Europe, expects to accelerate growth trends, propelled by innovation and expansion into new markets.

The company, which reported its first-quarter results yesterday (17 April), said that its plant-based business delivered “high single-digit growth”.

Finance chief Cécile Cabanis described the plant-based performance as “strong”​. She noted: “Across the world and segment we can admit to high single-digit growth. Silk and So Delicious are growing strongly… Alpro is continuing to post double-digit growth.”

Danone reported its first-quarter sales this week. On a like-for-like basis, revenue grew 0.8% in the three month period. Broken down by division, LFL revenue was up across all units: specialty nutrition increased 0.4%; plant-based and dairy sales were up 0.2%; and the group’s waters business was up 3.9%.

However, the Essential Dairy and Plant-based (EDP) operating unit failed to meet market expectations due to what Cabanis described as a “slow start”​ to the year. Divisional sales were up 0.2%. Analysts at Bernstein had expected growth of 1%.

Bernstein analyst Andrew Wood noted: “EDP saw a sequential slowdown versus Q4 2018 (+1.5%), as performance was impacted by one less trading day in Europe and North America, the pruning of the premium dairy portfolio in North America…and the political boycotts in Morocco. More positively, the plant-based segment grew in the mid-to-high single-digits, with all brands contributing positively, except Vega.”

Accelerating in plant-based

Cabanis was confident that the company will be able to accelerate the performance of its plant-based brands to meet its longer-term objectives.

Last year, Danone set itself the target of tripling its global plant-based sales from €1.7 billion last year to around €5 billion by 2025. This would require a long-term compound annual growth rate of 15% - meaning Danone will have to significantly accelerate sales.

The company said it expects EDP growth to accelerate in the second quarter to 2% and then “sequentially”​ in the second half of the year.

“The acceleration of growth will come from two things,”​ she said during a conference call.

“The first is that we continue to expand into geographies. We are starting expansion in central Europe and southern Europe. We are expanding in Russia, which is a very big country. We will continue to enhance the expansion of Alpro into territories where it is not.”

Alpro ice cream
Alpro's extension into the freezer aisle has proven popular with European consumers, Danone revealed

Danone also plans to grow its US brands, Silk and So Delicious, in Latin America.

The second growth lever will be innovation and “adjacency”​, Cabanis continued, pointing to the success of Alpro’s move into the freezer aisle last year. “We launched an ice cream which is working very well in Europe. There are some other opportunities in terms of adjacency.”

Cabanis also hinted that the company will continue to explore different plant-based ingredients through its R&D efforts “Innovations [will] use the full range of plant based ingredients,”​ she revealed.

“We are fully confident on the building of our plant-based plan. Looking at our ambition, which we mentioned last year, of €5 billion in [sales by] 2025, this is the way we will continue to expand.”

Slower growth dairy investing in innovation

Innovation is also a crucial part of Danone’s strategy for its dairy brands, which Cabanis said have “stabilised”​ in Europe thanks to “strong value-added innovation momentum and investment in fast growing trends, such as organic”.

Product development behind probiotics and the Activia brand is also paying off, the finance chief revealed, with the launch of Activia shots proving popular and “bringing especially Italy back to strong growth”.

She added that upcoming launches are expected to further support dairy sales in the coming year. “Undergoing initiatives such as Activia Mix and Go expanding into new moments of consumption and no added sugar presenting almost half of the volumes in the UK”​ are expected to feed through to the top line.

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