(Bloomberg) -- Danone SA said health-conscious shoppers are driving demand for its products as the company sidesteps the cost-of-living pressure on consumer sentiment that’s afflicting its rivals.
The French yogurt maker’s comparable sales increased 4% in the second quarter, compared with 3.8% expected by analysts. Almost three-quarters of that came from greater volumes and consumers switching to more expensive formats, rather than price increases.
The shares rose as much as 4.8% in morning trading in Paris, and they’re up 11% over the past 12 months.
Danone bucked a trend set by rivals Nestle SA, PepsiCo Inc. and Unilever Plc, which missed revenue estimates for the quarter on weak consumer demand in some countries, including the US and China.
“People choose mineral water over a sugary drink,” Juergen Esser, Deputy Chief Executive Officer in charge of finance, said in an interview, noting that products like high-protein yogurts, vitamin water and hospital nutrition are seeing higher growth as shoppers ditch high-sugar, ultra-processed food and drinks.
“After Covid, people became more and more health-conscious,” Esser said. “This is not a short-term dynamic,” he said, and the shift could help explain the pressure on products like confectionery and chips sold by rivals.
Danone reaffirmed its like-for-like sales growth guidance of between 3% and 5% for the year, with a moderate improvement in operating margin. The quarterly growth rate was the lowest since 2021 as price rises eased.
What Bloomberg Intelligence Says
Danone’s volume-mix improvement to 2.9% in 2Q (2.1% HY), shows its brand focus and investment is making some progress, yet the company didn’t upgrade its organic sales growth target of 3-5%. This suggests its recent disposals may have been a larger drag on performance than expected and confirm that further innovation and investment is required
— Duncan Fox, BI consumer-goods analyst
Danone Volume-Mix Recovery Reassures, Yet Must Accelerate: React
China, Japan, Australia and New Zealand grew faster than other regions, with a more than 8% increase in comparable sales, despite price cuts.
Products like yogurt in Japan and the recovery of sales of the Mizone vitamin drink in China drove demand in the region, along with medical nutrition.
Overall specialized nutrition, which includes ranges for cancer patients, where Danone is expanding, was the company’s fastest-growing unit.
That business is set to be a big part of the next stage of the group’s recovery effort as CEO Antoine De Saint-Affrique seeks to capitalize on an aging populations, while using selected mergers and acquisitions to drive growth.
Danone is just one global branded goods company trying to coax back stretched customers, after a prolonged period of high inflation and lending rates forced households to cut back, often by switching to cheaper supermarket labels.
“Market doubts of what pricing pressures will do to most consumer stocks in coming quarters will get stronger,” Bernstein analyst Bruno Monteyne said in a note.
(Updates with deputy CEO from fifth paragraph.)
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