PARIS — Managing a global food and beverage business is complicated. Managing that business during a period of global inflation not seen in 30 years adds to the pressure. During a July 26 conference call regarding Danone SA’s first-half performance, chief executive officer Antoine Bernard de Saint-Affrique discussed consumer trends the company is seeing in different parts of the world.
For example, he called the Chinese market “very active” and noted its later opening following the COVID-19 pandemic means consumer mobility still is increasing and demand is continuing to rise.
“If you look at Europe — actually, there is no such thing as a consumer in Europe,” he said. “The degree of inflation is very different country by country. I mean, you see what happened in the UK or in Poland is very different from what happened in France.”
In North America, he said consumer behavior is starting to become more cautious and frugal.
“We saw a bit more of consumer action in the last quarter, once again, differentiated category by category, which translated to a greater weight in some channels,” De Saint-Affrique said. “So, discounts and clubs did very well while some other channels did less well …”
The fragmentation of consumer behavior around the world was reflected in Danone’s first-half results where the company’s net income rose to €1.13 billion ($1.26 billion), equal to €1.70 ($1.89) per share on the common stock, from €774 million ($862 million), or €1.14 ($1.27) per share, the year before.
First-half sales rose 6% to €14.2 billion ($15.8 billion) from €13.3 billion ($14.8 billion) the year before. Pricing contributed 9.4% to the sales growth while volume/mix was down 1.1%.
“Over the last few months, we have defined a new architecture for the Danone brand, tiering and segmenting the brand by occasion, by format, price points and channel,” De Saint-Affrique said. “On the one hand, we have strengthened the core of the offering, adapting formats and price points to recover volumes, and obviously operating leverage. But also, and this is important, to drive brand penetration at a time where some shoppers may start feeling the squeeze from inflation.”
He added, “importantly, we made consistent progress on our strategic agenda in an environment that remains volatile and challenging. The combination of resilient volume mix, continued pricing where needed and high productivity allowed us to expand our margin from operation by 93 bps compared to last year.”
In North America, Danone’s sales rose 7% to €3.14 billion ($3.50 billion) during the first half of the year. Brands contributing to the growth included Coffee Creations, International Delight, Stok, Oikos and Evian.
The company also provided an update regarding the state of its business in Russia. On July 18, Russian authorities indicated that the board of directors and CEO of Danone Russia (EDP) had been changed. The changes took place without the knowledge of, or approval by, Danone, according to the company, and, while Danone no longer retains control of the management of its operations in Russia, it remains the legal owner.
As a result, Danone said it will deconsolidate its Russia operations as of July 2023, triggering an approximately €200 million ($223 million) cash impairment charge. The charge will be recognized on Dec. 31, 2023, according to the company.