Groupe Danone (DANOY)

QUOTE AND NEWS
Forbes  Sep 5  Comment 
During research for the just-released Forbes Insights report on digital marketing, The Race is On, we had an opportunity to speak with Michael Aidan, head of digital & VP digital brand platforms at Group Danone S.A. While certain of his comments...
FiercePharma  Sep 4  Comment 
Many a U.S. drugmaker has pounced on an opportunity to pick up a foreign company, haul overseas and reap the tax rewards. But while rumors this summer said Illinois-based Hospira would be jumping on the tax-inversion bandwagon, its deal isn't...
Clusterstock  Sep 3  Comment 
By Anjuli Davies and Sophie Sassard LONDON (Reuters) - U.S. drugmaker Hospira’s talks to buy the medical nutrition unit of Danone and use the deal to move its tax domicile abroad have stalled, according to people familiar with the matter, as...
newratings.com  Sep 3  Comment 
PARIS (dpa-AFX) - French dairy giant Danone SA (DANOY.PK) Tuesday appointed Emmanuel Faber as Chief Executive Officer, while the current Chairman and CEO Franck Riboud will remain as Chairman of the Board. The change in governance, based on the...
Wall Street Journal  Sep 2  Comment 
Danone said CEO Franck Riboud would step down from the job he has held at the French dairy company for 18 years. He will remain chairman.
New York Times  Jul 30  Comment 
Hospira’s potential $5 billion deal for a Danone unit highlights a variation on inversions: "spinversions." The odd combination, says Robert Cyran of Reuters Breakingviews, also reflects the perverse incentives distorting corporate decisions.
Bloomberg  Jul 30  Comment 
Traders are betting Danone will buy baby-formula maker Mead Johnson Nutrition Co. There may be better ways for Europe’s second-largest food company to spend its money, at least for now.
SeekingAlpha  Jul 29  Comment 
Danone ADR (OTCQX:DANOY) Q2 2014 Earnings Conference Call July 25, 2014 03:30 AM ET Executives Pierre-Andre Terisse - CFO Regis Massuyeau - IR Director Analysts David Hayes - Nomura Warren Ackerman - Societe Generale ...
Benzinga  Jul 28  Comment 
In a report published Monday, Morgan Stanley analyst David R. Lewis reiterated an Equal-Weight rating on Hospira (NYSE: HSP). In the report, Morgan Stanley noted, “Potential acquisition of Danone's medical nutritional business may provide...
FiercePharma  Jul 28  Comment 
The string of pharma M&A deals fueled by the lure of cutting taxes continues and Midwest-based Hospira is now said to be about to take the plunge. Its vehicle of choice is the medical nutrition business of France's Danone, which sources say it...




 

Groupe Danone (OTC: DANOY) is a French food and beverage company with revenues totaling nearly 15 billion EUR (19.55 billion USD) in 2009.[1] Danone's largest consumer brands include Activia, Actimel, Vitalinea/Taillefine, Danonino/Petit Gervais, Evian, Aqua, and Blendina.[2] Danone's Fresh Dairy Products segment is the company's largest source of income. [3] In order to take advantage of the growing Baby Nutrition and Medical Nutrition markets, Danone acquired Numico, a world leader in both markets.[4]

Danone competes with companies like Nestle (NSRGY), Unilever (UL), Kraft Foods (KFT), and Cadbury Schweppes (CSG) in the packaged food market. As retailers push private label products, the ability to earn and maintain shelf space at groceries, convenience stores, and other retailer outlets plays a large role in the profitability of packaged food and beverage companies like Groupe Danone. However, Danone's strong consumer brands help it maintain shelf space and profitability.[5] Despite Danone's strong brands, the rapidly increasing costs of raw materials, such as milk, increase Danone's production costs and compress margins.[6]

Company Overview

Business and Financial Metrics

Second Quarter 2010 Results[7]

FY sales outlook increased to at least +6%; margin and FCF outlook reconfirmed In the second quarter, Danone's sales increased 6.9%. Underlying fully-diluted EPS increased 7.7% to €1.38. Free cash flow from operations increased 34.9% to €858 million.

Danone 2010 Revenues (in euros)[8]

Segment 2009 2008
Fresh Dairy Products8,5558,697
Waters2,5782,874
Baby Nutrition2,9242,795
Medical Nutrition925854
Total Revenues14,98215,220

Business Segments

Fresh Dairy Products (57% of 2009 revenue)

Fresh Dairy Products was Danone's largest segment in 2009, contributing 57% of the company’s total sales. The division includes Danone's four blockbuster brands (Activia, Actimel, Vitalinea/Taillefine, and Danonino/Petit Gervais). Danone is a leading supplier of fresh dairy products with 22% of the market worldwide.[9] Danone's dairy products focus on nutrition and compete with brands like Nestle Milk, Nestle Nutrition, and store brands.

Waters (17% of 2009 revenue)

Waters is the company's second largest segment. Danone produced 18 billion liters of bottled water in 2009, making Danone the number two producer or packaged water with market share of 8.5%[10] The group's bottled water brands include Evian, Volvic, and Aqua. These brands compete against brands like Nestle Waters, Dasani, and store brands.

Baby Nutrition (20% of 2009 revenue)

The Baby Nutrition segment is the leading producer of medical nutrition products in 19 countries, most of which are in Europe and Asia.[11] Danone produces brands such as Blendina and Nutricia, which compete with products like Gerber and store brands.

Medical Nutrition (6% of 2009 revenue

The Medical Nutrition segment offers products for medical patients. These products are intended to improve patients’ quality of life and health and also have a positive impact on the total cost of care. For example, Nutridrink is a drink for elderly people exposed to the risk of malnutrition. Danone is steadily increasing investment in clinical studies to establish the benefits of its products, thereby meeting the needs of both patients and healthcare professionals.

Trends and Forces

Dairy prices on the rise

The price of key raw foods used by Danone has increased substantially. In response, Danone has raised its average price per unit of goods.[12] Since 57% of Danone's 2009 sales came from its fresh dairy products, milk and other dairy products are Danone's largest production inputs. Danone's ability to continue passing on price increases will play a big role in its profitability if dairy prices continue to rise.[13]

Consumers Demanding Healthier Foods

All of Danone's revenues come from sales of food and beverage items. Therefore, changing consumer demands for food and beverage items directly impact Danone's sales. These changes are sometimes seasonal; for example, consumers tend to demand more hot beverages such as coffee during the colder winter months.[14] These changes can also take place over longer periods of time. For example, consumers have been demanding healthier options when eating out, which reflects a general increase in the importance of health and wellness to consumers.[15] In order to take advantage of this trend, Danone has increased the money it spends on clinical studies to prove the health benifits of its foods by 15 times in the last five years.[16] Additionally, the company purchased clinical nutrition and baby nutrition company Numico in 2007 to bolster its health-conscious product line.[17]

Strong Euro Hurts Danone's Sales

Because Danone reports its revenues in Euros but does 39% of its business outside of Europe, exchange rates affect Danone's revenues. When the Euro appreciates, any transactions recorded in foreign currencies will convert to fewer Euros and lower revenues for Danone. On the other hand, when the Euro depreciates the opposite is true and the weak Euro will boost Danone's sales.

In order to minimized the effects of exchange rate fluctuation, Danone purchases financial instruments such as swaps.[18]

Competition

Danone competes with other packaged foods companies as well as store brands from retailers such as Safeway (SWY), Wal-Mart Stores (WMT), and Walgreen Company (WAG). Danone's main competitors are:

  • Nestle (NSRGY)-A Swiss company that produces packaged food and beverages as well as products for the personal care market. Nestle is the worlds largest packaged food company and a worldwide competitor for Danone. [19]
  • Unilever NV (UN)-A Dutch company that produces packaged foods and products for the home and personal care markets. Unilever is one of Danone's largest international competitors.[20]
  • Kraft Foods (KFT)-A U.S. company that produces packaged foods products. Kraft is one of Danone's largest U.S. based competitors.[21]
  • Cadbury Schweppes (CSG)- A U.K. company that makes confectionery and non-alcoholic beverages. Cadbury Schweppes primarily makes carbonated soft drinks, which do not compete directly with Danone's milk- and water-based drinks. However, its carbonated beverages are possible alternatives to Danone's beverages.[22] According to the National Restaurant Association, more and more customers are ordering specialty waters (like Evian) instead of carbonated soft drinks. This could give Danone an edge when competing with Cadbury Schweppes.[23]

References

  1. Danone Group Information
  2. Groupe Danone 2007 Annual Report: Business, pgs 68-78
  3. Groupe Danone 2007 Annual Report: Business, pg 70
  4. Groupe Danone 2007 Annual Report: Business, pgs 68 and 78
  5. Groupe Danone 2007 Annual Report: Business, pgs 68-78
  6. Groupe Danone 2007 Registration Document: Risk Factors, pg 6
  7. "Danone continues to deliver strong volume and sales growth" July 27, 2010
  8. Danone Annual Report 2009
  9. Groupe Danone 2007 Annual Report: Business, pg 74
  10. Groupe Danone 2007 Annual Report: Business, pg 77
  11. Groupe Danone 2007 Annual Report: Business, pg 68
  12. Groupe Danone 2007 Registration Document: Operating and Financial Review, pg 34
  13. Groupe Danone 2007 Registration Document: Risk Factors, pg 6
  14. Spectrum Commodities: Coffee Seasonal Chart
  15. Consumer Demand for Ways to Fit Quality Meals Into Hectic Schedules Shape Restaurant Trends in 2008, According to National Restaurant Association
  16. Group Danone 2007 Annual Report: Science, pg 32
  17. Group Danone 2007 Annual Report: Business, pg 78
  18. Groupe Danone 2007 Registration Document: Financial Information Concerning the Assets, Financial Position, and Results of the Company, pg 106
  19. Google Finance: Nestle
  20. Google Finance: Unilever NV
  21. Google Finance: Kraft Foods
  22. Google Finance: Cadbury PLC
  23. Consumer Demand for Ways to Fit Quality Meals Into Hectic Schedules Shape Restaurant Trends in 2008, According to National Restaurant Association
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