By Dominique Vidalon and Alexander Marrow
PARIS (Reuters) -Danone’s high-performing Chinese business drove a third-quarter sales beat on Tuesday, with strong demand in China for infant milk formula and medical nutrition largely offsetting weakness in coffee creamers in a competitive U.S. market.
Finance chief Juergen Esser said Danone’s Chinese business was “firing on all cylinders” and expected significant growth to continue in the coming quarters, while analysts mused that the French consumer goods group could be becoming increasingly reliant on the success of its infant formula business in China.
Danone, which owns brands from Evian water to Activia yoghurt, said sales grew 4.8% on a like-for-like basis to 6.876 billion euros ($8.02 billion), ahead of the 4.3% growth forecast in a company-provided analysts’ consensus.
Despite the strong quarter, Danone, whose shares fell around 1.4%, left unchanged its mid-term guidance of like-for-like sales growth of between 3% and 5% and recurring operating income growing faster than sales.
CHINA RELIANCE COULD WORRY INVESTORS
The China, North Asia and Oceania region was Danone’s stand-out performer, with like-for-like sales growth of 13.8%.
“We have good reasons to believe China will deliver significant growth in coming quarters,” said Esser.
Esser said Danone had a winning model in China, where underlying dynamics, such as an older population boosting medical nutrition sales and growing demand for healthy hydration, were helping.
Danone experienced strong China growth in infant milk formula, medical nutrition and Mizone water, while Activia and Oikos in dairy delivered double-digit sales growth in Japan.
“The skew/reliance on impressive success in China Specialised Nutrition (17% LFL) could start to worry investors,” said Jefferies analysts, highlighting U.S. volume growth of 0.3% well below analysts’ expectations of 1.8%.
“China infant formula will suffer dragon baby roll-off in 2026 that needs to be made up elsewhere,” Jefferies said.
China experienced an uptick in the birth rate in the Year of the Dragon in 2024.
STRENGTH OF HEALTH-FOCUSED PORTFOLIO
Danone, whose growing focus on health and science has helped it build resilience in a volatile environment, delivered quarterly sales growth that outpaced the 3.9% growth of rival Unilever and the 4.3% growth of Nestle.
“The bar was quite high this quarter but Danone have hit it,” Barclays analysts said in a note, citing “standout” China performance and sequential improvement in European volumes.
In Europe, Danone sales grew 2.6% in the quarter, driven by volumes, reflecting the good performance of Evian water and “functional” dairy products such as Danone Skyr, Activia Kefir and YoPro with high protein content.
North America delivered softer growth, with sales rising 1.5% like-for-like in the quarter, as demand for protein products such as the Oikos brand of Greek yoghurt helped offset weakness for coffee creamers in the United States.
($1=0.8575 euros)
(Reporting by Dominique Vidalon in Paris and Alexander Marrow in London; Editing by Sudip Kar-Gupta, Clarence Fernandez and Conor Humphries)
