The secret behind Danone’s ‘very recession resilient’ portfolio

Shane Grant, Danone
bG9jYWw6Ly8vZGl2ZWltYWdlL0NhcHR1cmVfaDZXYlNxdS5KUEc

Danone’s portfolio is “very recession resilient” with offerings like coffee and creamers for cost-conscious consumers and a portfolio of dairy and plant-based products that mirror broader food trends, the CEO of the company’s North American business said in an interview.

Shane Grant, who took over the post two years ago, said with consumer purchasing power getting squeezed amid higher prices for everyday products and services, shoppers are showing a penchant for cutting back on “large, discretionary items and prioritizing food and beverage.”

Grant said brands like Danone’s Stok coffee and International Delight creamers are thriving as people seek to replicate a coffee house experience at home to save money. Meanwhile, items like probiotic-focused Activia and low-sugar Two Good yogurts, as well as Silk and So Delicious plant-based milk, yogurt and frozen treats, are benefiting from better-for-you trends in the food space that show no sign of abating.

“We’re clearly watching, and very close to home for us, is how the consumer defines essentials in this next stage,” Grant said. “To date, we have seen very good resilience in our categories.”

Shane Grant, Danone

Shane Grant

Permission granted by Danone

Last month, France-based Danone forecast like-for-like sales to grow 5% to 6% in 2022 compared with a previous prediction of 3% to 5%, even after price hikes were put in place to offset higher costs. More recently, the company’s sales during its second quarter in North America jumped 7.2% as it benefited from price increases, volume growth and improvements in product mix. Creamers, yogurts and plant-based items each posted high single-digit growth.

“Those pieces are really the lion’s share of the portfolio, so when they grow at a good rate, the business really performs,” Grant said. 

Despite recent strength, Danone is closely watching for changes in consumer buying habits and it “has a number of levers” it can use to respond accordingly, he said. Already, the company is planning for additional price increases. It’s also offering a diverse range of products at varying price points and changing the so-called packaging architecture — such as through smaller entry items like a 32-ounce Silk product versus a larger 59-ounce carton or 96-ounce size.  

Danone, so delicious, plant based, ice cream

Optional Caption

Courtesy of Danone

“We are balancing the business for growth while balancing it for competitiveness. We are … doing those things in an environment which is challenging, which is unpredictable,” Grant said. “But we don’t want to waste the crisis, and we really think we can get the business to remain competitive during the next months and quarters.” 

Private label brands, which have benefited recently following price hikes to brand-name products by larger CPGs, so far have not had a major impact on Danone’s business, the executive noted. (The company also manufactures some yogurts for private label.)

“We’ve seen some advancements of private label in some categories, but nothing really above historical norms,” he said. “We’re watching the consumer for any sensitivity that’s going to show up week to week.” 

Grant said Danone has spent much of the first half of the year prioritizing running its operations through a challenging business environment, but said the company remains on the lookout for possible divestitures or acquisitions. Even with instability, he said there hasn’t been “a massive shift in valuations as of yet” for potential targets, with prices largely remaining elevated.


“We are balancing the business for growth while balancing it for competitiveness. … We don’t want to waste the crisis, and we really think we can get the business to remain competitive during the next months and quarters.” 

Shane Grant

CEO, Danone North America


Danone, which received 21% of its sales in retail from plant-based items during the last 52 weeks ending July 31, according to IRI data provided by the company, remains upbeat about the category even as consumption in areas like alternative meat face near-term headwinds. Last week, Beyond Meat lowered its revenue forecast and announced it will cut its workforce by 4%, citing wider economic uncertainty and consumers trading down to cheaper proteins. 

Danone is gaining share in plant-based beverages and has “clear leadership” in yogurt, creamers and frozen with brands such as Silk and So Delicious, as well as strength around its innovation and product quality, Grant observed. The company is projecting mid-to-high-single-digit growth in its plant-based business this year.

“We’re certainly pleased with the performance,” Grant said, noting Danone is “bullish” on the upside potential.

Danone also works with many of the most popular plant-based ingredients like almonds, oats and soy and can use its expertise in the category to improve the taste, texture and nutrition of its products on the market. These attributes are regularly cited by the 60% of households using animal-based products as reasons they are reluctant to make the switch to plants, the company said.

The company recently took milk and deconstructed everything about it — its taste, nutritional components, molecular composition and even the nostalgic feeling it created in the consumer — to formulate its two new dairy-like alternatives, Silk Nextmilk and So Delicious Wondermilk to make them more like their animal counterpart.

Grant said breaking down barriers like these “will drive the evolution” of plant-based products and provide further growth to the overall category.

Related Posts Plugin for WordPress, Blogger...

About the Author

Jervie David Montejar
A food lover who wants to try every delicious dishes around him and spread the news to everyone to try it as well. Finding the latest trends about food and restaurants around Cebu and the rest of the world :) "Life is uncertain. Eat dessert first." -Ernestine Ulmer
Loading Facebook Comments ...

Be the first to comment on "The secret behind Danone’s ‘very recession resilient’ portfolio"

Leave a comment

Your email address will not be published.


*


This site uses Akismet to reduce spam. Learn how your comment data is processed.

x