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Danone eyeing Southern European dairy demand restoration

By Mark Astley , 03-Dec-2012

Danone eyeing Southern European dairy demand restoration

French dairy giant Danone has pinpointed the restoration of Southern European dairy product consumption and demand as one of its main short term strategic priorities.

Speaking last week at the Premium Review Conference in Paris, Danone CEO Pierre-André Térisse outlined the group’s current market strategy for ensuring growth – including the planned regeneration of dairy demand in Southern European nations such as Spain and Italy.

Sales of Danone fresh dairy products in the region - and in particular Spain - have fallen dramatically recently. This consumption collapse has been attributed to continuing economic strife in Europe, and the resulting increase in levels of unemployment.

In Spain, unemployment currently stands at 25.8%.

Aside that, Danone also intends to focus its efforts on maintaining profitable growth in markets such as Russia, the US, South America and China – regions that now account for the majority of Danone’s sales.

Geographical transformation

Danone’s short term strategic priorities have been adjusted in accordance with what the company has described as a recent “geographical transformation.”

In 2007, European sales accounted for 59% of Danone’s total sales, with growth markets accounting for the remaining 41%.

Five years later, European sales account for just 42%. Danone’s growth markets, including Asia, the US and Russia, now account for 58% of sales.

In June 2012, Danone was even forced to issue a profits warning for the year – reducing its operating margin target to account for the collapse of dairy consumption in the Europe.

In response, the French dairy giant hopes to restore growth in the region.

In Spain, Danone is focusing on delivering “value for money” through a campaign of promotional selling and a range of new innovations. While in Italy, another country hit badly by the current Eurozone economic crisis, Danone is focusing on consumer connection.

European nutrition leader

Despite its difficulties in the stagnated European market, Danone remains the market leader in fresh dairy, baby nutrition and medical nutrition across the continent. It is also the second largest provider of bottled water in the region.

In the US, Russia, Mexico, Brazil, Argentina, South Africa, Egypt and Morocco, Danone is the leading provider of fresh dairy products.  In China, it is also market leader in baby and medical nutrition.

Earlier this year, Danone also increased its presence in India through the acquisition of Wockhardt India – the country’s second biggest baby and adult nutrition business. 

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