The sharp fall in the firm’s stock has surprised both Danone and analysts, as it came after the announcement of a healthy second quarter top-line growth.
This morning, Danone shares were down almost 6 per cent at €43.44 compared to €46.12 on Monday evening, before the firm announced its half-year results.
Speaking to NutraIngredients.com, a company spokesperson agreed that there are question marks surrounding the causes for the dip.
“We don’t come up with our own reasons as to why share prices fall, we like to ask the market too. But this time round, there are question marks, no one really knows,” he said, adding that the most likely reason is the general pressure that the food sector is currently under.
What is clear, he said, is that the reaction is not a result of the regulatory uncertainty that earlier this year prompted the firm to remove health claims from its probiotic products Activia and Actimel in certain markets.
The firm also announced the withdrawal of its article 13.5 claim applications for spoonable yoghurt, Activia, and drinkable yoghurt, Actimel during its Q1 results presentation in April. Both dossiers contain more than 10 probiotic, strain-specific clinical trials.
However, Danone says the future of its probiotic category is strong, and there have been no indications of concerns from either investors or consumers over the past quarter.
“I would have said yes [that there were potential concerns] if you’d asked me after Q1, when we’d just announced that we were removing the claims. There was no visibility at that point, and that generally causes concern. But in the last round we’ve seen no change in underlying volume and sales trends in France, UK, Spain and Hungary [where Danone has removed health claims from the products].”
He added that the new European health claims regulation would actually place Danone at a competitive advantage by creating barriers to entry to the market. Even without claims on its products, Danone’s brands have strong recognition in the markets where they are sold, he said, and the company has already spent between 10 and 20 years educating consumers in these different markets on the benefits of probiotics.
So why are stocks falling?
However, amongst this market confidence and a strong half-year performance, Danone’s share price has consistently dropped since Wednesday morning. According to the company, this may be more a reflection of short-term investor activity than longer-term investor concerns.
“We delivered a good set of results, we outperformed in the group as a whole. We brought in some good profit, so some investors may have chosen to exit,” said the spokesperson.
On the other side of the spectrum, he added, there are some investors who may have been disappointed by the results. “The more bullish people may have gotten ahead of themselves and thought that Danone would have performed even better, so again they chose to exit.”
Most likely, however, is the “general nervousness” in the market, he said. “The food sector is expensive right now relative to other sectors, and because of this investors may be taking a cautious approach,” he said.
He added that the picture will become clearer within the next few weeks, when two of Danone’s major competitors – Nestle and Unilver – release their results. Unilever will be reporting on August 5, and Nestle on August 11.