Danone Backs Guidance as Shoppers Welcome Easing Price Hikes — Update

By Dominic Chopping

Danone backed its full-year guidance as it eased the pace of price hikes and saw shoppers begin to buy more of its branded products.

The French food company behind Activia yogurt and Evian water said Wednesday that like-for-like sales growth in the second quarter was primarily driven by volumes rather than price hikes, marking a change from the price-led growth of recent years.

After a couple of years of raising prices to cover an inflation-led surge in costs, packaged food producers are beginning to ease the rate of price hikes as they try to entice customers back.

Danone lifted prices by an average of 7.4% last year, but said it would ditch broad-based pricing earlier this year as inflation began to normalize and instead focus on selective price increases on only specific products while switching from price-led growth to volume-led growth.

It increased prices by 1% in the second quarter, a smaller hike than the 1.5% expected by analysts. In the first six months, Danone raised prices by 2%, the same level as Nestle which last week said it raised prices by 2% in the first half on average, noting increased promotional activity and an acceleration in volume growth.

The company said sales grew 4% on a like-for-like basis in the second quarter, driven by 2.9% growth in volumes which beat expectations. A company-compiled consensus expected LFL growth of 3.7% and 2.1% volume growth.

First-half like-for-like sales also grew 4%, with volumes up 2.1%.

It reported a first-half recurring net profit--which excludes exceptional items--of 1.16 billion euros ($1.26 billion), up 2.6% on year, as reported sales fell 2.9% to EUR13.76 billion.

A company consensus had seen recurring net profit of EUR1.11 billion on sales of EUR13.66 billion.

Danone still expects like-for-like sales growth of between 3% and 5% in 2024 and a moderate improvement in recurring operating margin.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

July 31, 2024 02:18 ET (06:18 GMT)

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