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Danone Reports Fastest Sales Growth in Three Years on Water

Danone Sales Beat Analysts Estimates on Unimilk
French consumers on average consume one cup of fresh dairy products a day, compared with less than one cup every two days in Unimilks markets, Danone has said. Photographer: Antoine Antoniol/Bloomberg

Danone, the world’s biggest yogurt maker, reported first-quarter sales that beat analysts’ estimates, led by bottled water brands that include Evian.

Like-for-like revenue increased 8.5 percent from a year earlier, the fastest growth in three years, the Paris-based company said today. The median estimate of 15 analysts surveyed by Bloomberg News was for growth of 6.9 percent.

“The first quarter has been a cracking start,” wrote Warren Ackerman, an analyst at Evolution Securities with an “overweight” rating on Danone. “Water was the big beat.”

Bottled-water revenue rose 13 percent on a comparable basis, while analysts were expecting 5 percent, Ackerman said. Pricing added 2.6 percentage points to the unit’s sales growth. Danone, the owner of the Volvic and Aqua brands, said pricing for bottled water is growing again in developed countries. Shipments rose in all regions, particularly emerging economies.

Danone, the maker of Activia yogurt, got about 17 percent of sales from bottled water last year. Total first-quarter revenue rose 20 percent to 4.76 billion euros ($6.9 billion), boosted by the acquisition of Russian dairy company Unimilk, which made Russia Danone’s second-largest market.

Danone rose as much as 1.4 percent in Paris trading and was up 50 cents, or 1.1 percent, at 47.33 euros as of 9:06 a.m.

Unimilk’s like-for-like sales rose 15 percent in the quarter, helping Danone’s fresh dairy division achieve 6.5 percent growth. Volume at the Russian unit fell 2.3 percent as Danone started trimming its number of products by 30 percent.

Dairy Deals

International beverage companies are pouncing on acquisition targets in eastern Europe. Danone bought 58 percent of Unimilk, Coca-Cola Co. purchased Russian juice producer OAO Nidan, and PepsiCo Inc. agreed to buy Wimm-Bill-Dann Dairy & Juice Co. last year to benefit from rising incomes in the region. French consumers on average consume one cup of fresh dairy products a day, compared with less than one cup every two days in Unimilk’s markets, Danone has said.

Danone today repeated its forecast that raw-material and packaging costs will rise 6 percent to 9 percent for the whole year, with a “steeper” increase in the first half.

Danone also reiterated that it expects like-for-like sales excluding currency shifts to rise 6 percent to 8 percent this year. The company said it also aims for a 0.2 percentage-point improvement in its operating margin, excluding certain items.

‘Strong Start’

Nestle SA, the world’s largest food company, has said it expects sales growth excluding acquisitions, divestments and currencies of 5 percent to 6 percent this year.

Danone’s first-quarter sales are “clearly a strong start and it confirms Danone as fastest-growing” among Europe’s top three food companies, which include Nestle and Unilever, said Chris Wickham, an analyst at Matrix Corporate Capital LLP.

Like-for-like sales exclude divestments and currency changes, and were reported on a basis that assumed that the company owned Unimilk in the first quarter of 2010.

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