Author:Pan Xian (Original)
This afternoon, Danone, which has brands such as A-Tamei, Pulse and Evian, released its 2022 first quarter report and recently disclosed the performance of China's region. Subsequently, the French food giant's stock price recorded its biggest intraday gain in 13 years.
So, what's going on behind the stock price change? Bloomberg today quoted French media reports that Danone's French rival, Lantres, may consider acquiring all or part of Danone's stake. Let's take a look at each one.
Chinese milk powder and pulsation
Let's start with Danone's global performance. According to the above financial report, in the first quarter of 2022, Danone's net sales were 6.236 billion euros (about 43.149 billion yuan), an increase of 7.1% year-on-year. Among them, the price led to a 4.9% increase, and the sales volume/combination brought a 2.2% increase.
In terms of categories, pulse's drinking water and beverage business was the "growth champion" in the first quarter, followed by the professional special nutrition business where Aitamei milk powder was located.
According to the financial report, during the reporting period, sales of Danone's drinking water and beverage business increased by 15.9% year-on-year to 951 million euros (about 6.580 billion yuan), and the professional special nutrition business increased by 9.5% year-on-year to 1.919 billion euros (about 13.278 billion yuan). Sales of basic dairy and plant-based products, which accounted for the largest share of Danone, amounted to €3,365 million, up 3.6 percent year-on-year.
Juergen Esser said at the results meeting that all sub-categories of the specialty nutrition business contributed to growth. Driven by the business in China and Indonesia, the global market share also performed well. "In particular, our Amat brand continues to show strong competitive momentum."
Let's pay attention to the region where the Chinese market is located (Note: it is composed of China, North Asia, and Oceania). Danone's earnings report shows that in the first quarter of 2022, the region was the highest growth market, with sales up 15.3% year-on-year to 735 million euros (about 5.086 billion yuan). Among them, sales volume/portfolio contributed to the growth of 13.2%.
The company pointed out that the China and North Asian markets achieved 15.3% growth during the period, led by the specialty nutrition business, but the high growth was also related to the low comparative base.
XiaoShidai noted that at today's performance meeting, Danone also disclosed the sales structure of the region to which the Chinese market belongs for the first time. Judging from the data of the first quarter of this year, the proportion of professional special nutrition business is the highest, followed by drinking water and beverages, basic dairy products and plant-based.
According to the above-mentioned conference data, in the first quarter of 2022, in the region of the Chinese market, sales of Danone's professional special nutrition business were 543 million euros (about 3.757 billion yuan), an increase of 21.5% year-on-year; sales of drinking water and beverages were 115 million euros (about 796 million yuan), down 1.2% year-on-year; and basic dairy and plant-based sales were 77 million euros (about 533 million yuan), an increase of 4.0% year-on-year.
Specific to the Chinese market. According to the financial report, in the first quarter of this year, Danone achieved a median double-digit growth in infant nutrition products, including a low comparative base, Chinese labels and good market share of foreign language label products. Juergen Esser pointed out at the meeting that Danone Chinese infant milk powder to win the share, the company will continue to invest, so that A-Hemet maintains its position as one of the leading brands in the market.
From a channel perspective, domestic channels selling Chinese label products achieved median double-digit growth. The foreign language label products sold by the cross-border e-commerce platform (Note: officially developed by Danone) achieved strong growth and significantly offset the further decline in foreign language label products through indirect channels (Haitao, relatives and friends). Juergen Esser revealed that indirect channels account for less than 20% of Danone's infant milk powder in China, and the proportion is expected to be further reduced.
Juergen Esser said at the meeting that danone China's infant milk powder in the first quarter of the high growth in the first quarter can not ignore the factors that remain competitive in the first quarter because of the low comparative base. However, as the comparative base returns to normal in the next few quarters, Danone's growth rate will gradually move closer to the category level.
"This year, the momentum of this category (growth) may remain stable." He said Danone will focus on promoting the growth of the Amat brand in different channels, in addition to increasing adult nutrition products and children's special medical foods. According to Danone's financial report, in the first quarter of 2022, China's children's special medical food and adult nutrition business achieved double-digit strong growth.
In terms of pulse, the data of Danone's first quarter performance meeting checked by The Snack Generation shows that due to the impact of the epidemic prevention and control measures in March this year, the brand fell slightly in the quarter.
Juergen Esser added at the meeting that in the first quarter, the epidemic prevention and control caused the production and transportation of pulses in some markets to be temporarily blocked. Although the brand declined slightly in the first quarter year-on-year, its market share remained stable, and its business objectives for basic consumption and distribution were also well promoted.
Guidelines for 2022
Speaking about the first quarter results, Danone's chief financial officer, Juergen Esser, said in the earnings report that the 7.1% year-on-year sales growth opened a good situation for 2022. Widespread growth was achieved across regions and categories, driven by a positive contribution from prices and combinations.
He also revealed that Danone is actively promoting a new strategic plan called "Renew Danone", with Danone paying more attention to the quality of execution with the support of pricing and portfolio management and continuous productivity improvement.
"Renew Danone" is a new strategy unveiled by Danone CEO Antoine de Saint-Affrique in March. The four pillars of the strategy include: restoring Danone's competitiveness in core categories and geographies; selectively expanding its presence across segments, channels and geographies; actively nurturing future growth opportunities; and actively driving product portfolio rotation.
"It's all about tinkering, nurturing and accelerating. For us, the game is called the first step towards the next two or three years. During this time, we need to go from lagging behind to being consistent with the performance of our markets. Sheng Ruian said at the time.
In its earnings release today, Juergen Esser also said that the company has begun reinvesting in the capital generated by the "local first" strategy.
According to Snack Generation, "Local First" aims to give Danone more autonomy to its operations in order to increase responsiveness and creativity. During the landing process, Danone's internal architecture will be streamlined and personnel optimized. Previously, the strategy has been completed in Europe. According to the French media "Echo", "local priority" will wait until this year to be implemented in Indonesia, China or Turkey.
Looking ahead to 2022, Juergen Esser reiterated in its earnings report that Danone aims to achieve year-on-year sales growth between 3% and 5% led by price factors, with a recurring operating margin of more than 12% for the whole year.
External comments
Today, danone's "scandal" with Lantreis has become the focus of foreign electricity.
According to Reuters, a spokesman for Danone's headquarters said it had no intention of selling its three major businesses. Danone's chief financial officer, Juergen Esser, was also asked by analysts about the rumor at the just-concluded results meeting, saying: "We are very proactive in tinkering with those underperforming assets. We'll let you know when new information becomes available. ”
According to the data, Lantres was established in 1933 in the core area of milk production in western France, and has now developed into the world's largest dairy group. Lantries is also the world's largest cheese manufacturer and the world's third largest liquid milk manufacturer. With 270 plants and 85,000 employees in more than 52 countries, the company produces cheese, milk, fresh dairy, butter, cream, dairy ingredients and infant nutrition. Recently, the company has been actively engaged in acquisitions, including the completion of the acquisition of Kraft Heinz's natural cheese business last year, and the recent acquisition of Bmi's dairy business and brand in Germany.
According to French media, investment bank Perella Weinberg Partners is offering Landris a partial or full-scale acquisition of Danone's business. The rumor said the operation would be complicated because The Lantrys had a lower turnover than Danone.
Finally, pay attention to the latest performance of The Company. Agence France-Presse said today that first-quarter results were critical for Danone. After months of internal adjustments, Danone's former CEO left in March last year. Danone hopes to reassure investor sentiment. In addition to demonstrating confidence, Danone is also aware of its dependence on markets such as the United States, China, France, Russia and Indonesia, which contribute half of sales revenue.
Agence France-Presse also said that raw material prices and packaging costs have also made Danone pay special attention. After handing over the first quarter results, Danone's next meeting will be a shareholders' meeting, during which a number of new directors will be elected, and the founder family members will also complete their final terms on the board this year.
Bloomberg said today that as consumers eat out more and buy more Evian water, Danone reported "the highest sales growth in seven years." Within the seventh month of ShengRuian's leadership of Danone, he was trying to turn the world's largest yogurt producer around, while the Russian-Ukrainian conflict exacerbated raw material inflation. The company reiterated that the cost of items such as milk, packaging and transportation could increase by more than ten percent this year.
Danone CEO Antoine de Saint-Affrique (file photo)
In addition, Bloomberg pointed out that Danone maintains its guidance on recurring operating margins of more than 12% in 2022. But that means the indicator "could reach its lowest level in more than a decade." Danone's margin was 13.7 percent last year and 15.2 percent in 2019.
Bloomberg also quoted Juergen Esser as saying that Danone has raised prices in all categories and regions, and negotiations in the European market were completed in the first quarter. If needed, the company is prepared to raise prices further. "As we said, price increases in the European market are being reflected on the shelves," Esser said, "and we need to wait a year to see if consumers will react to price increases."
According to Reuters news today, Danone recorded its strongest year-on-year sales growth since the fourth quarter of 2014, driven by factors such as low comparative base, price increases, stronger demand for infant formula products in the Chinese market, and improved outdoor drinking water consumption after the epidemic.
Reuters also quoted RBC European analysts today as saying they wouldn't care too much about a good quarter of performance, but today's results show that the renew Danone strategy, which has just been announced, has a credible start. It believes that price remains a key factor in Danone's performance growth, but better-than-expected first-quarter sales show the company's pricing power and a change from past poor sales performance.
Today, the Wall Street Journal quoted Jefferies analysts as pointing out that Danone's sales in the first quarter, led by the nutrition business where milk powder is located, believes that the health of this business is crucial to the company's profit and profit margin algorithms.