Danone raises sales outlook as shoppers absorb price hikes
By Dominique Vidalon
PARIS (Reuters) -Danone, the world's largest yoghurt-maker, raised its 2023 outlook on Wednesday after it managed to pass on increased costs through price rises and first-quarter sales growth was the fastest in a decade.
Danone, which expects prices to peak this year and also anticipates productivity gains, kept its forecast for a moderate improvement in recurring operating margin for the year.
The maker of Activia yoghurt, Evian water and Aptamil infant milk said it expected like-for-like 2023 sales growth of between 4% and 6%, having previously forecast 3%-5% growth.
Sales rose 10.5% like-for-like to 6.96 billion euros ($7.68 billion) in the first quarter, beating expectations for 7.3% growth in a company-compiled consensus of 18 analysts. This was its fastest quarterly growth rate in a decade.
By 0811 GMT, Danone shares were up 1% at 61.08 euros, outperforming the wider market.
All three of Danone's businesses contributed to growth and Specialised Nutrition and Waters were particularly strong, it said.
Danone increased its prices by 10.3% during the quarter while sales volume remained positive, up 0.2%.
Danone, like its rivals Nestle and Unilever, has increased prices to cope with higher commodities and supply chain costs, but faces the challenge of judging how much prices can rise before even affluent shoppers decide to stop buying.
"The story of ever higher prices, with minimal volume impact, continues. Is the sky the limit for our sector’s pricing?" Bernstein analysts asked in a note.
Finance Chief Juergen Esser told analysts that Danone had yet to see a shift in consumer behaviour, but that prices had probably reached a peak and he predicted a "gradual easing through the year".
In China, Infant Nutrition, and also Adult and Pediatric Specialties made a particularly strong start to the year with double-digit growth.
In Waters, the Mizone brand showed "an encouraging start" as travel conditions improved with the lifting of COVID-19 restrictions, Esser said.
($1 = 0.9063 euros)
(Reporting by Dominique Vidalon; editing by GV De Clercq; Editing by Sharon Singleton and Barbara Lewis)
