Since 1997, Groupe Danone (NYSE – DA) has focused on three categories – fresh dairy, beverages and biscuits, which are benefiting from an association with nutrition and health. The company is the global leader in water and fresh dairy, holding a leading position in most of the markets in which it competes. Due to its strength in these attractive categories, Danone is poised to deliver above average growth (10%+ earnings growth) versus its packaged food peers in the coming years. Danone has limited exposure to the U.S. (8% of revenues in 2004), so its international revenue base also provides diversification for portfolios.
Recently health and nutrition have become an increasing concern for consumers. Categories such as dairy, water and non-soda drinks have been beneficiaries of this trend. Pro-biotic drinks (yogurt drinks with beneficial bacteria), functional drinks (vitamin-enriched, etc.) and organic products provide large potential growth opportunities.
Over the past decade Danone has expanded its reach beyond its core Western European markets, establishing leading positions in a selective group of countries. Many of these markets still have low per capita consumption of Danone’s products, providing a huge opportunity. The company was an early mover in high growth markets such as China and India. Currently, its presence is limited to beverages and biscuits in the Asia-Pacific region, leaving dairy as a future growth opportunity.
We have been actively pushing companies to address water scarcity issues, and are pleased that Danone unveiled a Groundwater Resources Protection Policy in late 2004. It also reports on social and environmental issues within the Global Reporting Initiative framework.