Danone sale-growth goals

Groupe Danone SA has reduced its revenue expectations for the next three years, as the French dairy company now expects the world-wide economic downturn to lead to a long-term change in consumer-spending habits.

Danone has spent much of the past decade narrowing its portfolio of products to focus entirely on health-product offerings. Key to this strategy and revenue growth are premium-priced probiotic yogurt brands Activia, which Danone says helps regulate digestion, and Actimel, which it says helps support the body’s natural defenses.

Sales of Activia rose 24% year-to-year in 2008 to €2.3 billion, while Actimel generated €1.2 billion of the group’s €15.2 billion in revenue in 2008.

Danone responded this week by resetting its medium-term sales growth objective to at least 5% a year. The decision to trim the company’s medium-term revenue target was announced Wednesday evening after Danone’s annual investor conference. The news triggered a 4.4% drop in the company’s share price.

Danone said lasting effects of the downturn, including higher unemployment and massive government debt, will hold back future consumer spending, J.P. Morgan analyst Pablo Zuanic said in a note to investors.

In October, Danone said its health-benefit brands continued to grow faster than the average of the products in its dairy division, which accounted for about 57% of group revenue in the third quarter.

Danone sought to adjust to the economic slowdown earlier this year with a drive to boost volumes. Amid a fall in raw-material prices, the company cut prices, intensified promotions and introduced new products. Volumes rose 7.1% in the third quarter.

The Wall Street Journal November 2009

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Singapore’s growth signals recovery in Asia.

Singapore, a bellwether of the world’s fastest –growing economic region, tightened monetary policy after reporting its swiftest expansion on record, in the latest sign that Asia is recovering far more rapidly than the West.

More evidence came from South Korea, where a spurt of hiring in the manufacturing sector helped push jobless numbers sharply lower and Moody’s Investors Service raised the country’s credit rating to its highest level since the 1997-1998 Asian financial crisis.

The data show how growth in Asia – not just in China, which reports first-quarter gross domestic product Thursday morning, but also among its neighbors – is continuing to surprise on the upside. In addition, the expansion is forcing authorities to confront the threat of inflation.

Singapore’s tightening surprised many economists Wednesday and raised the likelihood that other central banks in the region will follow the suit. Australia, Malaysia and India already have raised interest rates, but economies such as South Korea and Taiwan have kept policy at crisis levels for fear of derailing the recovery.

Some central banks in the region have been reluctant to tighten for fear of making their exports less competitive compared with China, which has kept its currency in a de facto peg with the U.S. dollar even as its economy is forecast to grow 9.5% this year, according to the World Bank.

Higher interest rates tend to strengthen currencies and make goods more expensive on the world market. However, overall growth, and expectations that China will let the yuan rise against the U.S. dollar in coming months, may be making it easier for policymakers to tighten policy without fear that stronger currencies will hurt still-recovering export sectors.

The Wall Street Journal April 2010

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