Danone eyes ‘selective price increases’ as volumes grow

Despite returning to positive volume growth, Danone’s CFO says the business will continue to make strategic price increases behind its “differentiated” products.

Danone is continuing to make “selective price increases” on products where it can provide a “differentiated” offering, even as it returns to volume growth.

The FMCG business, which owns brands including Evian, Alpro and Activa, saw positive volume growth in the first quarter of the year, with volume and mix growing 1.2%. 

This is the second consecutive quarter Danone has experienced volume growth, after registering negative volumes as a result of inflation fuelled price rises. Last year, Danone’s volume sales fell 0.4% across the financial year.

This quarter, sales reached €6.8m (£5.8m), up 4.1% versus the same period last year. While volume sales were up, pricing was also up 2.9% helping to boost overall sales for the quarter.

Speaking to investors today (18 April) chief financial officer Jurgen Esser explained the business is no longer taking “broad-based” pricing actions on its brands as it did during peak inflation. It is, however, looking strategically to see where it can make price increases against brands that can provide value compared to the competition.

“What we have been doing is to do selective price increases, especially on those product ranges which offer more differentiated elements versus competition,” Esser said.

When rates of inflation were rising many FMCG businesses leaned on pricing as the main lever of sales growth. This year, the focus for many has returned to driving volume growth.

How can brands drive growth in 2024?

Pricing shouldn’t immediately fall off the radar for these businesses, according to director at brand consultancy Passionbrand and Marketing Week columnist Helen Edwards, outlining the path to growth for FMCG companies in 2024.

“If you’ve got a reason for consumers to pay more, then you’ve always got an argument to increase price,” she told Marketing Week earlier this year.

Danone said today it has been “staying firm” in price negotiations with retailers, with Esser adding the company’s strong performance at the beginning of the year has given it “space to stay firm”.

The business’s leadership touted performance against its ‘Renew Danone’ objectives, a strategy developed by CEO Antoine de Saint-Affrique upon joining the business. The initiative aims to create more competitiveness at the business through a focus on its core products, as well as more relevant innovation.

Esser said the company’s focus on premium and “more differentiated” ranges was paying off and contributing to its positive mix (higher margin products being sold).