“This is the year of innovation for China”: Danone to beef up infant formula, FSMP range
Net sales in China, North Asia, and Oceania were up 8.6 per cent on a like-for-like basis to €1.8bn (US$1.9bn), the company said in its H1 FY24 results released on July 31.
Total net sales were €13.8bn (US$14.9bn), up four per cent on a like-for-like basis. Danone's largest category was dairy and plant-based products, followed by specialised nutrition, and waters, where net sales were €6.8bn (US$7.3bn), €4.4bn (US$4.8bn), and €2.6bn (US$2.8bn) respectively.
Despite China’s declining birth rates and market competition, Danone said it had maintained “competitive momentum” in the market.
CEO Antoine de Saint-Affrique said that performance in China was driven by both sales volume and new innovations.
“It's a stellar performance that is driven by great volume mix. As part of the performance, there is obviously the launch of a number of innovations in the market.
“We’ve obtained more licenses, opening us the opportunity to start launching more products in IMF. Some of our last launches, so I mean, the likes of Essensis, are doing very well,” said de Saint-Affrique.
To meet China’s new GB or GuoBiao national standards, the company launched Aptamil Essensis which contains Bifidobacteria breve M-16V and prebiotics short-chain galacto-oligosaccharides (scGOS) and long-chain fructo-oligosaccharides (lcFOS) in the ratio of nine to one.
This year is in fact, “the year of innovation for China”, CFO Juergen Esser said.
On September 1, Danone will also launch in Hong Kong a new infant formula product formulated with Nuturis – a concept which features large milk lipid droplets said to closely mimic those in breast milk.
Specifically, the milk droplets have a mode diameter of three to five micrometre, much larger than 0.5mm seen in standard formulas.
Moreover, the droplets are covered by a tri-layer membrane consisting of phospholipids, milk proteins, and cholesterol.
Research has shown that the Nuturis formula is able to promote growth comparable to standard products.
Nuturis will be launched progressively, as the company looks to build credibility and educate health care professionals and consumers on the differences of this product versus other products.
“Nuturis, as we said, we will launch or introduce in September 1 in Hong Kong and then expand it further.
“As we said as well, it's going to be progressive because you need to build the credibility with the health care professional so that to make sure that the consumer and also the doctors understand the difference of the product, which then gives you a base to have a long-lasting success,” said de Saint-Affrique.
Last year, Danone’s flagship infant formula brand Aptamil ranked second in China, only after local market leader Feihe, data from Kantar Worldpanel showed.
Aside from infant formula, the company is also ramping up its tube feeding products under the brands Nutrison and Peptisorb in China.
It is also growing its FSMP offerings following the launch of Fortimel last November.
“On tube feeding, we have very strong market shares in our tier 1 hospitals. We're obviously expanding our reach. We are going further in tube feeding, in powder and, yes, our nutrition brand is moving forward.
“And as we said, we are introducing FSMP in China. So same story. You do it in a methodical way, you convince the health care professionals, you are where the patients are and here you go.
“I think what we have done in China in a very systematic way is be very focused, be very deep in what we do and then be very consistent, consistent, consistent over time, which has served us well and is serving us well,” said de Saint-Affrique.
Maintaining margin
The company is confident that margin from its specialised nutrition will stay ahead of 20 per cent, although it has invested heavily in innovation and trials.
For instance, in China where there is a flurry of new product development, de Saint-Affrique said that margin has been “at the right level”.
“As part of the performance in China, there is obviously the launch of a number of innovations in the market. And as you launch innovations, you invest behind those innovations, be it in terms of listing, be it in terms of trial, be it in terms of promotion.
"The margin of our China business is at the right level and is maintained. The balance is linked to the flow of innovation, and we are doing what it takes to keep rolling at a fantastic pace in China with a real quality growth,” said de Saint-Affrique.
“We were very clear that the Specialised Nutrition margin will stay ahead of 20 per cent,” Esser stressed.
