Danone SWOT & PESTLE Analysis
COMPANY PROFILE -Danone
Business Sector :FMCG, Food Processing
Operating Geography :France, Europe, Global
About Danone :
Danone is a French food and beverage company established in 1919. Headquartered in Paris, it is a global frontrunner in Essential Dairy and Plant-Based Products, Waters, Early Life Nutrition and Advanced Medical Nutrition. The group has its operations in more than 120 markets and has more than 100,000 employees as of December2017. The company is listed on Euronext Paris where it is a component of the CAC 40 stock market index. It ranks #58 in Forbes’ World’s most valuable company brands and #135 in the Top Multinational Performers. In the year 1919, Spanish children were infested with severe intestinal infections. Observing this Isaac Carasso introduced a yogurt for its nutritional benefits and named it Danone after his son Daniel. This gave birth to the Danone brand. Today,Danone is the seventh largest food company in the world, third largest in Europe and the leading food company in France, Italy and Spain. Amongst its 4 core businesses (dairy product, waters, life nutrition and medical nutrition) Danone ranks number one for its dairy products worldwide. Stagnant revenues over the last five years and the highly expensive acquisition of WhiteWave Foods in 2017 has resulted in flat performance for Danone's stock as of 2018.In 2018, the Danone companies in North America and Canada succeeded in achieved B CorpTM Certification, this achievement leads to 30% of Danone’s global business being certified.Danone’s vision statement is ‘Danone, One Planet. One Health’. Danone’s mission reads ‘Bringing health through food to as many people as possible’.
Danone claims that its USP or unique selling proposition is that “The Company relies on a unique portfolio of strong brands, solid execution capabilities in terms of innovation, brand activation and the development of new distribution channels. Positioned in the most dynamic categories of the food and beverage industry, Danone has a strong leadership position in all its markets.”
Danone Revenue :
€24.7 billion (FY ended Dec 31st 2017) (y-o-y growth 12.78%)
€21.9 billion (FY ended Dec 31st 2016)
Ownership / Major shareholders :
Loomis, Sayles & Co- 0.94%, John W. Bristol & Co – 0.13%Competitive Analysis of Danone
The SWOT / TOWS analysis is a strategic planning tool that helps assess the internal and external factors which influence the company’s micro and macro environment. SWOT analysis is a useful technique to analyze the present strength, weakness, opportunity, and threats alongside their impact on the current business model of the Danone group.
Danone is the global leader in domains like the dairy products and bottled waters. It ranks number #2 in the baby food segment. Danone’s target group of audiences is the urban families belonging to middle and/ or upper-middle class. The company strives to be globally recognized as a brand that provides healthy products of supreme quality. Danone operates in 4 prominent domains with market share distribution in 2015as follows - 50% in dairy products, 21% in waters, 22% in early life nutrition and 7% in medical nutrition. The board portfolio of products is a major strength of the Danone group. Apart from this, the company is known for strengths like supreme quality, healthy food products, a strong employee base of 100,000+, global leader in dairy products, pioneer in introducing healthy yogurt, strong financial muscle and these also lend a competitive advantage to Danone
Danone has the highest market share in the dairy segment but increasing raw material cost is leading to a rise in the cost of end products, affecting the overall revenue and dropping of sales. The company’s high dependency on the Asian market (Especially China and India) is another weakness, as the demand for costly Danone products is declining in these markets. There is a huge opportunity for the expansion of the Danone company in markets with emerging economies, in western countries. People are preferring Greek yogurt over the regular one and are shifting towards healthier options, hence sales are expected to grow in future. Acquisition and mergers, extension of new products and expansion in market share in developing countries can act as some great opportunities for Danone’s growth. Increase in raw material cost, competition from global players of food and beverage industry, and cheap alternatives from local suppliers are some of the major threats to the Danone group
The SWOT analysis of Danone is presented below in a nutshell followed by the detailed analysis.
| 1. Strong presence in specialized nutrition segment 2. Wide product Portfolio 3. Solid International footing 4. Brand recognition with popular brands 5. Efficient distribution network | 1. Lacklustre performance in dairy segment 2. Overdependence on Limited Suppliers |
| 1. Expansion opportunities in emerging economies 2. Acquisition and Partnerships for viable and profitable expansions 3. New Product Development for product differentiation | 1. Highly competitive food and beverage industry 2. Liquidity risks may increase financing costs |
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Detailed SWOT Analysis of Danone
Strength
1. Strong presence in specialized nutrition segment: This segment sold under Nutricia’s umbrella brand, recorded the highest sales growth of 9.3% to 7.1 billion euros in 2017. It constitutes 29% of the group’s sales. It performed especially well in Asia. It offers products for the sensitive individuals from preterm birth to the old & for people with specific allergies. One of its highest selling component is specialized nutrition for infants to complement breast feeding which is 85% of Early Life Nutrition segment. Advanced Medical nutrition sales rose by 5% in 2017. This segment promotes synergies and space for further expansion as presently the products in this segment are limited to a few countries.
2. Wide product portfolio: Danone’s diversified product basket includes products ranging from essential dairy and plant-based products, packaged natural water and flavored and vitamin-enriched waters to early life nutrition and natural water and flavored and vitamin-enriched waters. These attractive categories are aligned with the changing consumer trends which puts the group on a sustainable and broad-based growth path. The renewal of production lines across these categories increase its market penetration and consumption across the globe. It also gives the group expansionary advantage and scalability.
3. Solid International footing: Danone is the global leader in fresh dairy products and plant-based products and second largest seller in early life nutrition and packaged waters by volume. 66% of Danone’s sales contribution came from international sales in 2017. It has established a solid footing in the largest consumer base, China with 7% sales. USA with 18% and France with 9% sales of the group in 2017 have been the largest international market bases for the group. It has also increased the production capacity of Aptamil plants in New Zealand to tap the growing demand. Water sales in Latin America and North America remained strong, giving a fillip to the weak dairy segment performance in Europe.
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Weakness
1. Lacklustre performance in dairy segment: Danone’s sales growth in dairy segment has declined by 2% in 2017 to 4.5 billion euros. The essential dairy and plant based international sales’ recurring operating margins fell by 29 basis points in 2017. It was driven by the sharp decline in volumes in Premium Dairy segment. It was due to excess supply of organic milk in the industry. The absorption of this oversupply through reallocation of the surplus to other products will be with a significant time lag. This is why it sold two-third stake in Yakult. This can negatively affect the revenue in 2018 as well. If Danone fails to revamp its dairy segment then more shutdowns may follow leading to decline in sales and hence revenue.
2. Overdependence on Limited Suppliers: The ferments used in Essential Dairy and Plant-Based business, powdered milk for the Advanced Medical Nutrition business in some Asian countries and sub-contracted services or information technology services are purchased by a limited number of suppliers. Only 15-20% of European, Russian and South African cow owners provide the bulk of overall volume. This overdependence can adversely affect its operations if the limited suppliers fail to meet Danone’s qualitative and quantitative standards. It can also hamper its operations due to delays in procurement of necessary inputs. The risks due to contamination also rise as supply chain is disturbed. Danone needs to increase the alternate supplier base to circumvent these uncertainties.
Opportunity
This section is available only in the 'Complete Report' on purchase.
Threat
This section is available only in the 'Complete Report' on purchase.
Major Competitors :
General Mills, Nestlé, Kraft Heinz Company, Lactalis, Unilever, Coca‑Cola Company, Pepsi, Mead Johnson (owned by Reckitt Benckiser).Major Brands :
Activia, Actimel, Alpro, Aptamil, Danette, Danio, Danonino, evian, Nutricia, Nutrilon, Volvic, AQUA, Blédina, Bonafont, Cow & Gate, Horizon, Mizone, Oikos, Prostokvashino, Silk and Vega.Key Business Segments / Diversification :
Recent Acquisition / Mergers / Alliance / Joint Ventures / Divestitures :
| WhiteWave Foods | Consumer packaged food and beverage | 2017 | Acquisition | Strengthened Danone’s product offering in organic and plant-based products |
| Stonyfield | Organic foods | 2017 | Divestiture | To avoid anti-trust claims for the more significant WhiteWave acquisition |
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TABLE OF CONTENTS
DELIVERY AND FORMAT
WHY CHOOSE US?
- The SWOT and PESTLE analysis report of Danone presents an understanding of the complex internal and external factors affecting the brand and its operations
- Core competitive advantages relished by Danone over its rivals and competitors from the Food and beverage industry
- A brief overview of Danone’s business profile, number of employees, owners & stakeholders and revenue jumps
- Overall company analysis to gain acquaintance about company information, company profile, business model, business plans and marketing strategy
- Study of Danone’s USP or unique selling proposition, mission statement and vision statement that has made it a global leader in the food and beverage industry
- The SWOT Analysis framework facilitates the company to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats
- Intelligence on Danone's share price, mergers and acquisitions, strategic partnerships and alliances which will state details about the synergy achieved and how these acquisitions contributed to the growth of the Company.
- Utilizing PESTLE/ PESTEL/ STEEPL Analysis for in-depth analysis of all external factors namely, political, economic, social, technological, legal and environmental and highlighting their influence on the performance of Danone group
- Understanding of how Danone has leveraged the strength of technology and supply chain management to keep competition at bay.
- A peek into the Danone’s key performance indicators, success factors, value proposition and core competencies
- Danone’s case study which gives intelligence into Danone's business model and how it manages to outstand competition.
- Insights about micro and macro factors through internal and external analysis
References used in Danone Analysis Report
1. http://danone-danonecom-prod.s3.amazonaws.com/user_upload/Investisseurs/Company_s_Reports/2018/Danone_-_Registration_Document_2017.pdf
2. http://danone-danonecom-prod.s3.amazonaws.com/Danone_-_Registration_Document_2017.pdf
3. https://www.foodnavigator.com/Article/2017/11/17/Danone-focuses-climate-efforts-on-regenerative-agriculture
4. https://www.caissedesdepotsdesterritoires.fr/cs/ContentServer?pagename=Territoires/Articles/Articles&cid=1250281122713
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Danone SWOT and PESTLE analysis has been conducted by Kanupriya Sheopuri and reviewed by senior analysts from Barakaat Consulting.
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