China's baby boom benefitting Irish Dairy Sector

China’s baby boom benefitting Irish Dairy Sector

Danone is leading the race to feed China’s babies, gaining ground against Nestle and Reckitt Benckiser and offsetting a slump in its yoghurt business.

Sales of the baby food climbed almost 10% last year, the company said.

That was fueled by growth in China and the rest of Asia, where Danone has doubled its market share in baby food in the past five years through online sales.

Danone makes baby food in Cork and Wexford, while Nestle has a huge plant in Limerick.

The whole industry supplying infant formula to China is hugely important for Irish dairy industry and hundreds of manufacturing jobs here — this country supplies 20% of the world’s infant formula and is the second biggest exporter to China.

Based on 2016 figures, exports of Irish baby food amounted to at least €1.2bn. Sales to China have been boosted by rising prosperity and a contamination scandal 10 years ago of local products.

And demand for infant formula also ramped up in what is Asia’s largest economy after it ended its one-child policy around 2016.

Sales in that market rose 30% in the fourth quarter. Danone’s strong push into e-commerce has helped it increase its global baby-food market share to 12.3% in 2017, gaining for a fifth year, according to Euromonitor.

Nestle, the leader with 20.9%, said its infant formula sales growth in China was soft.

Danone shares rose as much as 2.5% in the latest session and were up 15% from a year earlier. Nestle shares were up slightly and have gained 8% in the year.

Last year’s boom was buoyed by strong birth rates in China, though that’s slowing down, chief financial officer Cecile Cabanis said on a call with reporters. The peak in births was in the second half of 2016, Danone said.

“The market will progressively normalise in 2018, continuing into 2019,” Ms Cabanis said. Danone forecast earnings per share will rise at a double-digit pace. That follows 14% growth in 2017, above the company’s target.

Chief executive Emmanuel Faber has been trying to breathe new life into the yoghurt business as sales suffered from tougher competition and marketing missteps in a revamp of the Activia brand.

It acquired soy-milk maker WhiteWave for $10bn (€8bn) last year to tap faster-growing organic food and drinks.

Earlier this week, Danone said it’s selling €1.5bn worth of shares in Japan’s Yakult, six months after activist fund Corvex Management built up a stake in the French company.


Source: Irish Examiner

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