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Baby food stockpiling in China shields Danone from deteriorating European demand

Danone chief executive Franck Riboud poses prior to delivering a speech for the 2012 year financial results conference in Paris, Tuesday, Feb. 19, 2013. French food and drink company Danone says revenues grew 5.4 percent in 2012 but are coming under increasing pressure in economically-struggling Europe, where the company says it will cut 900 jobs across 26 countries. (AP Photo/Francois Mori
AP Photo/Francois Mori
Danone CEO Franck Riboud throws yogurt.
By Gwynn Guilford
FrancePublished Last updated This article is more than 2 years old.

The numbers: France’s Danone reported revenue of €5.34 billion ($7 billion), up 4.3% and beating analyst expectations of €5.28 billion. Sales excluding factors such as currency fluctuations also exceeded analyst expectations, jumping 5.6%, compared with the projected 4%.

The takeaway: The food company—whose consumer brands include Danone dairy products and Evian water—is doing a solid job of offsetting the effects of the European downturn with a shift toward emerging markets. For instance, while sales were up 10% in emerging markets and North America, European sales fell 5.1%. The company highlighted during its earnings call that sales in Italy and Spain were particularly grim. And Danone will only be contributing to that sluggishness: as part of a cost-reduction plan, it will be slashing around 4% of its European workforce this year.

What’s interesting: Danone is making a killing off China’s ongoing struggle with tainted foods. Baby food sales rose a whopping 17%, buoyed by China’s infant formula-hoarding. Meanwhile, the company said that Chinese demand for bottled water was a top growth-driver, as well. Demand for those products is driven by concerns about extreme pollution and tainted food products.

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