Danone's Revenue Growth Signals Strategic Turnaround Amid Global Challenges

Danone, the French food giant, has delivered a modest yet significant milestone in its turnaround journey: 4.3% organic revenue growth in 2024, surpassing the 4% threshold for the first time since 2019. This marks a critical step toward rebuilding investor confidence after years of volatility driven by geopolitical disruptions, inflation, and shifting consumer preferences. While reported sales dipped slightly (-0.9%), underlying trends suggest Danone is stabilizing its core businesses and positioning itself for sustainable growth.

The company’s like-for-like (LFL) sales growth—a metric that strips out currency swings, acquisitions/divestitures, and hyperinflation effects—reached 4.3%, propelled by a balanced mix of volume/mix gains (+3.0%) and pricing (+1.3%). This underscores Danone’s ability to drive demand through innovation and operational discipline. Key regions and categories played pivotal roles:

1. North America: A standout performer, with LFL sales surging +7.7% in Q4 2024, fueled by growth in Waters (e.g., Evian), High Protein (e.g., DanoneWave), and Coffee Creations (e.g., Silk Almondmilk). These categories are critical to Danone’s “Win in Categories” strategy, which prioritizes premium, health-focused products.
2. Europe: The Essential Dairy & Plant-Based (EDP) business, once a drag, posted its fifth consecutive quarter of positive volume/mix growth, reflecting improved brand equity and market share. Full-year LFL sales rose 1.7%, a modest but encouraging rebound from years of decline.
3. China, North Asia & Oceania: Strong momentum in Infant Milk Formula (IMF) and Medical Nutrition propelled full-year LFL growth to +8.0%. Danone’s premium positioning in these categories, alongside partnerships like the AFG (Arla Foods Ingredients Group) joint venture, has helped it navigate regulatory and competitive pressures in China.
4. Latin America: A return to growth, with LFL sales up +4.2%, as stable weather and strong execution in core brands (e.g., Danone, Danette) offset inflationary pressures.

Navigating Headwinds with Financial Discipline

Danone’s 2024 results highlight its progress in balancing top-line growth with margin expansion. The recurring operating margin improved to 13.0%, up 39 basis points year-on-year, thanks to cost optimization and pricing power. Meanwhile, free cash flow hit a record €3.0 billion, a 14% increase, enabling a modest dividend hike and debt reduction to €8.6 billion—a 15.7% drop from 2023.

Despite these positives, Danone faces persistent challenges. Currency headwinds, particularly in emerging markets like Argentina and Turkey, shaved 2.8% off reported sales. Additionally, the exit of non-core businesses—such as Russia’s EDP operations and the Horizon Organic and Wallaby brands—reduced sales by 4.8%. Management has framed these moves as necessary to focus resources on high-margin, strategic categories.

2025 Outlook: Steady Progress, but Risks Remain

Danone’s 2025 guidance of 3-5% LFL sales growth reflects cautious optimism. Management expects continued momentum in Waters (targeting 6-8% growth), High Protein (driven by DanoneWave), and Medical Nutrition, while EDP’s stabilization should avoid past declines. However, risks loom:

• Currency volatility: Emerging markets, which contributed 44% of 2024 sales, remain exposed to macroeconomic instability.
• Commodity costs: Input price pressures could squeeze margins if not offset by further pricing or cost savings.
• Competitive dynamics: Rival brands in categories like plant-based beverages and infant formula are intensifying competition.

Conclusion: A Fragile Turnaround, but Momentum is Building

Danone’s 4.3% organic growth in 2024 is a meaningful step toward its mid-term goal of 5-6% LFL sales growth and 14-16% recurring operating margin. The company’s focus on premium, health-oriented categories, paired with disciplined cost management, has delivered record cash flow and deleveraging. While headwinds like forex and scope reductions will persist, the structural improvements in regions like Europe and North America suggest Danone is becoming less reliant on volatile markets.

Investors should weigh the positives: a resilient cash engine, category leadership in key markets, and a strategy aligned with long-term consumer trends. However, the path to 5-6% growth remains narrow. If Danone can sustain its current trajectory—and navigate currency risks—its valuation (currently trading at 16.5x 2024 EV/EBITDA) could prove attractive. For now, the signal is clear: Danone is no longer in freefall. The question is whether it can convert stabilization into sustained outperformance.

Data as of February 26, 2025, based on Danone’s FY2024 results.