By Pierre Bertrand

Danone plans to double down on health and nutrition in the coming years as food companies seek to tackle the effects of Ozempic and other blockbuster weight-loss drugs on eating habits.

Two years into its turnaround plan, the company behind Activia yogurt and Evian water is pivoting toward acquisitions from an initial phase in which it offloaded assets it saw as underperforming. Its efforts come at a time consumers in many places around the world are ditching big brands in favor of private-label products after years of inflation.

The rise in popularity of weight-loss drugs such as Mounjaro, Wegovy and Ozempic left investors assessing potential long-term implications on sectors ranging from food to clothing. The drugs, known as GLP-1, mimic a natural hormone that helps people shed weight by suppressing appetite.

The French food producer said it sees changes in the way people eat, age and live as structural tailwinds for its business. It is confident a focus on health and nutrition will help it deliver profitable growth.

"The food industry is at a tipping point: Health, and the role food plays in health, will become more critical than ever," Danone Chief Executive Antoine de Saint-Affrique said.

Some analysts say Danone looks well positioned among food makers to benefit from weight-loss drugs. The company's exposure to yogurt, plant-based dairy and water makes it stand out as a possible GLP-1 winner, analysts at UBS wrote in a recent research note.

Danone said it is targeting like-for-like sales growth of between 3% and 5% for the 2025 to 2028 period, with recurring operating income rising at a faster pace than sales.

The company's sales growth target for 2025-28 is in line with the sales growth it projects for this year. In 2024, Danone also expects a moderate improvement to its recurring operating margin from the 12.6% it reported for last year.

At Thursday's capital markets day, Danone said it is opening a new phase in the strategic overhaul it put in place more than two years ago. After its efforts to prune its portfolio, the company is now moving toward a more acquisitive strategy and trying to expand its footprint.

In March 2022, months after de Saint-Affrique took the helm, the company outlined a program to foster growth and address what it said was a lack of focus on its core portfolio, sluggish innovation, inconsistent execution and low investments.

At the time, the company said a quarter of its portfolio was underperforming and would need to be divested or fixed. It shed biscuit and snack brand Michel & Augustin in February and dairy brands Horizon Organic and Wallaby in the U.S. in April. In May, Danone completed the sale of its Essential Dairy and Plant-based business in Russia.

The company is moving ahead in its overhaul push at a time consumer-goods companies are increasingly competing against more affordable non-branded products after a rise in living costs placed prices at the top of consumers' minds. In the U.S., the proportion of consumers' income spent on food is at a three-decade high, according to U.S. Agriculture Department data.

More than half of retailers expect private labels to drive growth this year, according to NielsenIQ, a market research firm.

After years of inflation following the Covid-19 pandemic, consumer-goods companies are becoming more careful on where to push through price increases. Danone doesn't plan broad-based price adjustments and is instead pursuing selective price increases for product ranges where it has an edge over competitors, Deputy Chief Executive Juergen Esser said during an earnings call in April.

Write to Pierre Bertrand at

(END) Dow Jones Newswires

06-20-24 0511ET