Danone reports F.D.A. approval for Activia claims

by Jeff Gelski
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PARIS — Groupe Danone said its yogurt business, coming off a successful 2013, soon may benefit from a U.S. Food and Drug Administration determination.

“We just got the authorization from the F.D.A. with three health claim links to Activia, to the digestive system, which will help us again re-launch, without the Greek version, the core business of Activia,” said Franck Riboud, chairman and chief executive officer of Groupe Danone, in a Feb. 20 earnings call.

The company is looking at how it may advertise the claims, he said.

“But it’s still in the process,” Mr. Riboud said. “So I can’t disclose anything on that.”

Many U.S. consumers may associate the Activia brand with digestive benefits, but the Dannon Co., White Plains, N.Y., had problems with Activia claims a little more than three years ago. In December 2010 the company reached agreement with 39 state attorneys general to pay $21 million to settle marketing claims made for its Activia yogurt and DanActive dairy drink.

Consistent with Federal Trade Commission standards, Dannon at the time agreed to more clearly convey that Activia’s beneficial effects on irregularity and transit time were confirmed on three servings per day. Dannon also agreed DanActive will not be marketed as a cold or flu remedy, which Dannon maintained it had never done. Groupe Danone is the parent company of the Dannon Co.

In fiscal year 2013, yogurt, especially Greek yogurt, helped Paris-based Groupe Danone reach Fresh Dairy Products business sales of €11,790 million ($16,175 million), which was up from €11,675 million in 2012.

The company now has a Greek variety of Activia, although Mr. Riboud did not say those varieties would be involved in the F.D.A. claims. Other Greek varieties are under the Danimals and Light & Fit brands.

“Greek is an ingredient for us,” Mr. Riboud said.

Danone’s Early Life Nutrition business, mostly because of a supplier problem in China, did not have as smooth a year as the company’s yogurt business.

On Aug. 2, 2013, Fonterra issued an alert concerning a possible contamination of certain ingredients supplied to Danone. The alert turned out to be false, but it led to a €200 million loss in sales in the fourth quarter for Groupe Danone. On Jan. 8 of this year Danone said it was terminating its supply contract with Fonterra.

“Clearly we can say it’s not our fault, okay, which is true, but at the same time, we have to look at our supply chain,” Mr. Riboud said. “We have to look at, how do we buy product?”

Groupe Danone has a future in China, he said.

“You need to understand and really trust in the fact we are going to rebuild China,” Mr. Riboud said. “First of all, don’t think we are going to rebuild the same animal. We are going to build a new one, a better one.”

Early Life Nutrition finished the fiscal year with sales of €4,263 million, up from €4,257 million in the previous fiscal year. In the Waters business, fiscal-year sales of €3,903 million were up from €3,649 million.

Companywide in fiscal year 2013, Groupe Danone had net income of €1,550 million, down from €1,787 million in the previous fiscal year. Groupe Danone also reports underlying net income, which measures the recurring performance and excludes significant items that, because of their exceptional nature, may not be viewed as inherent to the current performance. Underlying net income of €1,636 million, or €2.78 per share, in 2013 was down from €1,818 million, or €3.01 per share, in fiscal year 2012.

Fiscal-year sales of €21,298 million were up from €20,869 million in fiscal year 2012.

“Several factors affected our results, particularly in the second half,” Mr. Riboud said. “Currencies were volatile in emerging countries, milk prices rose steeply around the world, taxes went up sharply and a false food safety alert triggered by one of our suppliers (Fonterra) had a marked impact on our Early Life Nutrition activities.”

Group Danone expects like-for-like sales growth between 4.5% and 5.5% in 2014.
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