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An article from
DANONE DIGS IN AT DISCOUNT CHANNELS AS CONSUMER TASTES CHANGE
The retail channel is one of the fastest-growing segments of the dairy and
plant-based giant’s business in the U.S. with sales forecast to top $100 million
in 2023.
Published June 28, 2023
Christopher Doering Senior Reporter
*
*
*
*
*
Courtesy of Danone
Danone is aggressively expanding its presence in U.S. discount stores as the
dairy and plant-based giant aims to capitalize on the growing popularity of the
channel while ensuring its products are accessible to more consumers.
For much of its history, Danone has focused its efforts on stocking items such
as its International Delight creamers, Evian water and Activia yogurt in grocery
stores and mass retailers. But during the pandemic as the U.S. was starting to
enter a period of heightened inflation, Danone doubled down on its presence at
discount stores across the country, a top executive said in an interview.
Today, the discount channel is one of the fastest-growing parts of Danone’s
business in the U.S. with sales forecast to top $100 million in 2023. Still, it
will be a small part of the CPG company’s overall business. Sales for Danone in
North America during its fiscal 2022 year totaled $6.7 billion, up 8.9% on a
like-for-like basis from the prior year.
Optional Caption
Permission granted by Danone
“There was a really unique opportunity for us to double down in this space.
We've made the declaration that we want to invest to be able to win,” said Ariel
Dalton, senior vice president for commercial leadership in the U.S. for
Danone. “We're looking for it to be a bigger, healthier business for us in the
future.”
CHANGES ABOUND
A lot has changed at discounters that made it possible for Danone to even
consider growing its presence in the space, she said.
Retailers such as Aldi and Dollar General have added new locations, most notably
in areas that were previously food deserts. Aldi, for example, has averaged
opening 95 stores per year from September 2018 to September 2022, according to
Coresight Research.
Discounters also have prioritized carrying more fresh and refrigerated items as
they attempt to better compete with traditional retailers, a move that has
created more opportunities for Danone and other CPG food and beverage makers.
And in the last few years, the pandemic and recent bouts of inflation have
caused more households to make visiting discounters a more frequent part of
their shopping habits.
By aggressively expanding its presence at U.S. discount stores, the dairy and
plant-based giant aims to capitalize on the popularity of the sector while
ensuring its healthier products are accessible to more consumers. Danone
recently conducted a study that found 60% of Americans do not eat what they
would describe as very nutritious foods, due to significant economic and
physical barriers.
Dalton said Danone has spent several years laying the groundwork for its
expansion into the discount channel.
“It's not something that you can just decide overnight,” she said. “It takes
years because you need to have the right capabilities, the right formats,
flexible manufacturing.”
Optional Caption
Retrieved from Danone.
Danone studied what products would best resonate with consumers and the type of
offerings retailers were looking for.
Unlike mass retailers such as Walmart or a typical grocery store, discounters
don’t have a lot of space in the back to hold products. So Danone needed to
create display-ready cases that could easily be put on shelves, often by busy
employees who are responsible for doing a variety of jobs like stocking and
checking out.
In some cases, the food and beverage maker had to educate retailers about how
their stores, long dependent on private label, could benefit from carrying a
branded product. It also had to drive awareness among shoppers, many of whom
were not used to finding branded products at their stores.
Finally, Danone had to tweak the package sizes of some of its offerings, like
selling a 4-ounce Dannon Light & Fit yogurt instead of the 5.3-ounce variety it
usually offers, so it was closer to a $1 price point where it was more
affordable for cash-strapped shoppers. It also introduced smaller package sizes
better aligned with consumer budgets while mitigating waste on perishable items.
Accelerating its discount presence didn’t come cheap, especially at first,
Dalton said.
“It was more expensive initially to be able to do business in those channels
until we were able to build out those capabilities,” she added. “But we knew
long term it would pay off because we didn't want a shopper to have to make a
decision if they wanted our brand.”
Danone had to increase spending to build up its manufacturing and delivery
capabilities. In some cases, employees had to hand pack products until the
company developed the technology to create the display-ready cases or to handle
the different pack sizes.
The company also had to boost staffing for its sales team as well as its
category management team, the unit responsible for working with retailers and
helping them determine what items they should carry. During the past five years,
Danone has nearly tripled the size of its staff working with discounters.
Many discounters serviced by Danone typically carry products that are popular
with lower-income consumers, such as Danimals and Yo Crunch yogurts, some of its
International Delight creamers, and Silk and So Delicious, which are in demand
among individuals seeking plant-based options.
Going forward, Danone plans to bring other products in its lineup to discounters
and broaden the reach of those that are already present with items such as
limited-time yogurts that are big sellers in the discount channel.
“We don't want to just be the expensive brand that only some households can
afford,” Dalton said. “We want to make sure that we're accessible across the
board.”
RECOMMENDED READING
* The secret behind Danone’s ‘very recession resilient’ portfolio By
Christopher Doering • Aug. 10, 2022
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Filed Under: Manufacturing, Corporate Operations, Packaging / Labeling,
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