Danone, the French yoghurt maker in transition, is stepping up investment in nutritious drinks for cancer patients and the elderly, betting that an aging population will boost long-term growth.
The medical nutrition unit will be a big part of the next phase of Danone's recovery efforts, after CEO Antoine de Saint-Affric began to revive growth in sales volumes of products such as Fulvic bottled water and Activia yoghurt.
The dairy and plants business, which produces Actimel yoghurt drinks and Alpro soy milk, remains Danone's largest unit, generating around €14 billion. ($15 billion) in annual sales. But its specialist nutrition businesses – including medical nutrition – are more profitable and expected to grow faster, it will feature in De Saint-Affrique's strategy update on 20 June.
The division makes drinks packed with protein, nutrients and fiber designed to provide nutrition and support gut bacteria for people with diseases such as cancer that fight weight loss, as well as for patients who are tube-fed. The number of people aged 65 or over worldwide is expected to double to 1.6 billion by 2050, according to the United Nations.
“Populations all over the world are aging, and with that comes all kinds of diseases,” de Saint-Afrique said in his office in Paris. “We are one of the largest companies in medical nutrition, a leader in tube feeding, and we are also very strong in providing nutrition to cancer patients. These categories are growing very quickly.”
Jurgen Esser, executive vice president in charge of finance, said investors still view Danone as a yoghurt and water company. But the medical nutrition business is “Danone's best-kept secret, the jewel of the company,” he says.
Medical Nutrition generates around €3 billion in sales annually, more than a tenth of the company's total revenue. While falling birth rates in China and Europe may cloud the outlook for Danone's well-known baby formula business, an aging population will drive growth for products such as Fortimyl. He said Jean-Marc MagnodetHead of the specialized nutrition unit.
Under the Fortimel line, Danone sells products that contain all the nutrients a person needs in 125 milliliter bottles, which are especially effective for cancer patients who have lost their appetite. Some flavours, such as red raspberry, offer a cooling effect because people undergoing chemotherapy sometimes find their mouth hot.
Part of the challenge is creating powders that dissolve evenly in the liquid and are stable over time. Drinks must also taste good, an area where Danone's experience as a food maker helps. Its main competitors in this sector are the Swiss company Nestle SA and the American pharmaceutical company Abbott Laboratories.
Acquisitions
Nestlé has built its business in medical nutrition and nutritional supplements in recent years in a bet similar to that made by Danone. During the announcement of the 2023 results in February, Nestlé CEO Mark Schneider said that while Nestlé is committed to early life nutrition, “the biggest opportunity in many large economies relates to aging populations.”
Currently, about one-fifth of European cancer patients who require increased nutrition are prescribed medical nutrition products. Recent guidelines in Europe encourage their use, and awareness among doctors is growing, which should drive growth, said Isabelle Esser, Danone's chief research and innovation officer.
Treatments such as chemotherapy and radiotherapy require patients to maintain their strength, and research has shown that medical nutrition improves the ability to tolerate treatments.
With De Saint-Affrique's turnaround, Danone has almost achieved its goal of buying or selling assets amounting to 10% of revenue.
The acquisitions contribute to the expansion of Danone's medical nutrition portfolio. Last May, it bought Functional Formularies, a US-based whole foods in vitro feeding company, from Swander Pace Capital. in He walksThe group bought Promedica, a Polish company that specializes in caring for patients at home who cannot eat properly or suffer from malnutrition.
Last month it also said it would invest 70 million euros in its first production line in France focused on medical nutrition.