Danone reveals impact of 2007 dioxin scandal

“We got back into the black as late as November,” stated Jacques Ponty, general manager of Danone for South-Eastern Europe, referring to the impact the dioxin “scandal” had on the company’s Romanian business after traces of the chemical were found in yoghurts.
Ponty refused to discuss the sums that were spent to wipe out the effects of the scandal or the possible losses incurred. He explained there was a sales decline for a three-month period, from August to October, but the final balance shows a 20% increase in turnover against 2006.
“The company registered higher sales against 2006, starting last November, and now, after the holidays, we’re witnessing a higher-than-expected sales increase as consumers begin to purchase yoghurts again,” said Jacques Ponty.
While Danone officials were unwilling to disclose the promotional costs involved, AlfaCont data reveals the French company’s investments were over 6.7 times higher last year compared with the leader of the domestic dairy market, Friesland. As a result, Danone’s 2007 promotion budget topped 130m euros, in rate-card terms, up 35m euros on 2006, according to AlfaCont data. Moreover, in the months following the dioxin scandal, the promotional budget of the yoghurt market’s biggest player was 3-4m euros higher than in the previous period.
In the wake of the scandal, consumers reacted by refusing to buy yoghurts, even after lab investigation results proved negative. This had an impact on the entire market, with sales dropping by around 8% in August-September 2007 compared with June-July 2007. Danone attempted to overcome this crisis through a promotional campaign that ensured product safety in a bid to regain consumers’ trust. As a result, the company’s promotional budget increased by 35% against 2006.
Danone Romania has yet to finalise its financial report for 2007, but Ponty forecasts a 20% higher turnover against 2006. According to Finance Ministry data, two years ago the firm derived turnover worth 87.2m euros and 10.8m-euro net income. In line with the forecast growth rate, the producer in 2007 generated turnover worth above 100m euros, despite production and sales being affected in the second half of the year. In addition, stated Ponty, Danone’s share of the yoghurt segment reached 60% in late 2007, from 50% a year before.