My Blog
Food

Danone digs in at discount channels as consumer tastes change

Danone digs in at discount channels as consumer tastes change
Danone digs in at discount channels as consumer tastes change


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. 

Ariel Dalton, Danone

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.”

Danone Silk line

Optional Caption

 

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. 

Related posts

Kraft Singles releases new cheese slice flavors for first time in nearly a decade

newsconquest

The impact of inflation on indulgent snacks like chocolate, crisps

newsconquest

Bob’s Red Mill to halt DTC operations

newsconquest