Morocco boycott pushes Danone into the red
PARIS - A consumer boycott on Danone products in Morocco contributed to the French food giant's profits and sales sinking last year, it said Tuesday.
The world's largest yoghurt maker said in a statement that its net profit fell by 4.1 percent to 2.35 billion euros ($2.65 billion) in 2018.
Sales dropped by 2.1 percent in the last three months of the year, driven by a 35 percent plunge in Morocco, where there has been unprecedented boycott campaign over high prices against Danone milk and two other well-known brands since April.
The boycott's impact in 2018 "on total net sales was a decrease of -178 million euros (-$201 million) versus 2017 net sales, of which around two thirds come from losses in milk sales, and one third from losses in dairy products," the company said in a statement.
Chief financial officer Cecile Cabanis said in a conference call that there was still a market share for Danone's products in Morocco, but she did not expect to return to growth there before the end of 2019.
Despite the boycott, Danone said its full-year reported sales were down just 0.7 percent
It benefited from sales of dairy products stabilising in Europe, growing strongly in the CIS region that includes most ex-Soviet countries and also improving in Latin America.
In North America, sales in the "essential dairy and plant-based" food products division surged by 12.2 percent to five billion euros.
Sales of infant formula products fell in China, but Cabanis said the decline was slowing, dropping from 20 percent in the third quarter to 10 percent in the fourth.
Looking ahead to the current year, Danone is aiming for like-for-like sales growth of three percent and an operating margin above 15 percent.
Following the announcement, the company's share price bumped upwards by 0.3 percent in morning trading in Paris.
'Speak with one voice'
The losses in milk and dairy sales had already prompted the firm to cut by 30 percent the amount of milk it collects from the 120,000 farmers who supply it.
It also said it will lay off workers on short-term contracts, estimated by a government minister at 1,000 people.
Danone's profit warning was the most dramatic evidence so far of the damage being inflicted by the consumer boycott campaign aimed at major suppliers of milk, bottled water and petrol in Morocco.
The protest at high prices was launched on Facebook by unknown activists on April 20 against the dairy firm as well as Afriquia fuel stations, owned by the Akwa group of billionaire agriculture minister Aziz Akhanouch, and the Sidi Ali water brand.
The boycotters launched the campaign to protest at what they say are unfair prices set by large groups linked to a business and political elite, or foreign brands.
“The goal of this boycott is to unite the Moroccan people and speak with one voice against expensive prices, poverty, unemployment, injustice, corruption and despotism,” said one of the boycott pages.
Unlike the dairy company, fuel and water companies have not yet announced any losses due to the boycott and have declined to comment.
However Les Eaux Minérales d’Oulmès, maker of Sidi Ali, has been bussing about 80 people a week to its spring in the Atlas mountains in an attempt to convince consumers its prices are fair, while calling on the government to lower taxes.
The government voiced fears last week that the boycott may put off foreign investors.
This online protest is the first of its kind in Morocco, where a series of protests over poverty and unemployment and corruption have erupted this year and last year described as the most intense since the 2011 unrest that prompted King Mohammed VI to devolve some of his powers to an elected parliament.