Danone outshines Unilever and Nestlé

19 May 2010

PARIS: Danone is out-performing Unilever and Nestlé when it comes to establishing category leadership, a new study has shown.

Sanford C. Bernstein, the research firm, assessed the current activities of these companies across 100 categories in 80 countries.

One of its key metrics was "category dominance", which, it argued, was an essential component in driving long-term growth in profits and margins.

Dominance was said both to reinforce a manufacturer's negotiating position with retailers and to reduce price elasticity among consumers.

"We believe that dominance allows a company to grow faster and be more profitable than smaller, less dominant players in a category," the report said.

Danone's particular advantages included its broad reach, as its portfolio covers dairy goods, bottled water, baby food and medical nutrition.

Bernstein's analysis revealed that Danone was the "number one player in the categories/markets representing 71% of sales, and is top two in 91%."

This strength was even more pronounced for its yoghurt brands, which were pre-eminent in the markets that delivered 84% of sector revenues, and in the top two in 96%.

Unilever, which is prominent in the food, personal care and household goods industries, took what was termed a "strong second place".

It had achieved category leadership in the sectors and markets that generated 63% of category sales, and was in the top two in 85%.

Unilever's figures were especially impressive in certain areas, with its ice cream operations in Europe being one such example.

Nestlé was ranked in third place overall, although Sanford C. Bernstein suggested that the Swiss food group was "certainly still strong."

The owner of Kit Kat and Nespresso led the way in sectors and nations which were responsible for 59% of sales in the segments where it had an interest, and was in the top two in 82%.

However, it appears that one of the best-known aspects of Nestlé's operations may actually be holding it back.

"It is interesting to note that one of the categories that drags down its dominance measure is chocolate confectionery, even when calculated on a country-by-country basis," Bernstein's study said.

A potential pitfall which follows on from this kind of weakness is a vulnerability to under-performing products being delisted by retailers that are keen to expand their own-label ranges.

"Being number one or number two in a category frequently enables 'Category Captain' status, which allows the company to work hand-in-hand with retailers on consumer insight and shelf space/positioning," Bernstein's report added.

“It also protects against a growing trend by retailers to reduce SKUs and have a more focused offering of ‘Top 2' and value/private label products."

Data sourced from Food & Drink Europe; additional content by Warc staff