The French dairy giant Danone has expanded its revenue outlook for 2023, stating that its recovery strategy is bearing fruit, according to GlobalData.com.

Sales in the third quarter of the owner of the Actimel and Activia brands exceeded analysts' estimates, driven by higher prices but with a decline in volumes.

Danone now expects comparable sales growth to reach 6-7% this year, compared to the previous estimate of 4-6%. The company attributed its improved performance to its recovery strategy.

CEO Antoine de Saint-Affrique stated, "Eighteen months after the launch of Renew Danone, the benefits of our strategy are beginning to show. This quarter marks the seventh consecutive quarter of delivery, with sales growing by 6.2% on a like-for-like basis, driven primarily by the sequential improvement in volume/mix."

"We remain focused on addressing underperformers and investing with discipline behind our winners," he added.

He further mentioned, "We continue to look to the future with confidence, despite a challenging environment... we will also consistently implement our business model and further increase our investments behind our brands and innovation."

Danone launched its recovery strategy in March of last year, shortly after de Saint-Affrique was appointed CEO. The company has adopted a "fix it or divest it" approach to breathe new life into parts of its portfolio.

Presenting the path to organic growth and margin expansion at Danone's Capital Markets Day, former CEO Barry Callebaut stated that 10% of Danone's portfolio could be "rotated."

The 6.2% sales growth referenced by de Saint-Affrique in the third quarter today (October 26) brought Danone's revenue for the three months to 6.9 billion euros (7.3 billion dollars).

Danone raised its prices by 6.6% during the quarter, and revenues increased in all territories, with sales in Europe growing by 5.1% year on year, North America seeing a 3.9% increase, and China, North Asia, and Oceania growing by 8.4%.

As a result, the British investment bank Barclays was impressed with the results. In a research note, it stated, "In EDP [Essential Dairy & Plant-based], the portfolio transformation is beginning to yield results, especially with strong performance from the Actimel, Danone, YoPro, and Alpro brands."

It added, "We believe Danone is one of the most compelling turnaround stories in staples and is well-positioned and 'reset' for 2024, with volume/mix acceleration supported by a gross margin inflection. There is clearly more work to do, but the 18 months of reinvestment are starting to pay off."

Meanwhile, Danone CFO Juergen Esser told analysts on a post-results call that the company could benefit from the emergence of obesity medications.

The food industry is currently assessing the impact that GLP-1 weight-loss drugs, used by millions of Americans and gaining traction globally, could have on product sales.

It is believed that manufacturers with product ranges perceived as healthier than their counterparts could benefit from a consumer base that has become more health-conscious after experiencing weight loss. "If it is something that benefits our business, it's going to be interesting," Esser told Reuters.

Barclays previously said that Danone could be one to benefit from its product range in this regard, with yogurt and protein-rich beverages being conducive to the recovery of muscle loss due to GLP-1.

It said, "The notable point about Danone's portfolio is that 90% of its portfolio can be consumed daily, which is a testament to its 'relative' health credentials."

Last month, Danone launched a "global strategic partnership program" in an attempt to build closer relationships with suppliers, start-ups, and institutions.

In an effort to move away from what it sees as transactional relationships with suppliers, the company suggested that the Partner for Growth initiative will help it "capitalize on consumer trends to unlock growth opportunities for both Danone and its partners."