Advertising costs grow faster than sales at Danone

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PARIS--Advertising expenses at French food giant Danone grew by nearly 18% in the first half of 2000, or more than double the rate of sales growth seen during the same period.

Danone spent about $350 million on product and brand advertising in the first semester of 2000, representing 5.7% of total sales. Sales grew by 8% to about $6.2 billion, according to financial results released by the company.

Danone President Franck Riboud attributed the strong growth in advertising expenses to the company's consolidation in three key product areas -- biscuits, dairy products and mineral water -- as well as the ongoing launch of new products in most geographic regions.

Overall, Danone's biscuit sales were up 6.9% in the first quarter, dairy sector sales were up 7.6% and beverage sales, including beer divisions slated for sale, were up 9.8%.

Mr. Riboud expressed particular confidence in the ongoing launch of Actimel -- a milk-based breakfast drink marketed as a daily digestive aid -- in the coveted U.S. functional food sector. Actimel is Danone's leading brand in the probiotic fermented dairy sector, and is expected to bring revenues in this area above $400 million in 2001.

The push to sell Actimel in the U.S. fits with Danone's geographic growth experiences. In its saturated domestic market of France and the rest of the 15-member European Union, growth in the first half of 2000 hovered at 5.7% and 6.6% respectively, while growth in the rest of the world neared 12%.

While growth is the key objective, Mr. Riboud firmly stated that Danone was not a possible suitor for U.S.-based Keebler Foods, the No. 2 biscuit producer in the American market.

Copyright September 2000, Crain Communications Inc.

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