Danone imports aluminium packaging materials from Asia as cost in Europe rises

France's Danone is sourcing more aluminium and whey from regions of Asia, a move that experts warned might reduce prices but potentially annoy European suppliers. The dairy behemoth has mostly relied on Europe for its raw ingredients. It produces Activia yoghurt, Aptamil baby formula, and Evian water.

But the business is trying to control costs and safeguard profits due to cost inflation, which started with Covid-19 period bottlenecks before getting worse during the Ukraine crisis. According to Vikram Agarwal, the COO of Danone, the company is importing ingredients like aluminium, plastic, whey and, maltodextrin, paper packaging from outside of Europe.

"We had already started the program before the Ukraine war, and consequent supply risks and rising costs in Europe have made this even more relevant," added Agarwal.

Analysts warned that the decision to acquire whey, the liquid that remains after milk has been curdled and strained, from outside of Europe might strain Danone's ties to dairy farmers in its own nation and the rest of the continent.He added that independent specialists are evaluating the energy consumption of 20 Danone facilities as part of that process. It also alters product compositions and recipes to control supply interruptions and inflation.

“I’d say good luck with the French farmers. If they’re not striking for pensions they’ll soon be striking because one of their biggest customers is dealing with foreign competition,” said Bernstein analyst Bruno Monteyne.