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Mead Johnson Nutrition CO (MJN), Abbott Laboratories (ABT): These Companies Have a Formula for Success

An aggressive French company

Danone is a French foods multinational that is best known for its Dannon yogurt and Evian water. But the driver for growth is the company’s baby nutrition business with revenues growing 15% last year. This division now accounts for 20% of all sales.

Danone is expanding into the U.S. baby food market with its planned acquisition of organic baby food maker Happy Family. Danone’s prior focus was on Europe and emerging markets. This acquisition will give Danone a 4% share of the U.S. market. What I like about this acquisition is that it’s in the organic space where margins are higher. It gets Danone into the U.S. market with a niche baby food product that has room to grow with Danone’s marketing and distribution muscle.

Danone’s Dumex is the leading baby food formula brand in China. The company doesn’t have to worry about importing from Hong Kong because it manufactures its formula in China. During the infant baby formula scare in China in 2008, Danone went to great lengths to assure Chinese consumers that its factories in China had higher safety standards than even its plants in Europe. As a result, Chinese consumers have been loyal buyers of Dumex infant formula.

Foolish assessment

Where infant formula makers have the most to gain is in China, particularly if China relaxes its one-child policy. China’s infant formula market is expected to grow to $25 billion by 2017 as more mothers enter the workforce and have less time to breastfeed. This will benefit the brand-name infant formula makers Mead Johnson Nutrition CO (NYSE:MJN), Abbott Laboratories (NYSE:ABT), and Danone.

The article These Companies Have a Formula for Success originally appeared on Fool.com and is written by Mark Yagalla.

Mark Yagalla has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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