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Danone's souring Spanish sales point to wider malaise

The French food giant Danone has warned that it is being hit by the financial crisis in Southern Europe, an admission that suggests rivals such as Unilever and Procter & Gamble must also be suffering.

The world's largest yoghurt maker, with brands including Actimel and Activia, said Spanish consumers in particular were cutting back, forcing it to issue what is in effect a profits warning.

Danone is also being buffetted by higher costs for raw materials such as milk and packaging.

It says profit margins will fall by 50 basis points in 2012. Danone had previously expected "stable" margins.

The chief financial officer, Pierre Andr Terisse, said Danone planned to respond to declining consumption in southern Europe with price cuts, but that it was too early to provide details. He said demand in Asia, the Americas, Russia and the Middle East remained robust.

Jon Cox, an analyst at Kepler Capital Markets in Zurich, told Bloomberg: "While I am not surprised about the

deterioration in southern Europe and assume Spain, Italy and Greece combined are around 10 per cent of its sales, I am surprised that it talks about higher commodity costs."