Danone S.A.

Good day and thank you for standing by. Welcome to the Danone third quarter 2025 sales conference call and webcast. At this time all participants are in a listen-only mode. After speaker's presentation there will be a question and answer session. To ask a question during the session please press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question please press star 1 and 1 again. Please note that today's conference is being recorded. I would now like to have the conference over to your speaker, Mathilde Rodier, Head of Investor Relations of Danone. Please go ahead.

Good morning, everyone. Mathilde Rodier speaking. Thank you for being with us this morning for Danone's 2025 Q3 Sales Call. I'm here with our CFO, Jorgen Esser, who will go through some prepared remarks before taking your questions. And before we start, I draw your attention to the disclaimer on slide 21 of the presentation related to forward-looking statements and the definition of financial indicators that we'll refer to during the presentation. And with that, let me hand it over to Jürgen.

Thank you, Mathilde, and good morning. Thank you all for joining our Q3 call. A great occasion to share with you our latest sales performance and to discuss the progress on our midterm ambition. So let's begin by looking at our headline results for the quarter, starting with slide number two. As highlighted in our press release this morning, we are announcing a strong set of numbers with like-for-like sales growth of as much as plus 4.8%, a growth that is driven mainly by volume mix of plus 3.2%. Building on the momentum from the first six months of this year, this represents another quarter of consistent quality growth. In what remains a volatile and uncertain environment, our portfolio continues to deliver with resilience. We are increasingly leveraging two important elements. First, a unique portfolio focused on health and well-being, rooted in categories that grow faster than the average of the food and beverage industry. And secondly, a quality of execution that is progressively increasing, even if we have still areas of improvement. Let's break down this performance by region on the next slide, slide number three. The strong momentum we see in Q3 reflects broad-based growth across the regions. Europe continued its consistent path of step-by-step improvement with a solid delivery across all categories. In fact, Europe has now delivered eight consecutive quarters of positive volume mix, a testament to the effectiveness of the ongoing transformation. In North America, we saw this quarter a mixed performance with, on one hand, high protein yogurts continuing to outperform in a very dynamic growth space and despite major capacity constraints. While coffee creamers are progressively rebuilding its distribution, we have more work to do to bring plant-based break back to sustainable growth. The standout also in this Q3 is the China, North Asia and Oceania zone. The team around Bruno delivered again exceptional growth in this part of the world, with all sub-regions contributing strongly from China to Japan to Oceania. And in the emerging markets of Latin America, as well as Asia, Middle East, and Africa, we saw strong growth overall with our dairy and specialized nutrition portfolio being the key drivers. Having discussed the regional picture, let's now turn to our performance by category on slide number four. Our like-for-like sales performance reflects quality growth with a solid contribution from volume mix and positive price, actually in each of our categories, demonstrating the underlying demand for our science-based and value-added portfolio. In EDP, we delivered like-for-like sales growth of plus 3.5%, with volume mix up plus 1.7% and price of plus 1.8%. Our global high-protein platform with brands like Oikos and Yopro continues to grow strong double-digit with no sign of any slowdown. We are constantly fueling this growth by rolling out what has proven to work, but also by launching next-generation innovations into this dynamic space. In parallel, we see increasingly strong demand for other functional dairy innovations, for example, kefir or skier. In plant-based, Alpro continues to thrive, whilst we know that we have more to do in the U.S. with our silk breads. In specialized nutrition, we posted like-for-like sales growth of plus 8.3%, with volume mix up plus 6.5% and price of plus 1.8%. This comes on the back of a strong Q2 and reflects not only the exceptional demand in China, but also in other geographies. Our premium uptime platform grew at global level, again double digit, winning broad-based market shares. Demand for our medical nutrition segment remained also very high across all geographies, with brands such as Fortimel and Neocate achieving again double-digit growth. In waters, sales were up plus 2.3%, with volume mix up plus 1.3% and price of plus 0.9%. We saw solid execution and delivery across Europe, with strong demand for our recently launched vitamin water under the Volk brand, and continued solid performance of our Evian brand, including in the US. At the same moment, we are continuing to post very solid performance for our MyZone brand in China, completing another successful summer season. To put those like-for-like numbers into context, I suggest we review now our sales pitch for the quarter on slide number five. In addition to the plus 4.8% like-for-like growth previously discussed, we experienced an adverse currency impact of minus 5.1%, resulting from the appreciation of the euro against most currencies over the past six months. Importantly, though, for the first time since long, we report a positive scope effect, which contributed to this plus 0.7% in Q3. This is reflecting primarily the recent acquisition of Kate Farms, the first contribution to our compounding ambition. This ambition means to grow our company not only in like-for-like, but also in Euro terms after an initial period of portfolio pruning and divestments. For Q3, it resides into a reported growth of our net sales of plus 0.7%, with sales in absolute reaching 6.9 billion euros. Now let's take a closer look at each of our regions and their contribution to the like-for-like performance, starting with Europe on slide number six. Europe delivered solid like-for-like sales growth of plus 2.6% in this quarter, driven by a plus 2.1% contribution from volume mix and a positive contribution from price. As you can see from the chart on the bottom left, this means a further step up in the performance, that Pablo and the European team delivered since the journey started some three years ago. In EDP, we are seeing double-digit growth in Yopro, our high-protein platform, but also in our newly launched innovations such as Activia Kefir and Danone Skia. This is an encouraging sign for our future growth ambitions, knowing that we have still many regional white spaces for rolling those successful innovations out. Our Alpro plant-based products, particularly yogurts, continue to win share in the market. The brand is now consistently posting quality growth in an overall category that is back on track. In specialized nutrition, let me highlight particularly our medical nutrition platform that delivered, again, a strong performance with 40 male growing double digit, expanding progressively its reach to patients across Europe. And in waters, we posted solid growth, notably driven by the Evian, Volvic, and Badwa brands. So overall, another strong quarter in Europe, supported by all categories. Let me suggest that we move on to North America on slide number seven. In North America, we saw like-for-like growth of plus 1.5%, with a 0.3% volume mix and a plus 1.2% price contribution. In EDP we saw continued strong demand for our high protein range with the Oikos brand going from strength to strength. Innovation in this space continues and in Q3 we launched Oikos Fusion, a high protein product enriched with probiotic fibers very suitable for those consumers looking to manage their weight or taking GLP-1 like medication. As you know we are, like all the industry, managing a saturated production capacity for the yogurt category and Q3 has been particularly tense. We will benefit over the coming quarters from more capacity coming online, which will release some of the current supply constraints. In some other areas of the EDP portfolio, the performance is not where we want it to be. We have been progressively recovering distribution in coffee creamers, and this is obviously a journey which takes time, as the space we left on the shelf has been taken over by competitors. Beyond the distribution rebuild, you will leverage the moment to further innovate in this category, addressing the emerging trend of naturalness and clean label. The US team is actively working on solutions to bring this business back to where it belongs. And lastly, on EDP, we are progressing with our ambient protein shake exploration. We are encouraged by the early results and, as we speak, selectively expanding its distribution. We are hence continuing with this soft launch approach and are awaiting robust data on repeat purchase in order to decide on the level of acceleration and investment allocation for year 2026. Next to EDP, we saw satisfactory performance in specialized nutrition driven by our medical nutrition platform. Worth here to mention that outside of the like-for-like performance, we see a strong double-digit growth momentum of the Kate Farms Company, which we are currently combining with our existing US medical platform. Let's now move on to the CNRO zone on slide number eight. Q3 is another outstanding quarter in the China, North Asia, and Oceania region, with like-for-like sales growth of plus 13.8%, driven entirely by plus 15% volume and mix. This reflects both strong underlying demand for all categories where we operate, together with a further step up in competitiveness. In EDP in Japan, both Activia and Oikos are continuing their stellar performance, illustrating our strategy in action, bringing added value propositions into one of the largest dairy markets in the world that allows us to premiumize and win market share through functional differentiation. In specialized nutrition, the Chinese business was again firing on all cylinders. Demand for our infant milk formula and medical portfolio remains very strong. In IMF, the category is in a solid dynamic, growing particularly in the online and social media channels. We are continuing to win market share thanks to our superior digital business model, as well as thanks to our Aptamil Essences innovation, launched some two years ago, with further expansion opportunities in front of us. Beyond China and Japan, let me highlight the strong performance of our specialized nutrition portfolio in Oceania. We are reporting an increasingly meaningful contribution to the zone performance with growth across the segments. Worth mentioning here especially the great momentum of the Souvenet brand, addressing symptoms of mild memory and cognitive impairment. And finally, in waters, Mizone has successfully delivered also the 2025 summer season, expanding its reach with the fastest growing segment of the category, namely the healthy hydration segment. Moving on to Latin America on slide number nine. In Latin America, we delivered like-for-like sales growth of plus 4.3% in quarter three with volume mix of minus 2.3 and price of plus 6.6%. We have a solid momentum in EDP, where we are winning with Oikos, YoPro and the Danone brand, as the market moves increasingly towards value-added dairy products. In specialized nutrition, we continue to win shares with Aptamil, which is growing double-digit. We are expanding in parallel our medical nutrition reach across our pediatric and adult ranges. And in waters, the beverage market remains challenging due to weather and adverse economic conditions, especially in Mexico, And here, especially in the away-from-home segment. And finally, looking at the Africa, Middle East, and Asia zone on slide number 10. The AMEA zone saw a clear acceleration in Q3 with sales growth of plus 6.8%, with a solid contribution from volume mix at plus 2.6% and price at plus 4.2%. In EDP, we continue to report strong growth, particularly in Africa, with both the Danone and Activia brands. In specialized nutrition, the region continues to deliver strong competitive growth, underpinned by our focus on science-led innovation and market execution. In particular, we continue to see a strong growth momentum of the Aptamil brand in expansion markets, such as Vietnam, India, and the Middle East. Beyond Aptamil, we are pleased with the successful rollout of our patented iron biotics enzyme in regional early life nutrition-brand platforms. And finally, in waters, we are reporting a solid performance, including in Indonesia, in a very competitive market environment. Let me here conclude the regional review, a review which proves the breadth and resilience of our portfolio in delivering on our ambition. Let's move on to slide number 11. recapping our key takeaways and priorities as we look ahead. We have delivered over those first nine months of the year a strong performance with consistent quality growth led by volume mix. This reflects continued demand for our products across a well-balanced geographical footprint. We have several platforms delivering exceptional growth across the different categories, and at the same time, there are some areas that require further progress which we will translate into future growth opportunities. As you did certainly expect, we reconfirm today with confidence our guidance of plus 3% to plus 5% like-for-like sales growth and recurring operating income growing faster than sales. That's probably a good moment to stop and hold. Thank you once again for listening. Looking forward to your questions. And with that, Mathilde, back to you.

As a reminder, to ask a question, please press star 1, 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Once again, please press star 1, 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Thank you.

Thank you for listening. So the first question is going to be from Guillaume Delmas, UBS. First question from Guillaume, UBS.

Thank you very much, and good morning, Jorgen and Mathilde. Two questions for me, please. So the first one on specialized nutrition in the CNAO region, because that third consecutive quarter of double-digit like-for-like sales growth and accelerating every single quarter. So, Jorgen, Can you maybe help us unpack this performance in the quarter as in what kind of category growth are you seeing at the moment? What's your market share development and any selling sellout discrepancy we should be aware of? And I guess looking ahead, how long do you think you can maintain this kind of double digit run rate? when would you expect a marked deceleration or maybe it's just going to be about a very soft lending because you've got this, uh, upcoming new tourist rollout, which could be a key driver of growth, uh, going forward for, uh, SN, uh, CNAO. Um, and then my second question is on North America EDP. Um, I think the one and a half percent like for like you reported in Q3 is the weakest quarterly print since, uh, at the end of 2019 so that's nearly six years ago comps are not getting easier in the fourth quarter so just wondering here if these trends are a negative surprise to you I mean even worrying to you particularly from the market share point of view and are you still confident you can stabilize within this your coffee creamer business and I think the ambition at the start of the year was to by the end of 2025, grow coffee creamers in line with category growth? Do you still think you are on track to achieve this? Thank you very much.

Good morning, Guillaume. Thank you for your questions. Obviously, the CNRO zone is delivering exceptional growth, and particularly China is again firing on all cylinders, as you say. So let me double-click on it. Early life nutrition, the category is actually progressing as we expected, and as we have been discussing over the last few quarters. We see very moderate segment growth, started in stage one, thanks to the birth rates of year 2024, moving progressively in stage two, so no surprise on that front. It translates to overall very moderate growth of the category. And in that growth of the category, what we are seeing is that there is a shift from offline channels to more online channels to social media channels, which is not a surprise when you look at the overall shopping trends of the Chinese consumer. In this category, we continue to outperform and win market share clearly. The shift to online channels actually allows us to leverage what the team has built over the last 10 years, which is a unique digital business model. which is a truly competitive edge. And secondly, and there is absolutely no change in this message, is that the Ascensys platform is winning market share across China. The innovation we launched two years ago has become a quite sizable platform, and we see further growth opportunities on this front. And in parallel, as you say, we are preparing Nuturis. It has been soft-launched in Hong Kong, and we will bring it to mainland China at the right moment when we see that we have positioned essences in the right way and that we have a solid print there. When it comes to China medical nutrition, obviously different dynamics because there is an underlying strong demand from a category perspective. It spans actually across all segments, and it starts from special pediatrics, posting a stellar performance, and especially our allergy formula under the Neocate brand. As we discussed a good one year ago, it has a lot to do with the fact that there's more and more babies rightly diagnosed, and therefore they are getting the right medical nutrition, and we are seeing that reflected. But we are seeing also very strong demand on our adult medical nutrition business. benefiting, with no surprise, from strong demographics. So here we are pushing distribution of our tube feeding solutions, as we have been discussing. We invested into medical sales force quite significantly, and that starts to pay back. And at the same moment, we are building the future of this category with the oral nutrition segment. So looking forward, yes, China has been firing on oil cylinders. Let's be careful not to extrapolate that for all the coming quarters. We have good reasons to believe that China will deliver significantly also to our growth in the coming quarters. When it comes to North America, let me step back for a minute. It's an important question. It's not a question of comps. Let me be very clear on this one. When we look at the performance of the last two quarters, we cannot be satisfied as we missed some important growth opportunities. But there are a few reasons, probably three plus one reasons, why we are confident that North America will progressively go back to where it belongs. First, high-protein yogurts. They continue to fly. The demand is extremely high. We are quite seriously kept by production capacity. Finally, we have new capacity coming online, starting from Q4, and that will go into 2026, which will release some of the pressure we had, and Q3 was particularly... on this part. That will allow us not only to continue pushing high-protein yogurts, but also to finally, again, activate the rest of the yogurt portfolio. We have been particularly shy because there was no capacity available. And you will see Danny Mills coming with a relaunch in Q4, which is important for us because it's a big brand, and the kid segment is very strategic to us. On coffee creamers, let's be very clear here. Yes, we have been progressively recovering distribution, but yes, this is also a journey which takes time as the space on the shelf has been occupied by competitors. And as you can imagine, we are doubling down on our efforts to get our space back. But what we are also doing, and that's important, is that we are leveraging that moment to bring our product portfolio closer to the emerging trend of clean label and naturalness, which will help us to bring our international delight brand back. to where it has been. The third element I would like to mention here, and I mentioned actually also in the prepared remarks, is medical nutrition. Now with Kate Farms, first time we have a sizable platform in the U.S. that will help us to accelerate on this very important category moving forward. We want it to become really a powerhouse of growth for North America. And lastly, there's a leadership factor, as you can imagine. Henri Brussel, who is the newly appointed president of America as of January 1st, is already bringing a fresh perspective to the different categories. He's bringing back both, I would say, obsession about superior consumer experience, but also a renewed sense of urgency. So many reasons why we believe that North America will again play a very important role for our growth momentum in the future, and I have not even talked about the protein shakes.

Thank you very much.

Thank you, Guillaume. We're going to take the next question from Warren Ackerman, Barclays.

Yeah, good morning, Jürgen. Mathilde, it's Warren here from Barclays. Two from me as well. First one is on Europe, Jürgen. Very pleasing performance in Europe. Can you maybe double-click a little bit on European EDP? Where are you on the rollouts of some of the more valorized ranges on skier, kefir, high-protein? What kind of weight are they now in Europe? Are we at a tipping point where it's offsetting the more general ranges? And then can you maybe sort of outline what kind of growth you're seeing in the out-of-home channels in Europe that we don't see anywhere? in the scanner data. So if you can double click on European EDP and what you're seeing in terms of market shares and the trends, that's the first one. And then secondly, just on the guidance, you're running, I think, at 4.4% organic at the nine-month stage. Your guidance is three to five, so you're clearly tracking at the top end of that, the guidance range. You haven't today changed your guidance to the top end, but you're tracking at that level. Is there anything we should think about for the final quarter of the year? Is there any kind of sort of conservatism built into the guide? Any moving parts that you want to call out for the final quarter of the year? That would be helpful. Thank you.

Good morning, Warren. Yeah, as you say, Europe progressing pretty well in its transformation. It's getting better quarter by quarter. I think it's now six consecutive quarters where we see the growth accelerating, and this is including in EDP. And as you say, this is thanks to the fact that our more differentiated portfolio is becomes more important in terms of weight percentage of the portfolio quarter by quarter. All the innovations are working extremely well. Hyprotein we have been discussing for quite some time. Activia back to growth and Activia especially on fibers and what we are doing with the kefir progressing very well. Skia also doing very well. But all of those elements we have been launching only two years ago. So we are still early in that journey. But this is exactly where the opportunity is. Because when you take products like kefir or skia, we have not yet even rolled them out all across Europe. And this is where we see the opportunity, and you will see us going for that in a very speedy manner. To your point, we continue to outperform outside of large retail. This is also part of our strategy. This is where we have been underrepresented. for decades, but this is also where we have been intentionally innovating for. The majority of our innovations is drinkable format, suitable for away-from-home point of sales and on-the-go consumption, and that means that we continue to grow two to three times faster in away-from-home than in large retail. That is what the strategy and priority moving forward, which will stay top of the table. When it comes to the guidance, obviously we are very happy with the first nine months of the year. You can imagine that we are not giving quarterly guidance, neither by category, neither by region, as you know. There is no particular message actually for Q4 to pass here. Overall, what is important for us is that we want to demonstrate that our portfolio focused on health is a superior portfolio, and that this is also translating into a faster growth vis-à-vis the industry. We feel good with our 3 to 5% guidance for year 2025, but also beyond, and we are now consistently delivering in that corridor. And you know, in a way, while our ambition is to grow sustainably as fast as possible, there's always something in business which doesn't go well, and we have two softer quarters in North America. This is why we feel good about this guidance.

Thank you.

Thank you, Warren. So the next question is from . HSBC.

Good morning. Thanks for taking the questions. So just a couple of things from me. So the first one is if you could talk a bit about Latin America. We've had some quite mixed things from other companies in the region. So if you could talk about how you're seeing the conditions in the various markets you compete. And the second one is could you talk a little bit more about the rollout of the high protein? So why are you so confident that the category is going to carry on at these very high rates? where you think the next big rollout opportunities are, and perhaps a bit more detail on the scale of the capacity expansions you've got coming on in the coming quarters. Thanks.

Good morning, Jeremy. Latin America, we see what everybody is seeing, especially in Mexico, where consumer sentiment is pretty muted. That's one of the drivers why our water's performance in this year has not been satisfactory beyond the weather conditions which have been quite awful during all the season. Actually, we don't take that as an excuse. We focus on those elements where we have value-added propositions and where we can grow and you saw that quite nicely in Q3, which is particularly about specialized nutrition. which is now growing consistently at a very good speed, particularly in Brazil, but it spends all across the region to Argentina, actually, and this is on both early life nutrition and medical nutrition, on both categories, but also on dairy, which is doing well, and dairy is doing well across the region, thanks to Oikos and the Greek yogurt and high-protein yogurts, which are showing the same dynamic as everywhere else in the world. Thanks to our other core brands including the Danone brand which is doing which is doing very well. So overall I would say Satisfactory performance and let me use that moment to to say that when you look at our specialized nutrition business across emerging markets And I put you together Latin America plus our AMEA Zona you see that this is a 700 million euro platform as large as China and growing at high single digits. So this is becoming more and more for us a key growth engine moving forward, especially with Aptamir growing very, very strongly across, but also medical nutrition, which we are building. The second element, and to your second question on high protein yogurts, we see a massive trend from a consumer perspective on health and well-being. Yogurt actually is a very powerful, efficient, and convenient source of proteins and other goodies, and this is better and better understood. The consumption of yogurt is different region by region, but when you take the US, the US per capita consumption is one-third of the consumption of Europe, which gives you an idea of the size of the opportunity in front of us. And the protein trend continues clearly. There's been a recent study published in the U.S. saying that 71% of American consumers want to add more quality proteins to their diet. So there's many reasons to believe that this growth continues. On our side, we are actually innovating in that space, so that we go from quantity of protein to quality of protein and other ingredients. We launched what we call Oikos Fusion, which is a patented blend of whey protein, amino acids, and prebiotic fibers, which help to build or maintain muscles during a weight management journey. So it becomes more and more functional, more and more science-based, and I think that will help to keep the momentum of the category moving forward. And then this capacity coming online for us, it will also release some of the pressures we have seen, particularly in Q3.

Thank you, Jeremy. Next question from Céline Panutti, JPMorgan.

Good morning, Jürgen and Mathilde. So I would like to come back first on the U.S. If you could a bit help to understand some of the moving parts. Jörgen, you said that comp is not an issue and you have a tougher comp I think in the fourth quarter, but at the same time you're talking about this capacity coming online. Are we therefore expecting to see a sequential improvement in volume mix in Noram? And if you could as well try to go a bit deeper in understanding the sequence of actions and potential improvement in coffee creamers as we look into the next quarters. And, you know, as well, give us a bit more details on plant-based because it seems that it has been several times you've tried to prop up that performance and has not yet happened. And maybe lastly on that, you briefly mentioned the Oikos Hyprotein. I know you were launching it in Costco. Can you give us a bit more details on that launch and its potential contribution going forward? My second question will be so shorter. It's on... So the overall guidance, you mentioned the top line, but if I think about the profit growth and the fact that specialized nutrition is growing much faster this year and obviously a more profitable category from a gross margin and a bid margin standpoint, can we think about how do you think about potential uplift to gross margin? between putting that to the bottom line and reinvestment? And if so, if there are more reinvestment, where about are you putting this in the second half of the year? Thank you.

Yes, good morning. Good morning, Céline. Local North America, I think I probably said it, I said almost all two softer quarters, but there's nothing structural here. We are pretty confident in the ability of the North American business to again deliver a very solid contribution to the growth of our company. And this is because we are not dependent on one single growth engine. High protein yogurts, we will get a release on the constraints, which will really tense in Q3 as capacity comes online in the course of Q4. That will definitely help in a category which continues to fly. And this is releasing, as I said, not only the constraint on high protein yogurts, but also on the rest of the yogurts. Coffee creamers, we are fighting back our products on the shelf. That's a journey, as I said. It actually gives us the opportunity to innovate at the same moment, to make our products more on trend of naturalness and clean label. I think that's an important one, actually, to get international delight back to where it belongs. We have been winning shares, and let's not forget that, for two consecutive years on coffee creamers. 2025 is now a more challenged year because of, let's say, the supply chain issues we had at the beginning of the year. But structurally, we believe that this brand is a very powerful brand in a continuously growing category. Plant-based, I think with Henri Brisset actually coming now to North America, he will bring a lot of the good best practices they have been executing on Alpro in Europe with him. That will help and you will see that in the not so far future translating into the way we are relaunching silk in the U.S. So we continue to be optimistic that this will play a role in our growth trajectory in North America on both sides, on milk, but also on plant-based yogurts, something we have not been talking about so much. over the last one year, and you know that plant-based yogurts play already a very sizable role in Europe, not yet in the US. There's a wide space for us. And finally on protein shakes, actually protein shakes, we continue to receive very positive feedback from consumers. We are still not having a robust repurchase data that takes some time, as usual, but we are not standing still and just waiting. We have decided to selectively expand to retailers in the U.S. to build more awareness. And then once we have sufficient data, we are going to decide on the level of acceleration for 2026. And finally, Kate Farms is not to be underestimated, I believe. An amazing business. The traction we are getting on the ground is amazing. And finally, we have a $500 million platform of medical nutrition in the U.S., something we never had before. which we believe can also get us a sizable contribution there. So overall, I would say many reasons to be confident in the growth perspective of this region. When it comes to the guidance, look, I think top line is very clear. Bottom line, we are sticking with what we always said. For us, what is important is that quality growth translates into operating leverage. so that we can do both expanding our margins progressively and reinvesting into our business. And I think this year, 2025, demonstrates again that the portfolio rooted into science is a superior portfolio growing faster than the industry. So you will see us doubling down on science, on brand investments. You saw probably that two weeks ago we opened a research center in Saclay, particularly on gut health, particularly on one biome, in order to make sure that we stay pioneer in science for gut health for the years to come. And so we will progressively increase our margins at the right speed. And any upside, and we have been saying that I think consistently, any upside which goes beyond, we will invest back into the business in order to solidify our gross momentum for the years to come.

Yacine, if I may just follow up on the U.S. answer you gave. I mean, how much feasibility you have on the short term? I mean, clearly you made the point about the potential in the coming quarters. Just because I know that Q4 is a tougher comp, is this something that we should think about as we think of the final quarter in that region, or all the positives you mentioned, including the... capacity means that your volume will remain positive.

Yeah, Céline, I think two elements to say. Again, I have no particular message to pass on COMS, neither for Q4. And on the other side, we are not guiding by quarter, by region. So probably we'll pack it there.

Thank you. Thank you, Céline. The next question from John Cox, Kepler.

Yeah, good morning, guys. It's John from Kepler here. A couple of questions for you. Just really following up a little bit on that North America. You call out the plant-based as being responsible for this slowdown, but plant-based is a relatively small part of the overall pie. Just wondering if you could say, well, you know, this overall slowdown, half is maybe the plant-based and half is caused by, you know, cream is still coming back, less capacity in protein products. Just to give us a bit of an idea, because otherwise you'd think, well, the plant base has just fallen off a cliff because it's a relatively smaller part of the business compared to the creamers and the protein and all of those type of things. Secondly, just on Europe, and obviously that's a different story as things get better. Can you just give us a bit of a rough idea on the split in the European yogurt market, particularly with regards to your own portfolio? I think in North America, protein is over half of yogurt, but in Europe, it's probably, you know, a lot smaller. Just to give us a bit of an idea of, you know, when can we see or expect this ongoing acceleration? You know, it seems to be more driven by mix. You know, where are you as part of that journey and towards the sort of value added? And maybe just a follow up question from Warren's actually on the guidance for the year. You seem to be saying, you know, North America, you've got the capacity coming on in protein. You're confident in, you know, some of that plant-based improving, ambient protein doing better in North America. In Europe, things moving ahead and obviously a lot of momentum in China. You know, why should we assume there will be a slowdown from Q3 in Q4? Thank you.

Yeah, good morning. Good morning, John. First question, you are absolutely right. Plant-based, in a way, when you look at the size within the North American portfolio, is not sizable enough in order to explain meaningful acceleration or meaningful deceleration, and this is not the message we have passed. There are two elements which are important for North America, and the first one is really that capacity constraints have been heavy in Q3 on yogurts. which forced us to make important choices. That will be getting better over the coming quarters, starting in the course of Q4, and that will definitely help for the quarters to come in North America. And on the other side, we are fighting back on coffee creamers, as we said, to get back the product on the shelf, and this is really the two, I would say, key priorities for North America for the quarters to come. For Europe, we are actually, as you say, very happy with EDP. The portfolio setup is very different for dairy, US versus Europe, you say it. In US, half of the portfolio is Greek yogurt and most of that is high protein. It's still a minor part in Europe, but building very, very fast because it's growing at a very fast speed, high protein, Greek, skiers. It's getting more space on the shelf. Retailers are willing to open more space. The year 2026 and the negotiations to come will be a great opportunity to also negotiate more space for these high-growth segments. And so it will get more and more weight. And so in that sense, you're right. It's a quite, I would say, fairly balanced contribution from both volume on one side, We have more and more consumers discovering and rediscovering the yogurt and mix because we are going to more premium value-added propositions. And then on Q4, you know, there are some things in Q4 which will go better and some things in Q4 which may not go that well. I mean, China now two quarters firing on oil cylinders, which is really exceptional. And then some other elements, we have things where we can see acceleration. In business, it's never a linear journey, and so this is why we don't give any kind of guidance for Q4, neither for other quarters.

I want to just follow up on the creamers. When does the comp get easier? Because you've now had, what, three quarters of the incident, I think it was you removed from some shelves, and maybe there was a capacity problem as well. I guess that will roll off in, what, Q1 or Q2 next year?

If I recall it well, I think it was at the back end of Q1 that we were having some supply issues. So that's probably the moment to be all over.

Okay, great. Thank you.

Thank you, John. The next question from Charlie X. Hey, Jürgen and Mathilde.

It took you both well. Sorry, it's another one on coffee creamers in the US, please. Are you able to quantify roughly how much shelf space you've lost and what the ambition is to get back to? Because I think you won quite a lot of shelf space because the main competitor had issues. So just whether you think you can actually get back to what it was previously. And then just a bigger picture on creamers. Coffee prices in the US are soaring at the moment. It could pressure... um coffee in the away from home channel do you think creamers could be a beneficiary of high coffee prices um in the at home channel or do you think they're more of a discretionary item that could see pressure along with the whole coffee category and then my second question is on water please where i just wonder you could speak a bit more about my zone which slowed a little bit quarter on quarter but it's still very solid what are your plans there to to keep the brand momentum going Could you also just touch a bit on Indonesia and aqua and what you're seeing in that market, please? Thank you.

Good morning, Charlie. Let me start from your second question on water. I would say a solid print for the waters category in Q3. Europe doing well across many brands, including Evian. In China, Myzone completing another successful season. When you look at the number in terms of net sales, we are growing, I think, 5.6% in that Q3. What it is hiding is that the underlying volume growth is high single digit. Again, we are investing into distribution. We are investing into getting more space with distributors and on point of sale in order to prepare already for 2026 season. In an overall beverage category, which is growing at the low single digit pace, we see that healthy beverages are outperforming. And this is exactly where my zone is positioned. And this is where we see that we have the opportunity. And this is why we are pushing hard on distribution here. So I would say that that's on track. Indonesia also is a better quarter. You know that Q2 was pretty muted. We're not happy with the weather there. Q3 definitely was a bit back to normal in that sense. It's a very competitive market all across, I would say, food and beverages. We have a very strong brand with Aqua, leader in the market, a local brand, and we are investing into making sure that we are staying ahead of competition there, but it's a very competitive space. When it comes to coffee creamers, in a way, what's happening there is that We had our supply chain issues in Q1. Shares and distribution was falling down quite significantly. You could see that from scanner data. Market shares have stabilized in Q2 and since then have been recovering as the distribution has. That's a journey again because it's store by store to get it back. Overall, you know, this is a space which in a way Continues to grow because people prepare more and more coffee at home Because there's a more common economic standpoint more affordable way to have your coffee experience and the category is benefiting from it As people are looking for more healthy Propositions it's important that we with international light offer the right product and this is why I was saying you can expect us to innovate and renovate towards naturalness and clean label and in order to play a leading role in this category, which continues to show a solid growth momentum.

Thank you very much.

Thank you, Charlie. Next question from Tom Sykes, Deutsche Bank.

Yeah, morning. Thank you. Good morning, Jürgen. Just on your pricing, when you look at your country category average, obviously group pricing and then the pricing by category, where would you say is the biggest difference for yourselves versus competition? I think you were kind of asked it earlier. Where were you investing the efficiency gains the most? And would you be able to offer kind of an aggregate the degree to which you're below market pricing at all, please, driven by your efficiency gains? And then just on the high protein in North America, could you maybe give a view on how much of the Consumption is first-time consumption. And how much is repeat users? What occasions are growing most quickly? And when you're saying you're now focused on quality, that sounds a bit like you're trying to get existing users to trade up. That doesn't sound like volume. So just wondering, is that a pivot a bit in the strategy in US high protein at all, please?

Good morning, Tom. Look, you saw that pricing has been playing a minor role in our growth dynamic already for many quarters. And that's our strategy, actually. We are obsessed, I can say, about volume mix growth. And for us, pricing is something we do when we need to do it for the differential between inflation and internal productivity. We have been discussing at a few occasions that we are delivering productivity on our cost of goods sold ahead of the industry, and the operations teams are doing a fantastic job here, which is limiting the necessity to take pricing. Now, the way we take price or the way we invest into price is very strategic. On one side, it's consumer driven. So we price where there is high demands on high protein yogurts, for example, especially with the price of protein rising over the last 12 months. And on the other side, we are investing into price where it makes sense. I was discussing earlier about, for example, my zone in China, but there's also other categories in other regions where we intentionally invest into price. Not to lower the price on the shelf, because that's not our game, but in order to win distribution points for our products. And this is probably what you will also see moving forward into year 2026. North America, the demand on protein, there is more and more consumers consuming more often our high protein yogurts. And this is, I would say, an encouraging sign and trend, which means there is plenty of opportunity in front of us. And as I was saying, the U.S. consumption of yogurt is only one-third of the one of Europe. So there's a lot of headroom. Having said that, people understand better and better the difference between proteins, the source of the protein, but also how to absorb the protein in the best way. And that means you need to have certain prebiotics and probiotics consumed at the same moment. So we are going from quantity of protein to real benefit. And this is why we have been launching Oikos which is exactly enriched with these additional ingredients to make sure that you get the best benefit to your body and well-being. So it means that we are looking, we are expecting further volume growth, but we see also mixed opportunity by differentiating versus what competition is having in this space.

Okay, thank you.

Thank you, Tom. Next question from David Roo, Morgan Stanley. And I think it's going to be the last question.

David Roo?

Morning, team. Sorry about that. I'd like to just go back to infant milk formula in CNAO for a moment. I've got a couple of questions there. My first one is, can you give us a sense of what like for likes for China infant milk formula was, or how does that compare to the 17% for specialized nutrition and CNAO? And then just building on from this, you spoke about market growth across the stages earlier. But perhaps you can quantify Danone's growth across the infant milk stages. Once again, perhaps relative to the 17% for SN in the region.

Thank you. Good morning, David. Look, very good performance, not only in Q3, on early life nutrition in China. The team has really built over those last years, and particularly those last two years, something where we have a true competitive edge. And I was talking about two areas where I think we are ahead of competition. One is our truly digital business model, and the other one is on the census platform, which is standing out at shelf, because here, again, it's not ingredient-led, but benefit-led. This is helping us to win share quarter by quarter, over now many quarters, and we still see headroom, further headroom, to grow our market shares with Natouris, the innovation which we only soft launch in Hong Kong, still to come to mainland China. So I would say very confident in our ability to win in that category in China. When it comes to the category itself, what we are seeing is that the category has been overall stabilizing in 2020, at the back end of 2024. has been growing into a growth momentum in stage one first, thanks to the birth rates. Stage one is, from a weight perspective, a bit smaller than stage two and stage three, which is normal because in stage one you have still mothers breastfeeding and then moving progressively into mixed feeding. Now stage two is in growth, and then it will go to grown-up milks later on. So it's a progressive evolution of the growth trends through the different stages. Overall, what we see today is a category which is in moderate growth and obviously not easy to predict what the years to come will bring. It will depend a lot on the birth rates moving forward. You know that the government is trying to give many incentives to increase back birth rates, and we will see how effective that will be. What we do is we focus on what we control, and this is our initiative, and growing our market shares in this very attractive category.

Thank you very much. And just perhaps a quick follow-up there. Please can you remind me of Danone's revenue exposure to the infant milk stages in China? Thank you.

As I was saying, we are pretty much in sync with what the category is having. So stage one is the smaller part of this category. So stage two and what comes after has a bit more weight in the portfolio. So in that sense, it's beneficial that the growth moves now on to later stages.

Thanks.

Thank you very much. That was the last question. Thank you for your time this morning.

Thank you. Thank you to all of you. Thank you for listening this morning. Great results for Q3, and we look forward to engaging with you over the coming weeks. Have a great day.

This concludes today's conference call. Thank you all for participating. You may now disconnect your line. Thank you, and have a good rest of your day.