Danone
NOVEMBER 26, 2007
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WHAT'S NEXT -- MARKETING
How Danone Turns Bacteria into Bucks
Sophisticated R&D helps the yogurt maker find new microbes—and sell the health benefits to consumers
Viewed under a microscope, Bifidus animalis DN-173010 looks like a plump, slightly misshapen jelly bean. But when this bacterium gets into your digestive tract, it is one tough customer. Passing through the stomach, it survives a bath in gastric acid strong enough to corrode metal. Then it moves into the intestine, teaming up with other microorganisms to push fecal matter through the colon.
That may be more than you wanted to know. But this patented bug is making millions for Paris food company Groupe Danone (GDNNY). It's the key ingredient in Activia, a yogurt Danone is marketing as an aid to regularity. Activia posted nearly $2 billion in worldwide sales last year, up 30%. Analysts say its introduction in the U.S. in 2006 through the company's Dannon division was one of the most successful product launches in recent food-industry history, with sales expected to reach $300 million this year.
Activia exemplifies what Danone may do better than any other company in the world: turn bacteria into bucks. By using sophisticated science to identify microbes that can make people feel better and maybe even look better, Danone has become a leader in the fast-growing business of functional foods. And it has far outpaced competitors in persuading consumers to buy food enhanced with these bugs.
"What Danone has done is base these [products] on science and clinical studies," says Gregor Reid, a microbiologist at the University of Western Ontario. "That is what pharmaceutical companies do, but it's very unusual for a food...
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