Shares of Danone fell more than 5 percent on Wednesday. The drop came after BofA Securities repeated its underperform rating on the French food giant. The brokerage also cut its price target.
BofA said the main concern is China. Births in the country have fallen sharply. This is bad news for the infant milk formula market, which is a key profit driver for Danone.
According to BofA, births in China dropped to 7.92 million in fiscal year 2025. This is a steep 17 percent fall compared to last year. The decline was much sharper than expected.
The fall comes after a short rebound in fiscal year 2024. During that year, births had risen to 9.54 million.
Analysts said a decline was expected. But the size of the drop has raised fresh concerns about the future.
China plays a big role in Danone’s business. BofA estimates China contributes around 13 percent of total sales. It also brings in nearly 30 percent of adjusted operating profit.
Within this, early life nutrition is especially important. Infant milk formula in China makes up about 7 percent of group sales. It contributes around 18 percent of adjusted profit. Margins in this segment are close to 35 percent.
BofA warned that demographic pressure in China remains strong. The number of women aged 20 to 34 is shrinking. This group is seen as the most likely to have children. It is expected to fall by about 2.2 percent each year over the next 3 years.
China’s fertility rate is now just 0.98 children per woman.
If this trend continues, BofA expects the baby population for infant milk formula to shrink by around 6 percent per year from fiscal year 2026 to 2028. The overall infant formula market could decline by about 5 percent per year.
Danone has still managed to gain market share. Its share of China’s infant milk formula market rose to 16.6 percent in fiscal year 2025. This is up from 7.5 percent in 2016. It is now the second largest player.
However, BofA said this strong run may slow. As premium products start to face year on year comparisons, growth could ease.
The brokerage said Danone has done well so far despite tough conditions. But it expects the outperformance to slow from fiscal year 2027.
BofA remains cautious on Danone’s China, North Asia and Oceania business. It cut profit forecasts for the coming years. Slower growth in the region could also limit future margin expansion.
The brokerage trimmed its 2026 earnings estimate slightly. It now expects earnings of €3.92 per share. The 2027 estimate was raised to €4.14.
Danone is expected to report sales of €27.3 billion in fiscal year 2025. Sales are seen rising to €28.08 billion in 2026 and €28.96 billion in 2027.
