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Danone has begun to source more whey from Asia including China, India, and Southeast Asia, to cut costs but analysts predict this will antagonize European suppliers.
The dairy giant has mostly depended on Europe for raw resources, but price inflation brought on by the Covid-19 outbreak and the Ukraine conflict has increased costs.
According to the company’s COO, Vikram Agarwal, they had already expanded their commodity base into Asian markets before the Ukraine war. Consequently, supply risks and rising costs in Europe have made this even more relevant.
In addition to whey, Agarwal noted that Danone now purchases aluminum, plastic, paper packaging, and components like maltodextrin from regions outside of Europe.
Analysts believe the decision to source whey will particularly strain Danone's ties to European dairy producers. Whey is a crucial component of infant formula and geriatric nutrition products.
In order to combat supply disruptions and price increases, Danone is also altering recipes and formulations.
