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Dhaka Tribune

Danone, DANOY, could be facing significant government pricing pressure

DANOY stock could have difficulties with the usual French inability to understand markets

Update : 03 Jul 2023, 06:42 PM

Danone (OTCQX: DANOY) stock was up 2% Friday. DANOY stock could come under pressure though depending upon how people view the current - and usual - French government silliness about prices and markets. The actual effect would be not very large even if there was a significant issue within France. Simply because Danone exports - and indeed produces - so much elsewhere and out of that market.

 The issue though is one we should consider concerning all French food producers - and the retailers too. For if government is going to get things this wrong then all capitalism in the sector is in danger. The particular point is: “Kellogg (K), Unilever (UL), Coca-Cola (KO), Nestle (OTCPK:NSRGY), Mondelez International (MDLZ), and Danone (OTCQX:DANOY) are among 75 consumer goods companies in France that have been asked to lower food prices due to the raw materials costs falling sharply. France Finance Minister Bruno Le Maire said earlier in the month that the government secured a pledge from some companies to cut prices on hundreds of products under the threat of financial sanctions. The French government is reportedly using a list produced by a research group as a reference for the cost-lowering initiative.”

 Yep, lower prices or we'll fine you. It's the sheer economic illiteracy of the demand that grates so much - this is well over and above the usual English sneering at the French.

 Danone stock price from NASDAQ

 There's the obvious, is minor, detail that some of them might have not been putting their prices up to match higher input cots. You know, to be nice to their customers? Or, on the grounds that they'll make up the losses when prices fall back again - insisting that prices that didn't rise must track raw material costs down is not good.

 But there's the much larger question too. If companies are not bringing rices back down as raw materials prices fall then that means that those companies have pricing power. Because that's the definition of having pricing power. If the Minister actually thinks that this is true - that substantial numbers of companies within the French economy do have pricing power - then he should be looking to reform the economy to reduce that power. Not berating them from his office.  

 But then, you know, French politics. And that's the thing that worries. The Minister doing a bit of shouting doesn't matter very much. But when it doesn't achieve much, as it won't, then what new idiocy will they come up with? That's the thing to worry about Danone and DANOY stock - they're based in France and how much can go wrong there?

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