Danone CEO on price hikes uncertainty amid Iran war: ‘Nobody knows’

When asked if the company would be raising prices, CEO Antoine de Saint-Affrique said, “we are not there yet.”

“Nobody knows when [the war] is going to stop, and depending how the next two to four weeks are going to evolve, the outcome from a macroeconomic standpoint, is going to be very, very different,” he told CNBC’s Charlotte Reed.

“If it lasts for long enough, it will have an impact,” he added.

His comments come as companies increasingly take stock of how the war may impact their operations and cost base. 

The conflict in the Middle East has now entered its sixth week, with U.S. President Donald Trump turning up the tone on Iran over the weekend to reopen the Strait of Hormuz. 

The president on Monday said Iran has until 8 p.m. Eastern time to reopen the strategically important strait where normally a fifth of global oil supply passes through.  

The effective closure of the narrow passage has caused not only surging energy prices but also soaring fertilizer and shipping costs. 

“Higher costs will filter through at some point as price increases for commodities, agri-inputs, energy, packaging and transportation are passed on through supply chains,” ING economist Thijs Geijer told CNBC via email.

“Most economists and companies were anticipating a slowdown in food inflation. It’s clear that that won’t happen this year,” he added.

The Head of the International Monetary Fund Kristalina Georgieva warned Monday that even if the conflict resolves soon, the Iran war will inevitably lead to higher inflation and weaker growth.

Earlier this month, Britain’s Food and Drink Federation (FDF) forecasted food inflation of at least 9% by the end of the year, revised upwards from an estimated 3.2% previously. That would be the highest annual food and non-alcoholic drink inflation since 2023. 

“Given the fast-changing nature of the situation, this revision is based on assumptions that the Strait of Hormuz opens to cargo traffic within the next two-three weeks and the majority of key facilities, such as oil, gas and fertiliser sites, return to normal within a year,” the FDF said on April 1. 

“This is the time where you need to keep investing behind the brands,” he said. 

“People are focusing, so either you’re relevant, or you’re not relevant… This is time for us to keep focusing on what makes us different, what makes us unique, and what brings value for the consumer.”

Danone reported a roughly 2.1% overall price increase in the fourth quarter, while volume-led growth stood at 2.5%. Like many of its peers, it has focused on growing volumes after years of price increases following the surge in inflation in 2022, as consumers traded down to cheaper brands.

The company is betting it can capitalize on its healthy brands to remain relevant as food brands also face increasing competition from cheaper private labels that offer grocers higher margins. In March, it announced it would buy protein shake maker Huel for an undisclosed sum to optimize its position in the fast-growing nutrition space. 

Retailers have also warned that they can only absorb increased costs for so long before passing them on to their customers.

British retailer Next said late last month that it had accounted for £15 million ($20 million) of additional costs likely to arise from the Middle East conflict, such as fuel and air freight, assuming the disruption lasts for three months.

“Beyond the next three months, if we see these costs persist, then we will begin to pass costs through as higher pricing,” Next said.