Ladies and gentlemen, thank you all for standing by, and welcome to this Danone Q3 2020 sales. At this time, all participants' line will be on a listen-only mode. There will be a presentation followed by question and answer session, at which time, should you wish to ask a question, you will need to press star and the number one on your telephone keypad, and wait for your name to be announced. I must advise you all that this conference is being recorded today, Monday, the 19th of October, 2020. Without any further delay, I would like to hand the conference over to our first speaker for the day, Ms. Nadia Ben Salem-Nicolas. Please go ahead, ma'am.
Good morning, everyone. Nadia Ben Salem-Nicolas speaking, Head of Investor Relations at Danone. Welcome to Danone's conference call for its third-quarter sales, originally scheduled to tomorrow, Tuesday, finally pulled forward to this morning. Thanks for your flexibility and for being with us today. I'm here with Emmanuel Faber and Cécile Cabanis, who will first go through the presentation before taking your questions in a second step. We'll ensure we leave enough time for that. I draw, as usual, your attention to the disclaimer on page two. With that, let me hand it over to Emmanuel.
Thank you, Nadia. Welcome to you all. I hope you're all in good shape and in good health in this complex world. Thank you again for your flexibility indeed. We had some unpleasant rumors on Friday and felt that we would limit any volatility by just advancing this call to today. Maybe let me start before we go into our numbers and the perspectives by what is personally touching me probably most directly this morning with Cécile having made a decision to leave Danone. Cécile and I have been working together for many years, and she's been very close by my side since I'm in my current role. I'm seeing a great teammate and partner go, and Cécile and I felt that the best would be for us to address this as we enter into this call. Maybe, Cécile, a few words.
Thank you, Emmanuel. You will see that it is with great emotion that I'm giving the news today that I'm leaving 16 very exciting years at Danone. 16 years in which I have participated in all great transformation and adventures of the company. 16 years of action, of deep commitment, and convictions alongside first Franck and then Emmanuel. The last five years have been rich. I've been talking with you many times. As CFO, working with and enjoying the trust that Emmanuel gave me, I had the chance to contribute in a cycle that you followed closely, which was a profound transformation driven by an absolutely unique vision and working with incredible teams. From the acquisition of WhiteWave, that you remember, where Danone became the leader in plant-based and organic.
The focus on delivery and growth of 50% of the EPS and also the delivery, and you will see a slight over-delivery of the Protein ambition of EUR 1 billion efficiency. Of course, the formalization of the integrated goals for 2030, that really help transform Danone into a company that is driven with a very compelling vision and mission. I must say, I'm very proud of this journey. I didn't make it alone. It was done as teamwork with incredible teams, as I said. As you've seen, for those who have read the press release already, Danone is taking a new step, a new foundation, and is entering a new five-year cycle.
This was the time for me to reflect and ask myself an essential question. Do I throw my full energy into this cycle and commit for several years, or do I look at something else and start a new cycle of myself? There was a lot of thinking, discussions with Emmanuel and members of the board, whom I thank deeply for their trust as well. I believe that the opening of this new chapter for Danone must correspond to a new chapter for me. Now is the time, after 16 years, to start something new. I'm fully convinced that the adaptation plans that we will lay out during this call, and on which we've been working since several weeks, are the right one for Danone.
It's the moment for Danone to entrust a new team with the responsibility of continuing to build this unique company towards a new chapter of development. A new chapter, new team, new organization, it seems consistent. I know I'm leaving an incredible company with incredible and committed teams and people. I'm also convinced that I leave finance, strategy, M&A, IT, and cycles and procurement teams fully equipped to drive the changes that are needed today. The period ahead is full of challenges, but I know that the teams under the leadership of Emmanuel will size them and find the right innovative solutions, responses that will adapt well to the COVID world that we will live in now. The new COMEX organization has been designed precisely to support that, and I will be helping my team.
I welcome Juergen, the new CFO, and I will be helping him as well, and Emmanuel, with my full commitment. I will stay very close to Danone, very loyal to the company and the team. Of course, I will keep many friends. Sorry, maybe I was a bit long, but it's a very important moment for me. Thank you.
Thank you, Cécile, and thank you for taking the time. I know your decision is a profoundly personal one. I can and we can only respect it and express our deepest gratitude for your extraordinary dedication and contribution to our company. As I just said, I'm seeing you go as a partner and a wonderful colleague. We wish you an incredible future after you leave us in February, and we'll have more time for proper goodbyes. Thanks, in any case, for walking with us through this transition, and welcome to Juergen, which Cécile and Nadia will have opportunities to introduce to you as a community in the coming weeks and months, as this is how we've been designing the transition going forward.
If we now go into today's agenda, I think the title page is summarizing in a few words, but important words, what the message is that we want to convey to you. This is a new world, and therefore, in many ways, this company will need to reinvent itself again, as probably many others. That's clearly what we have in mind here. With four keywords for now, which is deliver, reshape, review, and adapt. If you go maybe directly to page three of the presentation, what you will hear from us today in a nutshell is the confirmation of a sequential improvement of our sales growth in the course of H2 this year. Our restored full-year guidance of 14% recurring operating margin and EUR 1.8 billion free cash flow for the full year 2020.
We'll be talking about reshaping the organization of Danone for the future, updating you on our adaptation plans to this new COVID world, and finally, launching a full strategic portfolio review with a simple objective, reconnect ASAP with our 3%-5% profitable growth midterm guidance. Page four gives you a little bit of where we are today. This blue arrow is basically the way we have pictured for ourselves this pandemic crisis with, as you know, three phases. The first half of 2020, which has been about the outbreak and the lockdowns, where we have protected our ecosystem and our ability to continue to serve best our customers, consumers, patients, babies, parents with our brands.
The second half, which is as we are right now, where we see some stop-and-go reopenings, but also reclosing, where it's really a phase for us to learn what is here to stick and what is here simply as a phase of lockdowns. 2021 onwards will be the new normal, for which we are now actively preparing ourselves. When it comes to the Q3, you will see a sequential improvement in Q3, further acceleration of EDP, and sustained delivery of efficiencies as Cécile mentioned. The focus will be on delivery for Q4. We believe we have this opportunity to keep our market share momentum. That's the right moment for large brands to shine, and we want to have that and secure the expected levels of margin and cash as I just outlined.
Beyond, and therefore Q1, we will implement our adaptation plans to, as I just said, reconnect ASAP with our profitable growth agenda. On page five, these are a few words and pictures just to share what we have learned from the last nine months, and there was a lot to learn from, and shaping how we are responding to this. Probably the overarching one is the first one. Local empowerment is king. It's a pandemic in which the governments, the countries, are driving the agenda of what economies and societies will look like in one, two, three, four, five, 10 years from now. Governments are back into the game in many ways. Multilateralism, as you know, is at stake, and therefore our vision that local was where everything needs to start when it comes to food and agriculture is even more important right now.
The second is, of course, with all the matter of the resilience of the food supplies, macro and micro, company by company, there is a need for extreme supply chain and customer service agility at a competitive cost. The third is that the ways people eat and drink today, and including during the pandemic, is creating consumer-centric growth opportunities that are both within defined categories, including the ones that we have, but also across those categories and beyond those categories. The fourth aspect is that beyond the ups and downs, there will be structural channel shift, and e-commerce is definitely one, of course. Finally, this is a moment where there is a power of trusted brands with a strong heritage, local relevance. We need to take that into account in the way we continue to shape and support our portfolio of brands.
With that, on page six, basically, three chapters to reconnect as fast as possible with our 3.5% profitable growth agenda. Three big decisions. I'd actually start with the bottom one, portfolio review. We are starting a strategic review to accelerate our return to profitable growth from a portfolio standpoint. From an organic standpoint, it means we are going to, and we have started including all our brands, all our SKUs, and assets review. It's very clear for us that when it comes to SKUs, for instance, some of our categories in some of the channels will not be able to carry as many SKUs as we have today. It's clear from our customers, the logistics, the supply chain constraints that they have is getting them to shorten their range, and therefore, there is an opportunity for us to make sure that we focus our portfolio of SKUs.
In some cases, it could go up to, probably in countries and categories, to 20%, 30% cuts in SKUs that we are reviewing. Same for brands. The smaller brands were everything that counted five years ago in the food revolution. Very clearly, they will continue to have a role, but that cannot be the same role. We also see all the benefits, both from a growth and efficiency and cost-saving standpoint of running the larger ones as well. Brands are under review. Assets, whether this is factories, logistics supplies, fleets, everything is obviously going to be reviewed with the same spirit. Beyond this organic review, there is also an inorganic review where we are starting to look at our businesses and again see how much we believe that they can be fit for a 3%-5% profitable growth agenda in this new world.
We are announcing today that we are reviewing our Argentina and Vega brand as an immediate step, and it's quite likely that other assets will be reviewed as well. Moving upstairs, the next obvious thing that we have started to work on is optimizing our execution in this new world. We see significant opportunities for growth and efficiency acceleration that we want to implement as soon as the Q1 of next year, and thereby finalizing and accelerating the finalization of our detailed plans of adaptation with, from an organizational standpoint, two very simple but we believe, radically important principle. One, countries will be empowered for speed and relevance of business action locally. Second, that goes with a delayering of the pyramid to simplify the ways of working. In other words, the rest of the organization needs to be as lean as possible in serving the countries.
The consequence of that, we believe, is going to be higher growth opportunities because of the speed to market and decisions locally, and very significant cost savings in the way we work overall as a company. The third upstairs is what actually starts this morning, a reshaping of the organization with a fitter and more agile to best serve strategy and execution Executive Committee team. I suggest we actually shift directly to page seven to look at what it means. From the team we had in January and effective in November this year, you can see on the box on the right side. First of all, we are appointing two macro regional CEOs covering both Danone North America and Danone International.
It will help us reap benefits, in particular for Danone North America, of smaller businesses that today were run outside of the EDP North America business, like the evian water business, the Happy Family, the Nutricia business, which will go now directly under Shane Grant's responsibility. For Danone International, Véronique Penchienati who now heads Specialized Nutrition and has built the merger of our Early Life Nutrition with Advanced Medical Nutrition businesses last year. Véronique will be the CEO of this macro region of Danone International, basically covering the rest of the businesses of Danone and our current category organizations for EDP, for Waters, and Africa, gradually starting from today. The focus of these functions will be to foster and optimize the local execution of our strategies, and also work on all the cross-category synergies that we can reach both from a cost and a revenue standpoint.
We then have two global functions, one that you know already with Nigyar, who is our Chief Growth Officer, covering knowledge about strategy and insights on consumers, brand management, digital, a number of other top-line related activities. We create, next to this function, a Chief Operating Officer role held by Henri Bruxelles, in charge of an end-to-end function that is required to perfect the way we design and we deliver our brands, our products. Henri will be in charge of an integrated function that goes from R&D, innovation, suppliers, cycles and procurement, manufacturing, supply chain, logistics, and quality.
This is going to be a transformational function for us, allowing us to reap the benefits of a seamless function all across this chain, and therefore much more efficient, in terms of costs, in terms of growth, because it will be more focused, and of course, seizing a lot of opportunities cross categories when we will organize the manufacturing, the logistics footprint, and the delivery footprint of our businesses in the countries locally. Finally, as we mentioned before, Cécile will transition after the full year of this year, and Juergen will gradually take over from Cécile, with a full completion in his function as the Chief Financial Officer, tech and data as of February 21. No change for Bertrand, who will continue to head our human resources function and the general secretary for us.
What that leaves us with for the next 12 weeks agenda, on page eight, is first of all, absolute focus on delivery. The Q4 sales will confirm a sequential improvement in our gradual recovery from COVID, albeit at a slower trend. We will keep our market share momentum. We have our efficiency actions and control measures in place, and therefore, will secure the expected level of margins at 14% on free cash flow at EUR 1.8 billion, as I mentioned before. The second chapter of our next 12 weeks agenda is to finalize the adaptation plans, that obviously we will present to you before implementing them in Q1 next year. The third is obviously progressing full speed on our strategic review agenda, on which again, we will update you as things unfold.
With that, I'd like to ask Cécile to take us through the review of our financials for the third quarter. Thank you.
Thanks, Emmanuel. I ask you to move on to page 10. We are publishing today Q3 sales, which are broadly in line with expectations. They show, as expected, a sequential improvement versus Q2. On a like-for-like basis, sales were down -2.5%, which is half of the level of decline that we observed in Q2. This improvement has been possible thanks to EDP, which is now consistently delivering +3% growth rate and, as expected, material improvement on the Q2 decline from Waters. You can see that the performance has improved in both developed and emerging markets. Moving to the next page, which is an important one because, it shows really how much the channel shift impacted by the COVID context has impacted the overall performance. We believe it's the most relevant way to analyze the performance in the quarter.
It's obviously contextual, dependent on COVID, as I said. It shows that the company top line are very extreme trends, depending on channel. If you look at at-home consumption, it remains buoyant, especially in the U.S., driven growth in the grocery channel, which is up 8%. We are seeing the same kind of dynamic for Waters in large jugs that are consumed at home in emerging markets as you know, Indonesia and Mexico. E-commerce is more and more sticking into people habits. Growth accelerated even faster than during the lockdown period. It's up more than 40% in Q3, now reaching 8% of Danone total sales.
If we look at the headwinds, we find again out-of-home channels, both for Waters, down 25% and accounting for 45% of the category sales in Q3, and for EDP, notably NORAM, down 30% and accounting for 10% of NORAM sales. The biggest impact is the travel freeze and border closures, which is weighing on cross-border channels in China on our Early Life Nutrition business, and these channels were down 60% in Q3. Despite this context of channel extreme trends, it's important, page 12, to note that our brands continue to compete effectively in their core markets. We continue to gain share in approximately 50% of our portfolio through most of our large brands. On average, the one you have in the chart, which gain around 100 basis points market share since the beginning of the year.
If we take a look at EDP brand, especially, they've maintained their strong momentum with continued share gains from International Delight and Horizon Organic in the U.S., Actimel and Activia in the U.K. or Danette in France. Water brands have also gained shares in Q3, despite continued channel disruption. This is the case for evian and Volvic in Europe, for AQUA in Indonesia, and Bonafont in Mexico. Moving to the sales bridge. Net sales amounted to EUR 5.8 billion for Q3, down 9.3% versus last year on a reported basis. This is primarily impacted by change in currencies, which had an effect of 7.1% negative on the quarter, which is mainly driven by devaluation in Latin America and Russia since the beginning of the year, and most recently, by a 5% depreciation of the US dollar against the euro.
Next, in the bridge is Argentina, which you know is not accounted for in our like-for-like basis, and adding an extra 20 basis points. On a like-for-like basis, revenues declined by 2.5% in the quarter. Volumes materially improved - 0.4% versus Q2 at - 2.6%, with better trend across all three businesses while remaining affected by the negative Water performance. Value also sequentially improved at - 2.1%. It reflects negative country mix, mostly driven by the China slowdown for Specialized Nutrition and partially offset by a product mix that helped us well in EDP and SN, still continuing to be a drag for Waters. Pricing was overall stable, and a positive product mix reflected the continued resilience of our portfolio. Moving now into the details of each category, starting with Essential Dairy and Plant-Based.
As I said, we are pleased to report that this quarter, again, our largest business has been the fastest growing one, posting a significant acceleration in sales, + 3.7% on a like-for-like basis, doubling Q2 growth levels and with a notable 4% growth in volumes. It brings EDP like-for-like sales growth year-to-date to over 3%. All segments have been growing, including the essential dairy part of the business with probiotics and functional yogurts. Organic milk and coffee creamers are among the best performing segments. Plant-based sales were up well into high teens level, both in North America and in Europe, where sales continued to benefit from higher penetration, higher frequency, and also expansion into new categories and ingredients. Year-to-date, plant-based sales reach EUR 1.7 billion. If we look at the performance by region, Europe and North America continued the mid-single digit momentum since the beginning of the year.
In Europe, it was sustained, as I commented earlier, by further market share gains, thanks to Actimel and Danone brands in particular. Alpro posted again high teens growth within its four historical markets as well as outside its markets, well into double-digit growth. North America business continued to be positively impacted by the shift to at-home consumption, benefited essential food categories like ours. Premium dairy and plant-based both grew at double-digit rates, and U.S. yogurt grew moderately in retail. Channel dynamics that I commented earlier and observed in Q2 were confirmed in Q3 with the partial reopening of out-of-home favoring a bit the coffee creamers category. On the other hand, we observed continued strength in retail and in e-commerce. Rest of the world, the business is now back to growth, with CIS solid growth, confirming the continued success of revamping our traditional portfolio, especially under the Prostokvashino brand.
We continue to observe, however, pressure in Mexico and Africa. Elsewhere, we saw first signs of improvement versus H1, notably in Brazil. If we look at Q4, we believe that the category can maintain this momentum, we don't expect any major change in dynamic. Moving page 15 on Specialized Nutrition, we had in Q3 strong swings in demand, which has been observed since the beginning of the year, leading sales to decline 5.7% on a like-for-like basis this quarter, which brings overall the year-to-date sales of Specialized Nutrition flat. Moving to China, which is the big part of the volatility of this quarter, we experienced a steep double-digit decline in the quarter against a high base last year when China was growing at more than 20%. This resulted from headwinds related to channel logistic issues caused by COVID-19, which generated a cross-border channel contraction and a pantry de-stocking dynamics.
What happened is that the continuous border closure and travel limitation between Mainland China and Europe, Oceania, and Hong Kong led to a sharp contraction by around 60% of the sales done through cross-border channel. As a reminder, these channels include the so-called indirect channels and Hong Kong platform, which represent a combined 40% of our infant nutrition business in China. By contrast, the sell-out in domestic channels such as mom and baby stores, direct e-commerce, and direct international, showed good resilience in the quarter, with Aptamil keeping a solid sell-out momentum and market share gains driven still by the Aptamil Platinum range. Aptamil remains the number one brand in direct e-commerce in China.
Globally speaking, all channels suffered from further de-stocking after the H1 pantry loading, not only at big [goods] level but also at mom and baby stores, after a restocking phase that we observed in Q2 following store closures in Q1 at the beginning of the pandemic. Europe posted mid-single digit decline, impacted by lower hospital activity that remained below pre-COVID level and by softer category dynamics versus pre-COVID, mainly on infant milk formula. Yet, we are seeing solid share gains in our key markets like U.K., Poland, Netherlands, and e-commerce continues to be a very strong driver of growth, boosting growth above 20%. On other regions like Southeast Asia, Middle East, and Americas, they maintain their strong growth momentum with all platforms growing and further taking shares.
The platform notably benefited from a strong acceleration of e-commerce and the launch of some successful innovation, both under the Aptamil umbrella and local brand. Looking at Q4, we expect specialized nutrition growth to improve, remain negative given continued headwind expected from cross-border channel on Early Life Nutrition China. Moving to the next page 16, on Water. The category remained severely under pressure in Q3 as expected. Sales are down -13.5%, this decline was less than half the Q2 level, in line with the sequential improvement that we expected. The performance is here again entirely correlated with the level of openings in out-of-home channel and more broadly, with the level of traffic. In the quarter, we have registered sales declining by 25% in out-of-home, while at-home sales continue to hold up well. This explain also the meaningful improvement versus Q2.
Looking at the regional split, recovery was not balanced. While in Q2, all geographies were down between 20% and 40%, in Q3, Europe and China saw a relaxation in traffic restriction, while in Latin America and Indonesia, social distancing was still quite severe. It led to Europe, where the trend improved versus Q2 with a -10% like-for-like decline. Category improved on the back of a resurgence of out-of-home sales over summer, even if September saw some further restaurant and bar restrictions. We managed to gain significant market share in our main markets such as U.K., France, and Germany, where we have fully deployed our rPET range for small format. In China, both the beverage category growth and Mizone market share improved versus Q2, allowing a partial recovery in sales, also still negative low double digit, around -10%.
Our market share is not yet back to the normal level, and the category still lacks traffic in the streets. We, however, remain optimistic on the new proposition, which is receiving very good feedback from consumers and improving distribution metrics. As anticipated, Latin America and Indonesia sales declined a steep double-digit with no significant improvement compared to last quarter, despite a resilience performance, as I said earlier, on the drink business that protected the volume share. The last quarter of the year looks very uncertain for the Water business. The volatility around restrictions measures, notably in Europe, is back to increasing again. As things stand, we expect some improvement in trends in Q4, but we remain very vigilant, especially as Q4 is the high season in Latin America, and we'll make sure we adapt the investment accordingly. Moving to page 17, I mentioned, and Emmanuel mentioned earlier, efficiencies.
You know that since the beginning of the year, we had to mitigate extra costs coming from the COVID-19. We've been focusing all the efforts to deliver more efficiency and be very disciplined in capital allocation. This is leading to a Protein plan that will be fully delivered and slightly exceeded on the EUR 1 billion plan that we had for three years and the incremental EUR 300 million that we were expecting this year. On portfolio management, we've made another sizable step this quarter, unlocking EUR 470 million in invested capital, generating EUR 100 million plus capital gains through the sales of the remaining stake we held in Yakult. Moving to my last slide, which is the Q4 and the full-year outlook.
As Emmanuel indicated, for the next 12 weeks, we will be very focused on delivery, keeping the market share momentum, continuing to improve our top-line dynamics across portfolio, and making sure that we deliver our efficiencies. As I said, the visibility remains limited, as demonstrated by the recent health measure taken by many European countries that have affected, once again, out-of-home channels. We don't foresee at this stage material improvement in terms of cross-border channel dynamic that impacted Early Life Nutrition in China in Q3. We therefore expect for Q4 sales growth to confirm a sequential improvement versus Q3, but remain negative. FX will continue to be a headwind. Despite this lack of visibility, we are fully committed to protect margin, and we expect recurring operating margin for the full year to be at 14%, in line with what I said in H1.
Efficiency action and controls are in place to support our ability to reach this level. It will allow a solid free cash flow generation that is absolutely key and a focus, as you know, since the acquisition of WhiteWave, that we expect to be around EUR 1.8 billion for the full year. I will leave Emmanuel to conclude.
Thank you, Cécile. As you've heard from Cécile, we continue to navigate this COVID world, improving gradually our execution. As I said to start with, we know we need to also change the way we play the game overall, that's really where, again, this 12 weeks agenda is so important for us, that we continue to deliver on the hard work that the teams are doing every day, we are improving, we are gaining market share, we control the margin. I'm certainly very pleased that we've started this review of all our SKUs, brands, and assets in order to prune the portfolio to make it fully compatible with a reconnection with our midterm guidance of 3%-5% profitable growth. The finalization of the adaptation plans is coming soon. We'll keep you updated with that.
The fact that starting this morning, we have a new reshaped executive leadership team, Executive Committee with me running the company entirely all hands on deck on both this delivery and this transformation and plan, for me is an important factor of my confidence in the fact that indeed, we are going to leverage all the unicity of the Danone's choices of categories, the health orientation, our sustainability topics, into really connecting all of this in this world to the profitable top-line growth agenda of the company. Thank you for your attention. I turn it back to Nadia as we are preparing for questions. Thank you.
Thank you, Emmanuel. Thank you, Cécile. For the discussion part before the Q&A, please be so kind as to limit your questions to a number of two, and please write them all at a time to allow as many as possible to participate. I think first question.
Thank you.
Comes from Alan Erskine at Credit Suisse. Hello?
Can you hear me?
Yes, we can. Good morning, Alan.
Good morning, everyone. Sorry. Yes, two questions from me. The first one is on the decision to review Argentina. Over the years, we've often heard from companies congratulating themselves on sort of holding the course and coming out of these emerging market crises in a stronger position. Is there not a danger that you're exiting Argentina at the bottom? My second question is regards to the management change. I recognize that by creating one sort of macro regional head for everything outside of North America reduces the number of touch points and should accelerate decision making. At the same time, you've three very discrete categories in Specialized Nutrition, Water, and EDP. By removing a sort of category structure, are you sure that you're not going to lose something in terms of managing the global brands, making sure best practice within the categories are shared?
It's leaving, very an awful lot to do from the outside. Thanks a lot.
Thank you, Alan. Maybe I'll take both. Argentina, we've been in Argentina for two decades and a half. We've been through the rollercoaster game indeed. You heard us and, including myself, I think, saying that indeed, by sticking to our game locally, by reorganizing, reshuffling the way we work in Argentina, we've emerged crisis after crisis stronger than we were before. That's the same that is currently happening. I don't think that if we were going to exit Argentina today, we would exit it at the bottom. We are exiting it at a time where we have incredibly strong brands with La Serenísima, with Villavicencio, Villa del Sur in Water. The Argentinian teams is executing the Argentinian way. They have not waited for this call to radically restructure, reorganize, et cetera.
The point is really that, in the macros of Argentina, do we see enough traction in the coming three years, two years, 18 months, that will create the connection of our Argentinian business with what I think is absolutely needed for us in this COVID world, which is focusing our efforts. The focus is really super important, and it needs to be on profitable growth opportunities. That's where we are, and I'm not saying that Argentina is going to be sold. We are going to review many options. We have partners there, and we just want to make sure that as soon as possible, we're making a conclusion on this particular asset. The same goes actually with Vega, which is a great brand that we acquired in the WhiteWave basket of brands, that went under a difficult moment of transitioning its range to organic.
We've been reworking this for the last 18 months, there is the same question. It's a great category, it's a great brand, but are we sure that it can reconnect and move the needles for our teams at the moment where North America has so much else to do that it's actually worth being us the best owner of that great asset. More to come and conclusions will be shared with you guys. On the management change, I think I'm aligned with the positive that you've just been describing, Alan. On the risk that you highlight, rest assured that we are not removing the category expertise that we have. In many ways, we believe category expertise is obviously of the essence. For all companies today, actually, the question of whether the lead should be on geographies or the lead should be on categories, is there.
Most of our competitors have actually switched to purely on metrics, purely geography or metrics, geography-led organizations. At this moment, what we announced today is that our global organizations will stay outside of North America, but they will report to one person. We believe that's the right point of reviewing options for us and certainly immediately start gaining what we can gain from the cross categories opportunities that we have. We have things like in Italy, we've been having joint sales organizations between our baby food and our EDP businesses for a number of years. In Russia, we are having cross logistics agreements and distribution with brands that have nothing to do with our portfolio, just riding the portfolio, using the incredible power of our Prostokvashino and overall EDP business there.
The same goes like in France, we've just made an investment on organic milk for Aptamil, that will produce the organic Aptamil business, is going to be a function of a cooperation between our EDP factories in the north of France and milk collection and the Steenvoorde factory when this is going to happen. The same on filtration in Steenvoorde that will allow us to extract essential and very pricey infant milk formula ingredients from the milk that we collect locally, and in connection with our dairy plant there. I won't stop on that, but it's absolutely essential for us that we reap these growth and efficiency cost-saving opportunities across the value chain of our categories.
Yet, of course, we absolutely are maintaining and will maintain whatsoever will be the adaptation plans, ultimately, the category expertise, that has been a driver of Danone's superiority when it comes to creating brands that win market shares.
Thank you, Alan.
Thank you.
Next question is from Celine Pannuti at JP Morgan. Good morning, Celine.
Good morning. Thank you. Yes, I can hear you. My two questions, maybe I'll continue. I have a follow-up from Alan's question on the new organization. You mentioned new team, new organization. There were rumors last week about a potential split of the CEO and Chairman role. Why did the board not decide to look at that as a new setup for the organization? Just to come back on what you said on the international, where 80% of the sales will be under one person, why not adding some emerging market regions and Europe with two distinct VPs overlooking that? My second question is on Specialized Nutrition. Are we going to go through a bit of a reset of the indirect channel that will last for the next couple of months? Is that something that we should expect as we look into 2021?
Can you give us your growth rate in Mainland China, please, in Q3?
Thank you, Celine. The board did not review this option because the board did not discuss this option of splitting Chairman and CEO. The only moment in the history of Danone when it happened was after Franck handed the CEO role to me after 20 years. We would only consider this in transition periods of one generation to another generation of Chairman and CEO. When it comes to your questions on international, I think it's a very valid question. The one thing I would add to this is that we still believe that there is a lot of things that we can learn from emerging countries in the so-called developed countries. In particular, in this COVID crisis, there is lots of learnings from many ways. Whether this is about organization or the way we adapt to the pandemics, the way we organize our operations.
The channels on proximity and convenience, many aspects, the direct delivery to consumers, many aspects of things that our teams have learned to do in EMEA, and overall emerging countries might well be of use in the more developed markets. That includes strategies of affordability for some of our brands, because there's no doubt that we are going to be in a situation where purchasing power is going to be at stake in this world, in Europe, in NORAM. Of course, our people in Indonesia, in Mexico, in Brazil, in Africa have been running these questions of affordability and efficiency in ways which, again, I think can and should inspire our older economies. So beyond Véronique herself, of course, there is a whole bench of executives below in the organizations, including ones that are in Europe and have experience about emerging countries and vice versa.
I think nurturing the cross-learnings from one to the other needs to continue to happen, and we believe the new current setup is allowing us to do this. When it comes to SN, I may ask Cécile to give you a bit more clarity. To your question just before that, whether there will be a continued contraction of indirect in the next couple of months in China, I think my answer is yes. In particular, for us overall, we are going to enter into a comparison basis for China in the Q4, that is obviously was very high in 2019.
Maybe on your question, Celine Pannuti, on Mainland China, some further clarification. Direct channel represents around 60% of our sales in China and includes, as you know, modern trade, mom and baby stores, and e-commerce. We need to distinct two things. First, from a sellout perspective, this channel has performed relatively well in Q3.
Being at the bottom end of the category growth range of 3%-5%. This is what you can look at, having the brands Aptamil and Nutrilon improve their market share. As I said, mainly supported by the Aptamil Platinum range. From a selling perspective, the demand was softer in Q3, and as we had the reverse effect from the catch-up that we experienced in Q2 at the end of the lockdowns, we saw inventories and destocking happening. Remember that on this part of the channels, there was a +50% growth in Q2. This is what explained that overall, with the sell-out that is positive, the overall growth is negative.
Thank you, Cécile. Thank you, Celine. Next question is from Martin Deboo at Jefferies. Good morning, Martin.
Martin Deboo at Jefferies. Can you hear me?
Yes. Good morning.
Thank you. Just one question. Emmanuel, in the context of restating the 3%- 5% medium term top-line guidance, I notice you're not reiterating the mid-single digit to high single-digit EPS guidance that you mentioned at Q4 in February. That begs the question of what medium-term margin guidance is going to be. I suppose a specific question is, what's the risk that you need a reset in FY 2021, given some of the commentary you're giving on headwinds in China ELN, which is the most profitable part of the business? Thank you.
Thank you, Martin. I think that, put it this way, we are not changing in any way the midterm guidance that we've given to you. It has never been taken away through the COVID crisis, it is there. Embedded in what I said, the mid-single-digit EPS, mid-to-high single-digit EPS growth is there on a recurring basis. We insisted, I insisted, at this stage, that the only thing I do on profitable growth, because we believe that margin is indeed a fundamental part, margin improvement is indeed a fundamental part of this equation. I'm very clear on what I see and what we do. The margin this year is not going in the right direction, there is no way we can reconstruct our agenda without a significant margin improvement in the years to come. That's what we're working on.
We also know, obviously, that SN China is a very profitable business. It has had its ups and downs. We had lot of ups. There is now a blip in the context of the frontier, the borders closures and the channel shifts. We've been managing that in the past. I would double down on your point, that margin is critical. This is also a reason why we believe this adaptation plan needs to come as early as Q1 in terms of implementation, for us to rebuild our margin equation in a manner which, again, reconnect ASAP with our midterm guidance.
Okay.
Thank you.
Thank you.
Thank you, Martin. Next question is from Warren Ackerman at Barclays. Good morning, Warren.
Good morning, guys. Two from me. I'm going to ask two operational ones, be a bit different. The first one is on EDP, some good news today. I think 3% year to date is encouraging. Could you perhaps dig into the four buckets, really, of Europe, U.S., Russia, and LATAM Africa? Particularly interested in comments about Russia improving. That sounds good. Then, maybe talk to us about specifically what the number for plant-based is all in. That would be great. Then secondly, just back on the margin question again. Can you confirm that the 14% margin is the trough margin? You've out delivered on Protein. Is there a new cost saving program that you're going to outline to us? Is there a capital markets event? I heard maybe there's going to be something in the new year. I guess the question everybody's asking is that margin's unbalanced?
You got the margin in the first half of Water that's 6%, and you've got mid-20% margins in Spec Nutrition. Can you just maybe give us a bit of confidence that the Water margin can recover back to plus over 10% and that the mid-20%s Specialized Nutrition margin is sustainable? That would be great. Thank you.
Thank you. Maybe I'll start. Yes, you're right, Warren, we're certainly pleased to see the sequential improvement of our EDP business. You all remember that we've always said that to nurture our midterm guidance, even before it became what it is today, we had our EDP business growing anywhere between 3% and 4%. It is in the 3% - 4% region right now. It's a 3.3% on a year-to-date basis, 3.7% on the Q3 basis. The breakdown is that, overall, we've been growing mid-single digit in NORAM. In particular, this is driven by plant-based, which is growing double digit, as Cécile said. The premium dairy business is also double digit. The partial reopening of away from home has supported our coffee creamer business. Yogurt is moderately growing for us in retail.
We have not followed some of the aggressive price and promotion activities of our competitors in both the Greek and the regular segments. We've focused on immunity, gut health, functional, that have been doing very well for us and as categories. That's for NORAM. When it comes to Europe, we are mid-single digit again, and Cécile highlighted a number of our brands and countries that are working well. You mentioned CIS. Yes, we see CIS with solid growth now, with easing comps, obviously, but very happy that we've actually now organized a really strong modern dairy organization and a traditional dairy organization that allow us to focus on both at the same time. In Africa, we continue to see continued pressure due to essentially the lockdown situations. Morocco, for instance, that had reopened has locked down significantly again. That's what it is.
When it comes to your margin question, yes, there are new cost-saving plans. My answer to Martin stays, we are pretty clear that there is both an opportunity, because we learned a lot about new ways of working and making efficiencies during this COVID, but also increasing cost of doing business in COVID. When we make both [maps], we come to believe that there are very significant cost savings that we can implement through a new program, and this is embedded in both the organizational aspect, the portfolio aspect that I mentioned of our adaptation plans on which we will update you pretty soon.
Thank you, Emmanuel. Thank you, Warren. I think we have time for the last question, which is going to come from David Hayes at Société Générale. Good morning, David.
Good morning, all. Thank you. Two questions from me. The first one on the portfolio management, the second one a broader strategic question. Just on portfolio management, can you be a bit more specific about why Vega and Argentina have come up early on the list and why maybe brands like Mizone aren't on that list yet? Then if you do dispose, I know it's in there, but if you do dispose of those assets, is that something you expect to create value from? Can other people do better with those brands than you can, and why is that possible versus Danone's operations? I guess finally, on the value creation, are you intending to reinvest that capital in core areas of Danone? What might that reinvestment look like? What are the core areas for that focus of reinvestment?
The second question, just in terms of a broad strategic question, just to maybe summarize the whole thing, are these changes driven just because of COVID, or are there other things at Danone that you feel aren't working properly that need to be addressed? If the COVID hadn't happened, would all of this not be going on, or would this change have happened anyway, even with or without COVID? Thanks so much.
Thank you, David. I'll try to be short on the first question, because in many ways, that's what we would like to discuss with you guys when we're ready. To put an example, I think Mizone is a brand on which despite what happened with COVID, has given us reasonable hopes that the relaunch of this year in the COVID world is being well received by consumers in terms of preference of the brand, the way our market share has actually held significantly better than we hoped. The fact that our distribution levels have picked up again to nearly the pre-COVID numbers now. That compares to brands that are as famous in China as Sprite or Fanta, which probably have the best distribution weighted average and numerical distribution numbers in China.
We have an asset here that might well grow profitably again as soon as China delocks, and probably if there is one country that will, that should be the one. I'll be patient one more year with Mizone personally before we believe that we can't be the right person to grow it, and therefore we'll see. The whole idea of the portfolio rationalization is, to your broader strategic question is, indeed to reinvest in the core. When I say we need to focus, when we dispose of our last bit of the shareholding in Yakult, that's the same. We want to make sure that we are focused as a management team and we focus our resources, both management, assets, and cash on what will make the profitable growth of Danone. To your very valid question on is that all just because of COVID or not?
The answer is no. As many other companies, very frankly, we are seeing in the COVID crisis an opportunity to move on things that would've been maybe not as priorities before, or maybe not creating the same sense of urgency in our own company or outside of the company in our ecosystems. Two simple examples would be the protein program, which Cécile referred to. That was a completely new way of working for us three years ago. We are very clear now that we know how to do things in a way that's new. By the way, the person that's going to work on the organizational part of our adaptation plan is the person that ran protein for us for three years, and that actually was also in charge of the integration of the Early Life Nutrition and Advanced Medical Nutrition businesses into just one single organization.
Absolutely clear that we are also leveraging on some more recent experiences. The other example that I would mention is End-to-End Design to Delivery. I think the most advanced companies around us have also been moving to, one way or the other, linking research and innovation with suppliers, ecosystems, and with manufacturing capabilities, just to ensure that there is no leakage in the innovation pipe in terms of the quality of its execution. We reconnected from a situation where we were amongst the only companies that didn't have a sort of an operation or a manufacturing or call it the way you want, function at Comex, to the End-to-End Design to Delivery thing, which I think puts us now ahead of a number of our competitors. It's a bunch of both catching up and move forwards, that obviously go beyond the question of the COVID itself.
Thank you.
Thank you, Emmanuel. Thank you, David.
Thank you.
Thank you, everyone. Thanks for attending this call this morning. I'm obviously available with the rest of the team to follow up today. This will conclude this call. Have a very good day.
Thank you, everyone. Have a good day and stay safe.