Ladies and gentlemen, thank you all for standing by and welcome to this Danen Q3 twenty twenty sales. At this time, all participants will be on a listen only mode. There will be a presentation followed by a question and answer session at which time I must advise you all that this conference is being recorded today, Monday, 19th October 2020. Without any further delay, I would like to hand the conference over to your first speaker for today, Good
morning, everyone. Nadia Benzala, speaking, Head of Investor Relations at Danone. Welcome to Danone's conference call for its third quarter sales. Originally scheduled tomorrow, today, finally pulled forward to this morning. So thanks for your flexibility and for being with us today.
I'm here with Emmanuel Faber and Cecile Cabanese, who will first go through the presentation before taking your questions in a second step and we'll ensure we'll leave enough time for that. I draw as usual your attention to this disclaimer, on Page 2. And with that, let me hand it over to Emmanuel.
Thank you, Nadia. Welcome to you all. I hope you're all in in good shape and in good health, in this complex world. Thank you again for your flexibility. Indeed, we had some unpleasant rumors on on Friday and felt that we would limit a new volatility by just advancing this call to today.
And 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 Cecile having made a decision to leave Danone. Cecile 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. So I'm seeing a great teammate and partner go, and I felt that the best would be for us to address this as we enter into this call. So maybe Cecile a few words.
You will see that, it is with great emotion that, I, I'm giving the news today that I'm leaving 16 very exciting years at Tennon, 16 years in which I have participated in all great transformation and adventures of the company, 16 years of action of deep commitment end convictions alongside our 1st tranche and then Emmanuel. The last 4 years, has been reached I've been talking with you many times, as CFO, working with and enjoying the trust that Emmanuel gave me, I had chance to, 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 plan 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 1,000,000,000 in efficiency. And of course, the formalization of the integrated goals for 2030, that really help from, 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 a teamwork with incredible teams, as I said, And, as you've seen, for those who have read the press release already, Danone is taking a new step on new foundation and is entering a new 5 year cycle. So 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 starting a new cycle of myself? There was a lot syncing discussions with Emmanuel and members of the board, who might thank DPree for their trust as well. And 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. So 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 and A IT and cycles and procurement teams fully equipped to drive the changes that are needed today. The barriers 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 NuComx organization has been designed precisely to, to support that. And I will be helping my team.
I welcome Jorgen, the new CFO, and I will be helping him as well. I Emmanuel with my full commitment. I will stay very close to, to Danone, very loyal to the company and the teams And, of course, I will keep many funds. So maybe I was a bit wrong, but a very important moment for me. Thank you.
Thank you Cecile, and thank you for taking the time. 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 to, for proper good buys. Thanks in any case for walking with us through this transition, and welcome to Jorgen.
Which, Cecile 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 the today's agenda, I think the title page is summarizing in a few words, but important words what the messages 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, but that's clearly what we have in mind here. With 4 key words for now, which is deliver, reshape, review, and adapt.
So if you go maybe directly to page 3 of the presentation, what you will hear from us today in a nutshell is the confirmation of sequential improvement of our sales growth in the course of and 1,800,000,000 free cash flow for the full year 2020. And 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% to 5%, profitable growth, midterm guidance. Page 4 gives you a little bit of where we are today. This, a row, blue arrow is basically the way we have pictured for ourselves this pandemic crisis with, as you know, 3 phases, the first half of twenty twenty, 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 re closing, where it's really a phase for us to, to learn what is here to stick and what is here simply as a phase of lockdowns. And 21 onwards will be the new normal for which we are now actively preparing ourselves. So when it comes to the sequential improvement in Q3 further acceleration of EDP and sustained delivery of efficiencies, as Cecile mentioned. The focus will be chair 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 adaptations plans to, as I just said, reconnect ASAP with our profitable growth agenda. On Page 5, these are a few words and pictures just to share what we have learned from the last 9 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 1, 2, 3, 4, 5, 10 years from now. Governments are back into the game in many, many ways. Multilateralism, as you know, is at stake. And therefore, our vision, that local, where 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, 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, these, 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 4th aspect is that beyond the ups and downs, there will be structural channel shift and ecommerce is definitely one, of course. And finally, this is a moment where there is a power of trusted brands with a strong heritage local relevance, and we need to take that into account in the way we continue to shape and support our portfolio of brands. So with that on Page 6, basically, 3 chapters to reconnect as fast as possible, with our 3.5 percent profitable growth agenda, 3 big decisions.
I'll actually start with the bottom 1, portfolio review. We are starting a strategic review to accelerate our return to profitable growth from a portfolio standpoint So 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.
And in some cases, it could go up 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 5 years ago in the food revolution. Very clearly, they will continue to have a role, but that cannot be the same role. And we also see all the benefits both from a growth and efficiency and cost savings standpoint of running the larger ones as well.
So brands are under review. And 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 unorganic 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% to 5% profitable growth agenda in these new wells. And 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 to very simple, but we believe, radically important principle. 1, countries will be empowered for speed and relevance of action, business action locally. Second, that goes with the 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 3rd upstairs is what actually starts this morning, reshaping of the organization, with a fitter and more agile to best strategy and execution executive committee team. And I suggest we actually shift directly to Page 7 to look at what it means. So, from the team we had in January and effective in November, this year, you can see on the right side of the box on the box on the right side. First of all, we are appointing 2 macro regional CEOs covering both Danone North America and Danone International.
It will help us reap benefits in particular for denim 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 Nutrisia business, which will go now directly under Shane Grant's responsibility. And, for Danone International, Veronique, Penn Kinetti, who now heads specialized nutrition and has built the merger of our early life nutrition with advanced medical nutrition businesses last year. Veronique will be the MAC, 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 2 global functions one that you know already with Negya, who is our Chief Growth Officer, covering, knowledge about, strategy and insights on consumers, brand management, digital, and a number of other top line related, activities.
And we create, next to this function, a Chief Operating Officer role held by Henri Brussel, in charge of an end to end function that is required to perfect the way we design and we deliver our brands, our products. So 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. So 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, sizing seizing a lot of opportunities across categories when we will, organize the manufacturing, the logistics footprint, and the delivery footprint of our businesses in the countries locally. Finally, as I mentioned, as we mentioned before, Cecile will transition after the full year of this year.
And Juergen, will gradually take over from Cecile, with a full completion in his function as the chief finance Officer, tech and data as of February 21. No change for Bertrand 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 8 is, first of all, absolute focus on delivery. The Q4 sales will confirm improvement in the 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 cost control measures in place and therefore, we'll secure the expected level of margins at 14% and free cash flow at 1.8 1,000,000,000,000, 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. And the 3rd 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, assist you to take us through the review of our financials for the 3rd
Thanks, Emmanuel. So 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, the sequential improvement versus Q2, On a like for like basis, sales were down minus 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 a plus 3% growth rate. And as expected, a material improvement on the Q2 decline from Waters.
And you can see that the performance has improved 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. And we believe it's sure, dependent on COVID, as I said, and it shows that the company top line are very extreme trend, sorry, depending on channel. If you look at headroom 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 drugs that are consumed at home in Emerging Markets, as you know, Indonesia and Mexico.
E Commerce is more and more sticking into people habits and growth accelerated even faster than during the lockdown period. It's up more than 40% in If we look at the headwinds, we find, again, out of room channels, both for water, down 25% and accounting for 45 percent of the category sales in Q3 and for EDP notably Noran down 30% and accounting, for 10% of Norham 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 a channel, extreme trend, it important, Page 12, to note that our brands continue to compete effectively in their core market.
We continue to gain share in approximately 50 percent of our portfolio through most of our large brands, on average, the one you have in the chart, which gained around 100 dips market share since the beginning of the year. If we, take a look at EDP brand especially that maintained their strong momentum with continued share gains for International Delight and Horizon organic in the U. S, Actimal and Activia in the UK or the net in France. Water brands have also gained shares in Q3, despite continued channel disruption, this is the case for Evian and Volviek in Europe, for acquiring Indonesia and Bonafont in Mexico. Moving to the sales bridge.
So net sales amounted to 1,000,000,000 for Q3. Down 9.3% versus last year on a reported basis. And this is primarily impacted by change in currencies, which had an effect of 7.1 percent negative in 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 U. S.
Dollar against the euro. Next in the bridge is Argentina, which is not accounted for in our like like for like basis and adding an extra 20 bps. On a like for like basis, revenues declined by 2.5% in the quarter. Volumes materially improved minus 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 minus 2.1 percent. 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 it category, starting with essential dairy and plant based. So as I said, we are pleased to report that this quarter, again, our largest business, has been the fastest growing one, putting a significant acceleration in sales plus 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 font traditional yogurt. Organic milk and coffee creamers are among the best performing segment. Plant based sales were up well into high teens level, both in North America and in Europe, where sales continue to benefit from higher penetration higher frequency and also expansion in 2 new categories and ingredient. Year to date, plant based sales reached 1,000,000,000.
If we look at the performance by region, Europe and North America continued mid single digit momentum seen since the beginning of the year. In Europe, it was sustained, as I commented earlier, by further market share gains, thanks to ActiML and Danone brands in particular. Alpro posted, again, high teens growth within its 4 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 you at your board 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 trimmers category.
But 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 set of revamping our traditional portfolio, especially under the Prostag Vashino brand. We continue to observe, however, pressure in Mexico and Africa. Elsewhere, we saw first signs of improvement, there H1 and notably in Brazil. If we look at Q4, we believe that the category can maintain momentum, and we don't expect any major change in dynamic.
Moving page 15 on the specialized nutrition, we had in Q3 strong swings in demand, which have 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, which is the big part of the volatility of this quarter. We experienced a tip double digit decline in the quarter. Again, so high base, last year when China was growing at more than 20%. This resulted from headwinds related to channel logistically issued caused by COVID-nineteen with generated a cross border channel contraction and a pantry disputing dynamic 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, this channels include the so called indirect channels and Hong Kong platform, which represent combined percent of our infant nutrition business in China.
By contrast, the sellout in domestic channels such as mom and baby store direct e commerce and direct international, showed good resilience in the quarter with Atamil keeping a solid sellout momentum end market share gains, driven still by the Atamil Platinum range. Atamil remains the number one brand in direct in MS in China. Globally speaking, all channels suffered from further destocking after the H1 Pan field loading, not only at daygoods level, but also at mom and baby stores, after a restocking phase that we observe in a Q2 following stock 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 UK, Poland, Netherlands And E Commerce continues to be a very strong driver of growth, posting 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 Atam in Umbrella and local brands. Looking at Q4, we expect, specialized nutrition growth to improve, but remain negative given continued headwind expected from cross border channel on early life nutrition China. Moving to next page, Page 16 on, on water, the cash agrobi's remained similarly under pressure in Q3. As expected, sales are down minus 13.5%. And the decline was less than half to Q2 level, so 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 reduced our sales declining by 25% in, out of home, while at home sales continue to hold up well. And this explain also the meaningful improvement versus Q2. Looking at the regional split, recovery was not balanced, while in the Q2, all geographies were down between 20% 40% in Q3, Europe and China. So relaxation in traffic has while in Latin American Indonesia, social distancing was still quite severe.
So, it led to Europe, where the trend improved versus Q2 with a minus 10% like for like decline category improved on the back of the reserve terms 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 UK, France, and Germany, where we have fully deployed our ArcBest range for small format. In China, both the beverage category growth and Mizone share improved versus Q2, allowing a partial recovery in sales, also still negative low double digit around minus 10%. However, our market share is not yet back to the normal level and the category still lacks traffic Industries. We, however, remain optimistic on the new proposition, which is receiving very good feedback from umab and improving distribution metrics. As anticipated, Latin America and Indonesia sales declined steep double digit with no significant improvement compared to last quarter, despite a resilience performance, as I said earlier, on the junk business that protected the volume share.
The last quarter of the year looked very uncertain for the water business. The volatility around restrictions measures are notably in Europe is back to increasing again. I think stands, 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-nineteen.
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 billion plan that we had 3 year and the incremental EUR 300,000,000 that we were expecting this year. On Portfolio Management, we've made another sizable step this quarter, unlocking 1,000,000 in invested capital, generating 1000000 plus capital gains, who 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, has demonstrated by Doressant's health major, taken by many European countries that have affected once again out of home challenge, and we don't foresee at this stage material improvement in term 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. And 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. And 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 1,800,000,000 for the full year. And I will leave Emmanuel to conclude
Thank you, Cecile. As you've heard from, from Cecile, we continue to navigate, this this COVID world, improving gradually, our execution. But as I said, to start with, we know we need to also change, the way we play the game overall. And that's really where, again, this 12 weeks agenda is so important for us that we continue to deliver on the hard work that teams are doing every day, and we are improving, and we are gaining market share, and we control the margin. And but we are very and I'm certainly very pleased that we have 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% to 5% profitable growth.
And the finalization of the adaptation plans is coming soon. We'll keep you updated with that. And 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 these delivery and this transformation and plan for me is, 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.
Thank you, Manuel. Thank you, Cecile, for the discussion, perhaps, before the Q and A, please be so kind as to limit your to a number of 2, and please write them all at a time to know as many as possible participants. I think first question comes from Alan Derskin at Credit Suisse. Hello? Yes, we can.
Good morning, Alan.
Good morning, everyone. Sorry. Yes, two questions from me. The first one is, is on the decision to review, Argentina. I mean, over the years we've often heard from companies that, congratulating themselves on sort of holding the course, and coming out of these emerging market crises in a stronger position, Is
it not
a danger that you're exiting Argentina at the bottom? And my second question is regards to the management change. I recognize that, by creating 1 sort of macro regional head for everything outside of North America, reduces the number of touch points and should, accelerate decision making. But at the same time, you've 3 very discrete categories in specialized nutrition, water and, and EDP. And by removing sort of categories 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, but it's leaving very neat and awful lot to do from the outside. Thanks a lot.
Thank you, Alan. So maybe I'll take both. Argentina, I mean, we've been in Argentina for, 2 decades and a half. So we've been through the roller coaster game indeed. And 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. So I don't think that if we were going to, exit Argentina today, we would exit it at the bottom We're accessing it at a time where we have incredibly strong brands with La Cera and Nissima, with Vila Vincenzo, Vila del sur, in water, we execute that the Argentinian teams is executing the Argentinian way and they have not waited for this call to radically restructure, reorganize, etcetera. The point is really that in the macros of Argentina, do we see enough traction in the coming 3 years, 2 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. So 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 VIGA, which is a great brand that we acquired from, the WhiteWave basket of brands, that went until a difficult moment of transitioning its range to organic. We've been reworking this for the last 18 months, but 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, that it's actually worth being us the best owner of that great asset. And so more to come and conclusions, will be shared with you guys. On the management change, I think I'm aligned with the positives 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. The the and 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 or metrics purely geography or matrix 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. And 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've been in a 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 Plostak Vashina and overall EDP business there. And so, and the same goes like, you know, in France, we've just made an investment, on organic milk for optimal that will produce the organic app terminal business is going to be a function of a corporation in our EDP factories in the north of France and milk collection and the Sandoz factory when is going to happen the same on filtration in standard that will allow us to extract, essential and very pricey infant milk formula ingredients from the milk that we collect locally, action with our direct dairy plant there. So I won't stop on that, but it's absolutely essential for us that we read this growth and efficiency cost saving opportunities across the value chain of our categories. And 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. Next question is from Celine Panutti at JP Morgan. Good morning, Celine.
Good morning. Thank you. Yes, I can hear you. My two questions. So 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? And also just to come back on what said on the international, where 80% of the sales will be under one person.
Why not having some emerging market so emerging market regions in Europe, we took distinct, VPs, overlooking that. And then 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? And can you give us your growth rate in Mainland China please in Q3?
Thank you, Celine. Well, the board did not review this option because the board did not discuss option of, splitting chairman and CEO. The only moment in the history of Danone when it happened was after Folk, handed the CEO role to me after 20 years. And so we would only consider this, in transition periods of 1 generation to another generation of, Chairman and CEO. When it comes to the, your questions on, international, I think it's a very valid question.
We have to, 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. And in particular, in this COVID crisis, there is lots of learnings for many, 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, the many aspects, the direct to 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. And 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. And, 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. And so beyond Veronique herself, of course, there is a whole bench of executives below in the organizations, including ones that are in Europe and have experienced about emerging countries and vice versa.
And 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, essence, I may add, I may ask, Cecile, to give you a bit more clarity, but 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 the answer my answer is yes. And in particular, for us overall, we are going to enter into a comparison basis for China in the Q4. That is obviously very high in, was very high in 2019.
And maybe Cecile can give you a bit more granular.
Maybe on your proceeding on Mainland China, some further clarifications. So directional represent around 60% of our sales, in China and includes, as you know, a modern trade, mom and baby stores and e commerce. We need to distinct 2 things. 1st, from a sell out perspective this channel has performed relatively well in Q3 and, growing at the bottom end of the category, a growth range of 3% to 5%. So this is what you can look at having the brands at Amel and new Celon improved their market share, as I said, mainly supported by the Atamil 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 challenge, there was a plus 50% growth, in Q2. So this is what, explained that, overall, with the sellout that is positive, the overall growth is negative.
Thank you, Cecile. Thank you, Christine. Next question is from Martin Deboo at Jefferies. Good morning, Martin. Yes.
Good morning.
Thank you. Just one question, Emmanuel, in the context of restating the 3% to 5% medium term, top line guidance. I noticed you're not, reiterating the mid single digit to high single digit EPS guidance that you mentioned at Q4 in February, that that begs the question of what medium term margin guidance is going to be. What can you say debt in FY 'twenty one given some of the commentary you're giving on headwinds in China real end, which is the most profitable part of the business?
Thank you, Martin. I think that, while we are 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, so it is there. So 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, and at this stage, that's 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. And we are very clear on what I see and what we do. The margin, this year is not going in the right direction, and there's no way we can struct our, our agenda without a significant margin improvement in the years to come. So that's what we're working on. We also know obviously that, SM China is a very profitable business.
It has had a ups and downs. We had lots of ups. There is now a blip in the context of the frontier, the border closures and to the channel shift. We've been managing that in the past, but what I would you know, I would double down on your point, that margin is critical. And this is also a reason why we believe this adaptation plan needs to come 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.
Thank you.
Thank you, Martin. Next question is from Warren Ackerman at Barclays. Good morning, Warren.
Good morning, guys. 2 for me. I'm going to ask 2 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 4 buckets really of Europe, U. S. Russia and LatAm Africa, particularly interested in comments about Russia improving. That sounds good. And then maybe talk to us about specifically the number of full plant based is, all in, that would be great.
And then secondly, just back on the margin question, again, can you confirm that the 14% margin is the trough? Margin. I mean, 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 something in the new year? Because I guess the question everybody's asking is that margins unbalanced. You got the margin in the first half at water, the 6% and you mid-twenty margins in spec nutrition. So 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-20s specialized nutrition margin is sustainable. That would be great.
Thank you.
Thank you. Maybe I'll start. I mean, yes, you're right, Warren. We're certainly pleased to see sequential improvement of our EDP business. You all remember that, we always said that to nurture our mid term guidance, even before it became what it is today, our we had our EDP business growing anywhere between 3% 4%.
It is in the 3% to 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 Norham, in particular, this is driven by plant based, which is growing double digit, as Cecile said, The premium dairy business is also double digit. The the partial reopening of away from home has supported our coffee creamer business And yogurt is moderately, growing for us in retail. We have not followed some of the aggressive price and promotion activities of our competitors in in both the Greek and the regular segments.
We've focused on immunity, gut health, functional, that has been, doing very well for us and as categories. So that's for Norham. When it comes to Europe, we have mid single digit again, and Cecile highlighted a number of our brands and countries that are working well. You mentioned, CIS, yes, we CCIS 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. So that's what it is. When it comes to your margin question, The yes, there are new cost saving plans. I mean, the fact is obviously that the I mean, what my answer to Martin stays, we are pretty clear that, there is both on the 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 And when we make both maths, 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, Manuel. Thank you, Warren. I think we have time for the last question, which is gonna come from Debides at Societe Generale. Good morning, David.
Good morning, all. Thank you. So two questions for me. The first one on the portfolio management, the second one, a broader strategic question. So 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.
And then when you if you do dispose of those and if you do dispose of those assets, is that something you expect to create value from? Can other people do better with those brands and you can and why is that possible versus Danon's operations? And then I guess finally on the value creation, are you intending to reinvest capital in core areas of Danone? What might that reinvestment look like? What are the core areas for that focus of reinvestment?
And the second question just in terms of a broad strategic question, just to kind of maybe summarize the whole thing. Are these changes driven just because of COVID? Or are there other things that then on that you feel aren't working properly that need to be addressed? So if the COVID hadn't happened, would all 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 from the first question. Because in many ways, that's what we would like to discuss with you guys when we're ready. But to put an example, I think Maison, 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 a preference of the brand, the way our market share has actually held significantly better than we hoped.
And the fact that our distribution levels have picked up again to nearly the pre COVID, numbers now. And And that compares to brands that are as famous in China as pride or fans are, which probably have the best distribution weighted average and numerical distribution numbers in China. So we have an asset here that might well grow profitably again, as soon as China deluxe and probably if there is one country that we own, that should be the 1. So I'll be patient one more year with Maison personally before, we believe that we can't be the right person to grow it, and therefore, we see. The, 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, of, of Danone. To your very valid question on, is that all just because of COVID or not? The answer is no. I mean, as many other companies, very frankly, we are seeing in the COVID crisis an opportunity to move on things that would have 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.
And two simple examples would be, the protein program which Cecile referred to. That was a completely new way of working for us 3 years ago. And, we've been we are very clear now that we know to know 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 run pottery for us for 3 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.
So, 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. And, and we reconnected from a situation where we were amongst the only companies that didn't have a sort of an operation or manufacturing or colleague the way you want, function at Comex to the end to end design to do everything, which I think puts us now ahead of a number of our competitors. So it's a bunch of both, catching up and move forward that obviously go beyond the question of the committee itself. 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, and this will conclude this call. Have a very good
Thank you, everyone. Have a good day and stay safe.