New restrictions implemented last year by the Chinese Food and Drug Administration (CFDA), which restricted the number of product lines a baby powder manufacturer could sell in China, has caused significant volatility in the Chinese market, according to Danone.

The French dairy giant said that infant formula sales in China through indirect channels have become highly volatile in the last year since the restrictions were announced with consecutive declines in quarterly sales via indirect channels.

In response to this, Danone has moved towards greater online retail sales and a direct distribution system in China for its infant formula brands, which it says is delivering double-digit sales growth and increased market share.

Danone made the announcement as it reported half-year results for 2017, with like-for-like sales flat at €12.1bn. Sales from its specialised nutrition division, which includes baby powder sales, increased by 5.5% for the six-month period to €3.5bn. The company said the Chinese market was resuming its growth trend.

However, in its core dairy and plant-based divisions, Danone saw half-year sales decline by 2.3% to €6.3bn on a like-for-like basis. Despite higher retail prices, sales volumes in Danone’s European and South American markets were back almost 5%. In the US, Danone said sales were affected by the “challenging environment” in the US food industry.

Danone saw half-year operating profits increase almost 8% on a like-for-like basis to €1.7bn, as profit margins widened by over 90 basis points to 14.2%.