Danone Plans Biggest Shakeup in Years With Portfolio Review
(Bloomberg) -- Danone Chief Executive Officer Emmanuel Faber plans to trim underperforming businesses throughout the company’s portfolio as shares of the French yogurt maker languish near a six-year low.
The company is studying a sale of the Vega protein powder brand as well as a unit in Argentina, potentially getting rid of assets with revenue of 500 million euros ($585 million). Faber said Monday some divisions could cut 20% to 30% of the products they make. The stock rose 1.4% in Paris until a market-wide trading disruption on Euronext.
Faber said divestments will be “pruning” and ruled out an exit of any of the company’s existing categories, which are dairy and plant-based products, specialized nutrition and bottled water.
“It took us more than 10 years to assemble this portfolio of categories, and there’s a clear cohesiveness,” the CEO said in a phone interview. “We would look at assets that don’t move the needle for Danone because they’re too small or would require to double in size locally, so someone else might be a better owner.”
Danone has struggled for years amid a competitive grocery market in Europe, rising milk prices and upstart competitors such as Chobani in the U.S. The company has lost about a quarter of its market value in 2020.
Two weeks after the 470 million-euros sale of a stake in Japanese beverage maker Yakult Honsha Co., Faber is set to make even more divestments. That may become easier as the company shifts to a system of management focused on geography rather than product groups. Danone announced the measures Monday as it reported a 2.5% drop in third-quarter revenue, on a like-for-like basis, and said that Chief Financial Officer Cecile Cabanis is leaving.
Faber said that small brands, which were in vogue five years ago, have become less important. The company will also review factories, logistics, supplies and fleets in order to make them more efficient, the CEO said.
“Danone is way behind the curve,” said Duncan Fox, an analyst at Bloomberg Intelligence. “It’s been several years of slow growth. The company may need to resort to larger asset sales across its categories for a year of transition in 2021.”
Juergen Esser, currently CFO of Danone’s bottled-water business, will replace Cabanis, who leaves in February after 16 years at the company.
Danone said it’s naming Shane Grant as a regional CEO for North America and Veronique Penchienati-Bosetta as CEO for Europe and the rest of the world. Henri Bruxelles will become chief operating officer.
On Monday, it gave a forecast for a 14% recurring operating margin and 1.8 billion euros of free cash flow this year. The company withdrew guidance for this year in April as the slump in tourism and restaurants weighed on its bottled-water business.
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