Danone is overhauling its management and structure and is planning to sell underperforming businesses as it seeks to recover from the shock of the coronavirus pandemic. 

Chief financial officer Cécile Cabanis, a well-respected executive who has been at the company for 16 years, announced she would leave by February.

The moves were a sign of how much coronavirus has scrambled Danone’s business by slowing sales of its yoghurts and bottled water in restaurants, cafeterias, and convenience stores, while boosting online and grocery store sales. Consumers have also begun trading down to cheaper brands amid a global recession, while border closures and travel restrictions put pressure on supply chains.

The company behind Evian bottled water and the Activia and Actimel yoghurt brands also reinstated its 2020 forecasts for a 14 per cent recurring operating margin and €1.8bn of free cash flow, and said it hoped to “rapidly reconnect” with its pre-pandemic goal of midterm annual like-for-like sales growth of 3 to 5 per cent.

“Business remains difficult to predict and the macroeconomic environment will continue to be volatile,” said Ms Cabanis on a call with reporters. “We are nine months into the Covid world and the changes it has brought so we are accelerating Danone’s adaptation plan.”

The company led by chief executive and chairman Emmanuel Faber has seen its share price fall by 28 per cent this year, far underperforming larger consumer goods rivals. Nestle’s shares have risen 2 per cent this year, Pepsi Co’s 3.5 per cent, and Unilever’s almost 11 per cent. 

A wide valuation gap has opened up between Danone and Nestlé in the past three years with the French company now trading at an almost 40 per cent discount on a price to earnings basis. 

Investors have been sceptical of Mr Faber’s focus on environmental and social goals, and frustrated by Danone’s inability to deliver on its financial targets. 

“The irony is that a company with health and wellness at its core is unable to grow, just when those qualities should be at a premium,” wrote Martin Deboo, analyst at Jefferies, in a note published before third-quarter sales. “Our central conclusion is that Danone’s problem with the market is an issue of trust and confidence, as much as one of delivery per se.”

Mr Deboo welcomed Monday’s announcements, saying they were “steps in the right direction then, along a road to recovery that we expect to be hard”.

In the third quarter, sales declined 2.5 per cent on a comparable basis to reach €5.8bn, which fell short of analysts’ forecasts for a 2.2 per cent decline on sales of €5.9bn, according to consensus compiled by the company.

To improve performance amid the downturn triggered by Covid-19, Danone said it would reorganise itself along geographic lines. It named a new chief executive in charge of North America, Shane Grant, and another for the international business, Véronique Penchienati-Bosetta.

Danone also opened the door to further asset disposals, promising to “conduct a full strategic review of the portfolio of brands, SKUs [products] and assets”. It pointed to its Argentina business and the North American plant-based brand Vega, which together have sales of about €500m, as immediate candidates for divestment. 

The company has already begun to clean up its portfolio, having sold its 6.6 per cent stake in Japanese dairy company Yakult earlier this month for €470m.


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