French food group Danone has pledged to step up investments behind its brands and actively rotate its asset portfolio, as it seeks to accelerate revenue growth in a fresh strategy plan led by new chief Antoine de Saint-Affrique.
Saint-Affrique, who took over as the chief executive officer of the world’s largest yoghurt-maker in September, said in a statement ahead of an investor meeting that the ‘Renew Danone’ plan was “all about creating the conditions for sustainable and competitive growth, and then delivering consistently in a way that creates value for all.”
The consumer goods giant, which owns Evian and Badoit water and Activia yoghurt, noted that it expects its operating profit margin to fall more than 12% in 2022, from 13.7% in 2021, with like-for-like sales growth in a range of 3% to 5% against 3.4% in the year-ago period.
Profitable Growth Goal
For the 2023-4 period, Danone set a goal for profitable growth and noted that it targeted like-for-like sales growth between 3% and 5%, with a recurring operating income growing faster than like-for-like net sales.
Under the plan, Danone will seek to improve competitiveness in core categories and geographies, selectively expand in terms of segments, channels and geographies, and engage in bolt-on acquisitions and divestitures, with a portfolio rotation reaching around 10% of net sales and an annual capital expenditures envelope equivalent to up to 4.5% of net sales.
Saint-Affrique’s main challenge is to boost sales across the group’s three businesses: dairy and plant-based products, infant formula, and bottled water.
Mounting Input Costs
Danone also faces mounting input costs, coupled with further uncertainties caused by Russia’s invasion of Ukraine, which has forced the company to suspend investments in Russia.
Saint-Affrique had replaced Emmanuel Faber, who was abruptly ousted as chairman and CEO last year, following clashes with some board members over strategy and calls from activist funds for him to resign over the group’s lacklustre returns, compared with some rivals.
Activist investors had called for more investments behind innovation, and for Danone to sell its less profitable brands.
Danone shares have lost 12% so far this year, slightly outperforming their European sector .SX3P, which has lost 13%.
News by Reuters, edited by Donna Ahern, Checkout. For more A-brand stories, click here. Click subscribe to sign up for the Checkout print edition.
