The French food multinational Danone, whose turnover dropped 9.3 percent in the third quarter of the year, has announced a review of its strategy in Argentina, within the framework of a sweeping reorganisation and restructuring plan for its brands.
In the third quarter, Danone had a turnover of 5.8 billion euros (about US$6.8 billion), a decrease of 9.3 percent compared to the same quarter of 2019, said company CEO Cecile Cabanis.
"In order to align with the profitable growth agenda of between three percent and five percent," the group announced the launch of a "complete strategic review, beginning with an immediate review of its strategic options in Argentina and for the Vega brand [in the United States], whose combined sales represent around 500 million euros" (US$585 million).
"Other assets may eventually be reviewed later," the company added.
Cabanis, who has been running the company since 2015 and will leave her post in February 2021, will be replaced by Jürgen Esser.
Danone Chief Executive Officer Emmanuel Faber confirmed the company is studying a sale of the Vega protein powder brand as well as a unit in Argentina. He said Monday some divisions could cut 20 percent to 30 percent of the products they make. The company's stock rose 1.4 percent 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, specialised 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 United States. 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 percent drop in third-quarter revenue, on a like-for-like basis, and said 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.”
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 percent 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.