Fixing the Recipe at Danone Will Take Time
March 15 2021 - 11:04AM
Dow Jones News
By Carol Ryan
Activist investors have scored a surprisingly quick win at
Danone. Bringing the Paris-listed food company back to full health
will be a much lengthier process.
On Monday, the maker of Dannon yogurt and Evian bottled water
said that Emmanuel Faber, who has led the business since late 2014,
will stand down. Two weeks ago, the board proposed a compromise to
Danone's unhappy shareholders by agreeing to split the roles of
chairman and chief executive officer held by Mr. Faber, while
allowing him to stay on as chair.
This didn't wash with investors, so board member Gilles Schnepp
will take over as chair instead. An external head hunter is already
looking for a new CEO. The news sent Danone's shares up 5% in early
morning trading.
It is a victory for Wisconsin-based fund Artisan Partners, which
only last month disclosed a 3% stake and demanded a full change of
leadership. U.K. activist fund Bluebell Capital Partners also has
been agitating.
Activist investors generally avoid French companies, perceiving
their odds of success to be lower than elsewhere: The U.K. had
three times as many activist targets as France last year, according
to Lazard. Pursuing Danone worked because mainstream shareholders
were already impatient with Mr. Faber. On his watch, the company
overpaid for dairy-alternative business WhiteWave in 2016, missed
sales and profit targets and delivered subpar annual shareholder
returns of 4% -- around half the level at Nestlé and Unilever.
Overhauling the business could be expensive. Danone already owns
healthy products, so may not need big deals to align its portfolio
with contemporary tastes. However, it has underinvested in its
brands for years. While competitors have slightly increased the
percentage of sales they plow back into marketing over the past
decade, Danone has cut back by 3.2 percentage points, according to
Bernstein. Resetting Danone's already low 14% operating margin may
be inevitable if the company is to reverse recent market-share
losses in important categories like plant-based drinks and infant
formula.
One question concerns Mr. Faber's focus on high environmental,
social and governance standards. A new boss will have to weigh any
new profit goals against Danone's ambitious ESG targets, a balance
that has proven tricky in the past.
Danone has taken its most significant step in years toward a new
approach, but it could take years to pay off.
Write to Carol Ryan at carol.ryan@wsj.com
(END) Dow Jones Newswires
March 15, 2021 10:49 ET (14:49 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
Danone (EU:BN)
Historical Stock Chart
From Aug 2024 to Sep 2024
Danone (EU:BN)
Historical Stock Chart
From Sep 2023 to Sep 2024