Danone factory

Danone said it recognised it had historically underperformed compared to rivals

Danone has set out a new multi-year turnaround plan as CEO Antoine de Saint-Affrique unveiled his vision for the French consumer products group for the first time since taking charge.

Following a six-month review since taking over the reins last year, de Saint-Affrique outlined hopes to fix years of underperformance by the Alpro and Evian owner at a capital markets day.

Margins will be slashed significantly this year to free up resources to invest behind innovation and advertising campaigns.

There will also be some portfolio rotation with underperforming assets sold-off and potential acquisitions into growth areas.

Danone said it recognised it had historically underperformed compared to rivals, which it attributed to “a lack of focus on its core portfolio, late and sub-scale innovation efforts, inconsistent execution and low investments”.

Previous boss Emmanuel Faber was ousted after a boardroom tussle last year for his part in the group’s failure.

Danone added the plan would enable it to reconnect with a sustainable, profitable growth model and there would also be a greater alignment between purpose and performance.

De Saint-Affrique’s plan is based around four strategic pillars: restoration of the group’s competitiveness in core categories and geographies; selective expansion of its presence, in terms of segments, channels and geographies; active seeding of future growth avenues; and active portfolio rotation.

“The company will restore passion for execution, a stronger discipline on capital allocation, and a greater sense of urgency in seizing opportunities and tackling issues,” Danone said.

Based on this, Danone announced a new set of targets for the 2022-2024 period, including price-led like-for-like sales growth of between +3 and +5% and a recurring operating margin above 12% this year.

Last month, Danone posted its strongest quarter growth for seven years on resurgent bottled water sales and rising prices, with net sales in the final quarter of 2021 jumping 6.7% to €6.2bn (£5.2bn) on a like-for-like basis. The group’s plant-based, probiotics and protein brands, such as Alpro, Actimel and Yopro, also all continued to deliver “exceptional” growth in Europe last year.

Bernstein analyst Bruno Monteyne called the plan “a modest but sensible start”

“The growth guidance is unexciting but achievable given the challenges that Danone faces, particularly in the short term,” he added.

Martin Deboo of Jefferies was more downbeat, calling the plan “ill-defined” in the medium term. “Proof of the pudding here is going to be in the eating,” he said.

De Saint-Affrique said Danone had been leading the way in many fields, but also underperforming for a while with a lot that could be improved.

We will face into our issues with greater speed and without compromise but will also make sure we better leverage our real strengths,” he added.

“We first must win where we are. We also have the opportunity to expand our brands in places they should be. This, combined with active portfolio management, will bring us back in the race. In parallel, we will start seeding for the future with the ambition to outperform our markets then.”

Chairman Gilles Schnepp said the plan was an important milestone for Danone. “We have a new CEO, a new strategy, and a clear objective: accelerate organic growth to restore sustainable value creation.”