Danone unveils new strategic plan
The plan is intended to enable Danone to reconnect with a sustainable profitable growth model, with delivery facilitated by a greater alignment between purpose and performance.
Over the past six months, de Saint-Affrique has completed a review of Danone with the objective to restore growth and drive value creation. He said the review showed the company benefits from a strong portfolio of brands – both global and local, leading positions and a balanced geographical exposure to developed and emerging markets. The review also confirmed the value of Danone’s commitment to performance and social and environmental responsibility, and its pioneering roots to provide people access to health through food.
However, the review also noted Danone’s historic under-performance compared to its markets, which can be attributed to a lack of focus on its core portfolio, late and sub-scale innovation efforts, inconsistent execution and low investments.
In this context, and under the oversight of Danone’s board of directors, de Saint-Affrique and the executive committee have built a plan that aims to restore Danone’s performance, competitiveness and value creation for the long-term.
The plan is built on four strategic pillars: Restoration of Danone’s competitiveness in core categories and geographies; Selective expansion of Danone’s presence, in terms of segments, channels and geographies; active seeding of future growth avenues; and active portfolio rotation.
Danone said delivery of the plan will be facilitated by a greater alignment between purpose and performance, and putting the consumer and customer at the heart of everything Danone does. 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.
Based on this, Danone announces a new set of targets for the 2022-2024 period.
It said 2022 will be a foundational year with price-led like-for-like sales growth between 3 and 5% and a recurring operating margin above 12%, assuming the reinvestment of 100% of Local First savings, a productivity higher than last year and a low to mid-teens level of input cost inflation (based on current macro-economic assumptions).
For 2023-2024, the ambition of profitable growth means like-for-like sales growth between 3 and 5% with recurring operating income growing faster than like-for-like net sales.
Another target is sustainable value creation and shareholder returns, with sequential ROIC improvement over the period supported by capital allocation discipline, portfolio rotation reaching around 10% of net sales, an annual capital expenditure envelope equivalent to a maximum of 4.5% of net sales, and further improvement in working capital.
The final foes is disciplined financial policy, with a healthy balance sheet with targeted net debt to EBITDA ratio below 3x, and stable or growing yearly dividend.
Gilles Schnepp, chairman of Danone, said, “Today is 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. The “Renew Danone” plan has the unanimous support of the board and provides the company with a clear compass.
“Complementing this strategy is the Board renewal program we initiated in July last year. By April 2023, we will have completed the Board renewal with new senior leaders from industry and business to ensure that it comprises the right blend of capabilities, perspectives and experiences to support Danone’s long-term success. I want to thank the current board members: they showed a great sense of responsibility and collective interest, and created the conditions for Danone to solidly enter into this new phase.
“The strategy set out today by Antoine is yet another step in Danone’s evolution. Building on Danone’s strong roots, the plan puts in place the foundations to refocus our business on growth, while creating sustainable returns for our shareholders, and all our stakeholders.”
CEO de Saint-Affrique said, “Renew Danone is all about creating the conditions for sustainable and competitive growth, and then delivering consistently in a way that creates sustainable value for all.
“Danone is a one-of-a-kind company, with a culture anchored in a vision combining entrepreneurship and responsibility. It is a company with iconic local and global brands, playing in growing and on-trend categories. Danone has been leading the way in many fields: branding, innovation, people’s development and sustainability. But we have also been under-performing our markets for a while and have a lot we can improve on.
“In the short term, we have to take better care of our core, with a renewed focus on great execution and strong innovations. We will face into our issues with greater speed and without compromise but will also make sure we better leverage our real strengths.
“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.
“None of this can be achieved without the passion of the Danoners. Building from our value, we want to revive a culture where performance and sustainability go hand in hand, and where you see the best of being local and global coming together. We want Danone to be known for being the home of great talents and great brands, and a synonym for great innovation and great execution.
“We are embarking on a renewal journey with a worthy destination: bringing Danone back to where it belongs.”
