PARIS (Reuters) – French food group Danone is targeting annual sales growth of 3-5% over three years and will step up investment in its brands and divest of non-performing assets as part of a new strategy set out by the new chef Antoine de Saint-Affrique on Tuesday.
Saint-Affrique, which took over the helm of the world’s biggest yogurt in September, must pursue its recovery plan amid rising input costs, coupled with new uncertainties caused by the invasion of Ukraine by the Russia, which forced Danone to suspend its investments in Russia.
Danone’s brands include Activia yogurt, Evian and Badoit water as well as Aptamil infant formula.
The “Renew Danone” plan is “to create the conditions for sustainable and competitive growth, then to deliver consistently in a way that creates value for all,” Saint-Affrique told investors gathered in Evian, near the French Alps.
While “there’s nothing wrong” with Danone’s three businesses – dairy and plant-based products, infant formula and bottled water – the key to driving sales growth was to improve the execution, invest enough in worthy brands and innovation, and divest from underperforming assets in these businesses.
“There will be no sacred cows, there will be no taboos,” Saint-Affrique said.
About 25% of Danone’s sales come from companies that were underperforming. “So we will fix them or sell them,” he added.
Chinese water brand Mizone was one such struggling brand although it returned to growth in 2021. Danone was also looking to turn around its business in Morocco.
Danone announced on Sunday that it was suspending its investments in Russia following the country’s invasion of Ukraine, but would continue to operate its dairy and baby food businesses there. Saint-Affrique said he was working on plans to mitigate the impact of the sanctions there and “all options are on the table”.
The food giant said it will reinvest all of the 700 million euros ($761.04 million) in Local First savings in 2022. It is aiming for productivity above last year’s 5% and a low to medium level of input cost inflation compared to 8% last year. year.
As a result, Danone expects its operating margin to decline to more than 12% of sales in 2022 from 13.7% in 2021, with like-for-like sales growth of between 3% and 5% from 3.4 % over the year. – there is a period.
As of 1409 GMT, Danone shares were up 0.4%, having erased earlier losses.
“The announcement on the portfolio rotation is clearly good news. The guidance for 2022 is unsurprising despite the fact that part of the consensus will have to revise downwards,” Oddo analysts said in a note. The consensus was for a 2022 margin of 13.5%.
For the 2023-2024 period, Danone has set itself a “profitable growth” objective and has indicated that it is aiming for like-for-like sales growth of between 3% and 5% with current operating income growing faster than the turnover. like-for-like business.
Under this plan, Danone will expand selectively in terms of segments, channels and geographies and seek complementary acquisitions and divestitures, with portfolio turnover reaching approximately 10% of net sales and annual investment budget equivalent to 4.5% of net sales. Sales.
Saint-Affrique replaced Emmanuel Faber, who was abruptly ousted as chief executive officer last year following clashes with some board members over strategy and activist fundraising only to have him quit due to the group’s lackluster performance compared to some rivals.
(Reporting by Dominique Vidalon; Editing by Sudip Kar-Gupta, Sherry Jacob-Phillips and Susan Fenton)
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