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Danone vows ‘no sacred cows’ as dairy giant prunes portfolio to boost growth

Admin by Admin
March 10, 2022
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Dive Brief:

  • Danone said there are “no sacred cows” and that the dairy giant will “keep pruning” its portfolio as it aims to boost growth and distance itself from recent underperformance, during an investor day presentation on Tuesday.
  • The France-based company said it would improve performance in troubled offerings such as Horizon Organic and traditional dairy, invest more in winning products such as yogurt brand Oikos and create value by selling existing brands or buying new ones. About 25% of Danone’s business comes from underperforming brands, the company estimated.
  • Under its “Renew Danone” platform, the company aims to restore its “competitiveness” in core categories and geographies and expand its presence in segments, channels and geographies. Danone is targeting a portfolio rotation of about 10% of net sales.

Dive Insight:

During Danone’s first investor day under new CEO Antoine de Saint-Affrique, the dairy giant behind brands such as Two Good and Silk painted a picture of a company that had stumbled but had the resources to quickly get itself back on track.

During its presentation, Danone noted many of its brands operate in healthy, on-trend and growing categories. It told investors its portfolio, which includes low-sugar Greek yogurt offering Two Good, plant-based brands So Delicious and Follow Your Heart, and Evian water, represents a strong base upon which to build. But despite these bright spots, Danone admitted it has underperformed in categories and against its peers, lacked consistency in guidance and delivery, and had an organization that has been unstable.

The shortfall, the company said, was due to a lack of urgency in its core, late innovation and a proliferation in SKUs, and inconsistent execution and suboptimal service. Danone set a goal for like-for-like sales growth of between 3% and 5% in 2023-2024.

“We … 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,” de Saint-Affrique said in a statement. We “have a lot we can improve on.”

De Saint-Affrique, who took over as CEO in September, is undoubtedly hoping to replicate the same level of success he created while heading chocolate maker Barry Callebaut for six years while establishing a faster-growing, more reliable corporation at Danone. He replaced long-time head Emmanuel Faber, who left the top post after activist investors agitated for a leadership shake-up amid a stagnant share price and pressure on many of its key businesses.

To be sure, Danone has an enviable portfolio of brands that play in trendy categories that give de Saint-Affrique a solid foundation to build on, but it won’t be easy. 

Danone is facing pressure in yogurt from General Mills’ Yoplait, Greek yogurt maker Chobani, as well as countless startups. The bottled water category is also inundated with scores of big-name and private-label brands.

Even in plant-based offerings, which Danone doubled down on with its $12.5 billion purchase of WhiteWave in 2017, the company faces stiff competition from other CPGs and smaller firms in this growing category. 

Danone will need to keep innovating and investing in its brands while doing a better job executing to keep itself competitive and top-of-mind for consumers inundated by choice. But what is difficult under a normal operating environment is even more challenging now.

Danone and other CPGs are facing rising costs for inputs and supply chain disruptions. Many corporations also are facing headwinds following Russia’s invasion of Ukraine. Danone said Monday it suspended investments in Russia and had closed one of its two factories in Ukraine.



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