French food giant Danone will step up investment in its brands as it targets 3-5% annual sales growth over three years. It will part with non-performing assets under a fresh strategy outlined by new chief Antoine de Saint-Affrique.
Saint-Affrique, who took over as the chief executive of the world’s largest yoghurt maker in September, must conduct his revival plan amid mounting input costs, coupled with further uncertainties caused by Russia’s invasion of Ukraine, which has forced Danone to suspend investments in Russia. Danone’s brands include Activia yoghurt, Evian and Badoit water.
Making a new Danone plan is all about generating the conditions for sustainable and competitive growth and then delivering consistently in a way that creates value for all.
While “there is nothing wrong” with Danone’s three businesses-dairy and plant-based products, infant formula, and bottled water-the key to sustaining sales growth was to improve execution, invest sufficiently in worthy brands and innovation, and part with underperforming assets in those businesses. “There will be no sacred cows, there will be no taboos,” Saint-Affrique said.
The food giant said it would reinvest all of the 700 million euros ($761.04 million) of Local First savings in 2022. It targets productivity higher than last year’s 5% and a low to mid-teens level of input cost inflation versus 8% last year. As a result, Danone expects its operating profit margin to decline to more than 12% of sales in 2022 from 13.7% in 2021, with like-for-like sales growth in a range of 3% to 5% against 3.4% in the year-ago period.