“Danone is back in the game”

Antoine de Saint-Affrique has been CEO of Danone since September 2021 ALAIN JOCARD / AFP

Committed to a plan to return to profitable growth by 2023/2024, the group is reaping the first benefits from the rationalization of its portfolio and its investments in innovation.

“The job is not done, but Danone is back in the game.” Antoine de Saint-Affrique, the managing director of the dairy giant, is reaping the first fruits of his growth recovery plan for 2023/2024, launched a little less than a year ago. In 2022, the first full year under his leadership, the owner of Actimel, Activia, Evian or Alpro posted a 7.8% increase in turnover, to 27.6 billion euros.

Above all, if the turnover was driven by the price increases invoiced to pass on the inflation of its production costs (+8.7%), this only marginally weighed on its volumes. These posted a measured decline of 0.8% over the year. Without taking into account its dairy and vegetable products activities in Russia, which are being sold, they even increased by 0.2%. In the fourth quarter, however, activity fell by 4.4%, under the effect of price increases.

By area of ​​activity, the rebound is notable in the United States (+9.7% in the fourth quarter) where the return to growth in dairy products that began in 2021 is confirmed (Activia, Oikos, etc.). But also in China (+3.4%), “where we are very competitive in infant milks, even if there are still things to do in our Mizone waters. These have suffered from the lack of mobility of the population in the country in recent months”, decrypts this Wednesday Antoine de Saint-Affrique.

Margin still down

In its objective of returning to profitable growth, the group knows that it will still have to consolidate the foundations. “In one year, we completely overhauled the board of directors, as well as the executive committee to bring in new talent. In addition to rotating our portfolio, attention to execution, innovation, and support of our brands has been our priority. This fundamental work will especially take on its scale in 2023.” While he believes he can achieve his objective of returning to profitable growth this year, the next few years should also be that of a more offensive position on mergers and acquisitions. Even development in new sectors, after having simplified its references.

Wishing to refocus on fewer brands, the group indeed completed the sale in May of the balance of its stake in the capital of its Chinese partner Mengniu in China. It also announced in October its plan to sell – still in progress – its dairy and vegetable products activities in Russia (5% of its turnover). As well as its intention to sell its Organic and Wallaby dairy brands in the United States (3% of its turnover).

This allows him to almost reach his goal of rotating 10% of his portfolio. “It’s not a goal in itself. Above all, this should enable us to reinvest in our strategic brands, and to prepare in the medium term to be more aggressive in areas corresponding to our mission of health through food. Medical nutrition, non-prescription drugs, food supplements…: the field of possibilities is immense and we do not forbid ourselves anything“, insists the leader.

Innovation and marketing support

Until then, the group will continue to focus on innovation. On February 6, it inaugurated its new international R&D center in Saclay. This investment of 100 million euros should allow it to go back on the offensive in innovation. After having reinvested almost all of the 700 million saved with its Local First reorganization plan, Danone will continue to invest heavily in its brands and innovation to support demand despite inflation. In its revival objective, this axis remains a priority for the group, which in recent years has shown a growth rate significantly below that of its major markets.

After investing 300 million euros, half of which in marketing, the group plans to double the stake in 2023 to transform the trial. In particular on its international brands such as Delight, Solk, Activia or Oikos. Significant, these strong investments partly explain the decline in the annual operating margin, which fell from 13.7% to 12.2% between 2021 and 2022. Sis still far from some of its peers, such as Nestlé, whose operating margin in 2022 rose above 17%. “In a crisis as we know it, you either slow down or speed up. We have chosen to accelerate, never sacrificing our long-term objectivesargues the leader. This should enable us to see a moderate improvement in the current operating margin this year.”

While the group went through the biggest governance crisis in its history in 2021, the manager is also counting on this gradual recovery to complete regaining the confidence of investors. A construction still in progress. “ Rediscovering a dynamic of trust means above all ensuring the regularity of our results. This is what Danone has been doing for several quarters now. This is the only way to recreate the link and trust with all stakeholders.concludes Antoine de Saint-Affrique.