Danone's chairman reportedly pushed out by board

Danone’s chairman Emmanuel Faber has now reportedly been ousted by the board. This comes shortly after he relinquished his role as CEO in a bid to calm criticisms as Danone saw weak stock market performance and growth. The move comes weeks after the board initially proposed to separate the functions of chairman and CEO. Some criticisms faced by the company include the lack of investment in marketing and innovation under Faber’s leadership, say media reports.

In February, prior to the split of the roles, investors Artisan Global said in an open letter that the CEO’s current strategy undermines the strength of its brands and ultimately the health of the company.

“The roles of CEO and chairman should be split to reflect modern-day corporate governance. Governance standards also require that prior leadership leave the board. And logic demands more consumer goods experience on the board of directors,” it said. Artisan Global also said it expects a new, non-financial CEO with consumer goods experience and a track record of success to be installed to restore Danone to the elevated status it deserves within the French business establishment. Meanwhile, activist investor Bluebell also made similar demands. 

Investors also questioned why Danone’s sales and volume growth, as well as profitability, continue to trail relevant category competitors and pointed out that Danone's water business had declined more than Nestle's; the sales decline of Danone's nutrition business is in stark contrast to the sales growth of Nestle and Abbott.

“These trends do not represent solely issues related to the Covid-19 pandemic—rather, they are a continuation of the trends reported over the last six years,” Artisan Global said.  While Artisan Global noted that management had appointed a new team and structure to reshape the company, it added that overhead put in place by the current management team is to be reduced, and brands purchased by the current management team need  to be sold.

2020 results

According to its 2020 full year results, Faber previously said that the company faced material specific short-term challenges in a number of key categories and geographies but also “clearly uncovered significant long-term opportunities”.

Faber added that after making 2020 a year of both delivery and progress under challenging conditions, 2021 would be a year of recovery for the company. Nonetheless, the company would require till Q2 to bounce back but Faber was “fully confident that Danone is building the right conditions and momentum to reconnect with profitable growth agenda as soon as H2”.

“In this context, we fully recognise that our share price is not where we would like it to be and we are pleased that this FY announcement resumes our ability to dialogue openly with our shareholders,” he said. Faber also said he would be sharing more on the growth platforms, as well as progress on transformation plans by the 25 March, when the second investor update is planned for. The event would have focused on how Danone will accelerate profitable sales growth.

Last year the company also announced a move to reshape its organisation onto a geographic structure to create efficiencies, whilst adopting a “local first” approach which would provide a lever for growth acceleration. On November 23, 2020, Danone hosted an Investor update focused on providing additional details on how shifting to a local-first organisation would unlock future growth and drive margin expansion in a post-COVID world.

The company was also in the midst of conducting a full strategic review of the portfolio of SKUs, brands and assets, starting with a review of its strategic options for Argentina and its Vega brand.

In the US, Danone is in the midst of acquiring “Follow your heart”, a California based pioneer company, leading the cheese and mayonnaise plant based alternatives. The acquisition was said to be building further on Danone’s global leadership on plant-based, now representing 10% of its sales.

Meanwhile in China, Danone reached an agreement with COFCO Dairy Investments to convert Danone’s stake in China Mengniu Dairy Company which it previously held indirectly, into a direct holding. Listed on the Hong Kong Stock Exchange with a current market capitalisation of approximately €18 billion, Mengniu is a leading Chinese manufacturing and distribution company of dairy products, in which Danone first became a shareholder in 2013. This conversion is the first step towards facilitating Danone’s disposal of its stake in Mengniu.

(Photo courtesy: 123RF)

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