Danone: culture club | Financial Times

French dairy group Danone’s relationship with its investors is turning increasingly sour. Disgruntled top three shareholder Artisan Partners published a strongly worded letter to the board on Thursday.

Artisan will present a plan drawn up with former Danone executive Jan Bennink to revitalise the group. Though details are few, the thrust of the US fund’s message echoes that put forward by activist Bluebell in January. In short, recent share price underperformance is unacceptable and drastic action is needed. 

The spotlight on chief executive and chairman Emmanuel Faber is growing brighter. Both sets of investors are unhappy about Faber’s dual role, while Bluebell wants a new chief executive altogether.

Faber has already embarked on cutting costs and reorganising the group. Investors, however, want to see growth. Failure to present credible plans to achieve this at a March update may be the turning point for this big cheese of the dairy industry. 

Danone’s product mix has added to its misfortunes during the pandemic. Bottled water sales have collapsed in line with the restaurant trade. New births in China fell 15 per cent last year, which bodes ill for the group’s most profitable business of infant nutrition there.

Since peaking in September 2019, the shares have fallen 35 per cent, compared with just a 10 per cent decline at Swiss rival Nestlé. The price-to-forward earnings valuation gap between the two has almost doubled over the same period to roughly one-third. That has left the shares the cheapest they have been since 2012.

Investors want more radical action to prove the company is still able to innovate and stem market share losses in big powerful brands. Invoking change at Danone in the past has not been easy. Immunity from foreign takeover at Danone was established long before Couche-Tard’s attempt to buy supermarket chain Carrefour was blocked. And activist Nelson Peltz achieved little with a run at the company in 2012. Changing the culture at Danone by force would be a long and drawn-out affair.

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