Danone: interim management with a mission

Danone has capitulated, dispatching boss Emmanuel Faber and scratching the previous fudged compromise that would have seen him remain as chairman with a new chief executive. What now?

Recently-arrived board member Gilles Schnepp, formerly boss of industrial group Legrand, becomes chairman. Three executives have been temporarily elevated to run the French yoghurt maker during the search for a new chief executive. They should avoid the temptation — always strong — to stick in a holding pattern. Danone has underperformed in a gung-ho market, missing guidance and trailing consumer goods peers such as Nestlé, whose shares trade at a premium.

Danone needs to stop ceding market share across its increasingly commoditised line-up of bottled waters, infant formula and yoghurt. It cannot afford a year of treading water while a new boss is identified. That timeframe is no exaggeration. As Bernstein notes, Reckitt Benckiser’s current chief executive only set out his new strategy 13 months after his predecessor departed.

Henkel cut that to just four months. But the German consumer goods company opted for an internal hire. Danone needs to cast its net far wider.

Strategies and pledges implemented by Faber need to be reality-checked. His proposed job cuts, restructuring and “local first” MO — designed to achieve 3-5 per cent of organic growth and recurring operating margins at a pre-pandemic level of above 15 per cent by next year — are myopic. Danone needs to sell more. To do so it needs to invest: more promotional spend and discounted prices to drive up market share.

Faber’s tilt at responsible capitalism, enshrining Danone as an enterprise à mission, also needs scrutiny. Pleasing all stakeholders is tough. Danone is not the first to have stumbled. Take Orbia. The Mexican conglomerate, eager to burnish its planet-friendly credentials, planned to divest its vinyls business. It quickly pulled the deal after reporting a 300 per cent rise in the division’s operating profit.

Danone’s new boss will have much to unpick. The interim committee should help to wipe the slate clean, rather than entrenching yesterday’s strategy.