UPDATE: March 15, 2021: Danone's board said Monday that Emmanuel Faber has stepped down as chairman and CEO at the maker of Activia yogurt and Evian bottled water. The France-based company said Gilles Schnepp has become chairman, while Véronique Penchienati-Bosetta, currently the head of Danone International, and Shane Grant, who is the CEO of its North America operations, will run the business while it searches for a new CEO.
UPDATE: March 2, 2021: This story has been updated with analyst reactions.
- Danone's board voted Monday to separate the chairman and CEO roles currently held by Emmanuel Faber while starting a search for a new chief executive to oversee the dairy giant, the company said in a statement.
- Faber will stay on in his current positions at Danone until a new CEO is found and then become non-executive chairman.
- The maker of Oikos dairy yogurt and Silk plant-based products has been under fire by several activist investors in recent months who have called for changes in leadership amid a slumping stock price and questions over the company's strategy.
Danone is a multibillion-dollar food giant with a deep bench of yogurt and milk options. It also has a huge presence in plant-based offerings, which it doubled down on with its $12.5 billion purchase of WhiteWave in 2017.
But despite an enviable portfolio of brands that populate large swaths of the dairy aisle, activist investors including Artisan Partners Asset Management, Causeway Capital Management and Bluebell Capital Partners have called for changes.
"The underperformance of Danone's share price has been driven, in our view, by a combination of poor operational track record and questionable capital allocation choices," Bluebell wrote in a November letter to Danone's lead independent director, Michel Landel.
Bluebell went on to note how since Faber took over in 2014, Danone has delivered total shareholder returns of 21%, compared with 56% for the Stoxx Europe 600 Food & Beverage, 97% for Nestlé and 101% for Unilever. Bluebell said this "fails to reflect the quality of [Danone's] assets."
Danone's brands include Oikos and Activia yogurt and Stok ready-to-drink coffee, and it has a large presence in bottled water through Evian. But these categories are increasingly competitive.
Danone is facing pressure from General Mills' Yoplait, Greek yogurt maker Chobani, as well as countless startups. The bottled water category is inundated with scores of big-name and private-label brands, and is tumultuous regardless a company's size. After struggling in the segment for years, Nestlé announced last month it was selling its North American bottled water business to focus on its international premium brands, local natural mineral waters, healthy hydration products and functional water.
Critics have also said Danone has focused too much on its environmental and sustainability efforts at the expense of its financial performance. The company doubled down on that commitment last year, vowing to place a greater focus on its environmental, social and governance goals and create an independent committee to monitor and report on its progress. And three years ago, its North America operations achieved B Corp certification two years ahead of schedule.
Before Bluebell's letter was made public, Faber had already announced a series of steps Danone was taking to better position it for a post-COVID-19 world. In November, Danone said it was cutting as many as 2,000 jobs, or roughly 2% of its global workforce.
Danone also is conducting a strategic review of its portfolio of brands, SKUs and assets. The French company announced Sunday it planned to sell its stake in China Mengniu Dairy, which has a market value of more than $2 billion, later this year. In February, Danone said it would acquire plant-based pioneer Follow Your Heart to increase its presence in the fast-growing sector.
It’s uncertain how much impact a new CEO will have on Danone without a major divestiture of brands, a transformative acquisition, or a significant boost in spending to innovate its existing offerings.
Activists would argue that separating the CEO and chairman role would bring more oversight to the chief executive's performance and increase the individual's accountability. Reuters reported Monday that a replacement for Faber could move quickly, with up to eight names of potential candidates already circulating among board members.
The decision to split the roles drew mixed reviews from analysts who said Faber would likely continue to have influence over the new CEO as chairman. They also noted the announcement of Gilles Schnepp joining Danone’s former CFO Cécile Cabanis as vice chair. Bloomberg noted Faber pushed for them to become new board members last year, and their roles should serve to only further strengthen his influence.
"Faber's presence as chair alongside former CFO Cécile Cabanis as vice chair is likely to constrain the latitude of any new CEO," said Martin Deboo, an analyst at Jefferies cited by Bloomberg.
A Bernstein analyst said removing Faber as CEO but not from the chairman position only postpones the problems. "This is not a clean break," Dow Jones reported, citing the brokerage firm. "It leads to one of two options: either a CEO-in-name-only who executes the chairman's plans, or a repeat of this tense standoff with shareholders a few years from now."