- Danone will cut as many as 2,000 jobs that will include up to 25% of positions at its global headquarters, the company said in a statement. The dairy giant said it aimed to generate about €1 billion ($1.2 billion) in savings by 2023 that will be partly reinvested in supporting growth and improving margins.
- As part of its reorganization, Danone will reduce levels of decision making across the company by shifting from a global product category model to one that gives more authority to local managers more attuned to consumer demands and trends in their areas. Currently a brand like Activia has four levels to manage it; under the restructuring it would be two.
- Danone executives announced in July the company would undergo a review of its business with a goal to have a plan in place by the end of the year. Since then, the company has named a new CFO and organized the company into two macro-regions, Danone North America and Danone International.
As the pandemic continues to surge, the yogurt and beverage giant has been impacted by the closure of restaurants and other venues that reduced demand for its water, a reduction of SKUs offered by its retail partners and a drop in the number of births that has curtailed consumption of its baby formula products.
To be sure, Danone has an enviable portfolio of products such as Two Good, the yogurt with two grams of sugar, and probiotics with Activia tailored to current trends such as health and wellness. It's $12.5 billion purchase of WhiteWave in 2017 added Horizon organic milk and plant-based options including Vega, So Delicious and Silk that are ideally positioned to meet those trends. While Danone has a dominant position in these segments, competition in growing from General Mills' Yoplait, Greek yogurt maker Chobani, Lactalis' Siggi's and Stonyfield lines, as well as countless of upstarts that have introduced their own offerings in these categories.
Water also remains an ultra-competitive category where scores of big-name and private label brands can be found. After a prolonged period of underperformance, Nestlé announced last summer it considering the sale of the majority of the North American Nestlé Waters business unit. Brands within this portfolio include Poland Spring, Deer Park, Ozarka, Ice Mountain, Zephyrhills and Arrowhead.
"We are unable to fully reap the benefits of the current positive trends nor face in an optimal way their challenges," Emmanuel Faber, Danone's CEO, said in a statement. "Our recent results evidence this. We definitely need to reinvent ourselves."
Bloomberg noted that for years Danone has struggled to reinvigorate its European dairy division despite introducing dozens of new products. The media outlet said Faber, in a call with analysts, confessed the company was over-innovating and pushing products it couldn't support or that wouldn't have a lasting impact.
The decision to give more authority to local managers has been a successful one employed by companies such as Mondelez International. By doing the same, Danone is giving more autonomy to individuals on the ground who better understand customers and trends in their area. The job cuts, which amount to about 2% of its 100,000 person workforce, will streamline the company's operations and improve efficiencies. And the $1.2 billion the company saves from its restructuring will go a long way toward improving its bottom line and investing in its brands to remain competitive.
But analysts quoted by Bloomberg remained unconvinced over Danone's restructuring plan. Some feared the overhaul would require a lot of time within the company for the foreseeable future that could prove to be a distraction. The change also provided fresh evidence that management has not done a good enough job innovating and growing its brands.
“We can’t help feeling that we’ve been here before with Danone — frequently,” wrote James Edwardes Jones, an analyst at RBC Capital Markets. “We would like to think that this will be the one that delivers, but experience suggest caution is appropriate.”