A statement from Chairman and CEO Emmanuel Faber explains that Danone faces a paradox: On one hand, Danone’s healthy and sustainable brands are “more relevant in today’s world,” but on the other hand, the company is “unable to fully reap the benefits of the current positive trends nor face in an optimal way their challenges” due to the closure of out-of-home channels, the elevated cost of operation, and the cost of securing the products themselves. Faber stated: “We definitely need to reinvent ourselves, as a company, very much like all of us are doing it in our own ways of living, working, or consuming.”
When it comes to the local trend, Faber says, “it is a systemic evolution whereby the diversity of dietary habits rooted in their local cultures is now considered as a key security and resilience factor for global food systems.” He adds that many countries are also beginning to look for food sovereignty, and consumers are looking to local to help them regain control over their food.
Danone’s plan to go local has the support of the Board, Faber stated in the press release, and has been built listening to the company’s 100,000 employees. It has three main axes:
- Danone’s local business units will regain autonomy, “as close as possible to consumers and the field.” Entities in countries will not be dependent on the global company, although they will be expected to participate actively in the global management of the company. Danone International will be reorganized into Europe, Asia/Africa & Middle East, Greater China & Oceania, CIS & Turkey, and Latin America.
- The nature of the company will alter to support agility: “For instance by having only two decision-making levels… to manage a brand like Activia where there are four today,” Faber said. This will reduce the number of jobs available at Danone by between 1,500-2,000 positions in local and global headquarters. Faber notes that the company will “pay particular attention to the quality of the human and social aspects of this transformation, including by implementing the specific policies that we have designed to face the current crisis with our social values and principles.”
- The company will gain “efficiency and competitiveness,” Faber says. The Local First organization works with the implementation of Danone’s integrated value chain organization announced on October 19—End-to-End Design-to-Delivery—which will allow the company to access new sources of productivity. The End-to-End organization, according to a separate press release, will integrate global and local capabilities from Research & Innovation, Cycles & Procurement, Operations (manufacturing and supply chain), and Quality. It will be led by Henri Bruxelles, appointed Chief Operating Officer End-to-End Design-to-Delivery, and is intended to support the company’s transformation to better serve consumer needs.
Combined, these three axes will generate recurring savings which Danone estimates will amount to €1 billion by 2023. That money will be partially reinvested to support company growth, and partly used to reenforce margins. Faber states: “After 12 months of COVID, we now forecast thanks to this adaptation plan to return to profitable growth in less than 12 months, as soon as H2 2021 and for our recurring operating margin to return to its pre-COVID levels at more than 15% by 2022.”The press release adds that the presidents for the new, more local segments will be:
- Floris Wesseling for Europe
- Corine Tap for Asia, Africa & Middle East
- Bruno Chevot for Greater China & Oceania
- Charlie Cappetti for CIS& Turkey
- Silvia Davila for Latin America
“I know I can count on the energy and the commitment of all the Danone teams around the world to work in implementing our Local First plan,” Faber concluded. “I believe it is fundamentally aligned with the deep DNA of our company. I would like to express my gratitude to our teams for the remarkable work they’ve been doing over the last months in incredibly challenging conditions. And I also would like to thank them for their personal contribution to the global consultation that was completed last week in which more than 85,000 of our employees have given feedback that will guide us in the local implementation of our plans in consultation with our unions and employees representatives.”