China Food

Today, Danone’s big change!


Today, French food giant Danone, which owns the brands of altamix, pulsation and Evian, announced its performance in the third quarter of 2020 and plans to adapt to the “new world of epidemic”, including high-level changes and business review.

This is also Danone’s biggest adjustment in recent years, involving personnel and products and other fields. The company’s share price rose 2% after opening.

 

Xiaoshidai noted that after the announcement, Emmanuel Faber, Danone’s chief executive officer and chairman, and C é cile Cabanis, Danone’s chief financial officer, attended the analysts’ meeting after the announcement, and further talked about the three decisions of the new plan, as well as the performance and outlook of China’s milk powder and pulse in the current quarter.


Left: Emmanuel Faber, Danone’s chief executive officer; right: C é cile Cabanis, Danone’s chief financial officer (photo)

 

Now, let’s take a look at the live news.


New plan

 

“In the past nine months, we have a lot to learn about how to deal with this problem.” Fan Yimou said at the meeting.

 

He then pointed out that what Danone learned included: local empowerment as the king, extreme agility at competitive cost in the supply chain and customer service, consumer centered growth opportunities for existing and other categories, structural channel transfer such as e-commerce, and the power of reliable brands with deep tradition and local relevance.


Left: Danone’s experience in the epidemic situation; right: Danone’s three decisions to implement the new plan

 

At the previous second quarter performance meeting, he said Danone would implement the adaptation plan after “doing the homework” for the new epidemic world, and hoped to raise this to a strategic level. Now Danone’s new plan is out.

 

“In order to reestablish our relationship with (medium term) targets such as 3% – 5% profitable sales growth as soon as possible, we have three major decisions.” Fan Yimou said at the meeting. According to the data of the meeting, the three decisions are respectively to reshape the organization, strengthen the executive power and review the product portfolio strategy.

 

First, in terms of restructuring the organization, Danone has appointed a number of new executives, including two regional CEOs, V é ronique penchienati boseta, which runs Danone’s international business, and Shane grant, Danone’s North American business. “As performance leaders, they will be committed to the coordinated development of different categories of the company, focusing on improving the company’s performance, ensuring excellent overall operation level and achieving high-quality business development in all regions.” According to the circular.

 

“The two positions will focus on promoting and optimizing the local implementation of our strategy, and are committed to achieving all the cross category synergies we can achieve from both cost and revenue,” Mr. Fan said at the meeting


On the right is Danone’s new senior management team


At the same time, Danone has created a new position of chief operating officer, to be held by Henri Bruxelles.

 

“Henri will undertake a range of responsibilities for R & D and innovation, product cycle and procurement, production, supply chain and quality management.” Mr. Fan said that managing these links by the chief operating officer would drive greater cost and growth efficiency for the company, as Danone would be more focused, scaled and able to seize the opportunities of many different categories when organizing local production, logistics and delivery.

 

In announcing the new appointment, Danone also said that C é cile Cabanis, the chief financial officer, would leave in February 2021, opening a new chapter in his career outside the company.

 

“I’ve been with Danone for 16 years, and I’ve been involved in all the important events of the company. I’m very proud of this journey, not by myself, but with an incredible team “After 16 years, it’s time to start something new,” C é cile told the conference today

 

“I’ve been working with C é cile for many years,” says Mr Fan. She has been with me since I took up my present position and is a great teammate and partner.

 

According to the circular, Juergen Esser, the current CFO of Danone’s drinking water and beverage and Africa business, will take over the post of CFO.


C é cile Cabanis (data photo)

The creation of more new positions is only one step in Danone’s restructuring of the organization. In addition, Danone has to strengthen its executive power by simplifying work processes and so on.

 

It is reported that Danone will improve its executive power from three aspects, including accelerating the implementation of the new plan, empowering markets in different countries by improving the speed and relevance of its actions, and simplifying its working methods. “We believe that (increasing) the speed of response to local markets and decisions will lead to greater growth opportunities and significant cost savings for the company as a whole.” He said.

 

“We see significant growth and efficiency opportunities and we hope to implement [the new plan] as soon as possible in the first quarter of next year.” Fan Yimou said at the meeting.


Fan Yimou (Photos)


Review

 

In addition, Danone has products to operate on. Like coca cola, Danone is ready to “clean up” its products and to focus its resources on larger brands.

 

Mr. Fan revealed at the meeting that Danone would examine “all brands, all SKUs and assets.”. Danone announced today that the company has taken the lead in the strategic evaluation of Argentina business and Vega brand, and may evaluate other assets in the next stage.

 

In fan Yimou’s view, the reduction of products is not only due to the need for supply chain to be limited under the epidemic situation, but also for consideration of market changes.

 

“Take SKUs as an example, some of our channels and some categories will not have as many SKUs as we do now, and it is clear that restrictions on our customers, logistics and supply chain have forced them to narrow the scope of (SKUs)” “In some cases, SKUs in the markets and categories of different countries we are looking at may be reduced by 20% and 30%,” he said

 

“It’s the same with brands. In the food revolution five years ago, smaller brands were everything. But obviously they will continue to play a role, but no longer the same. From the perspective of growth, efficiency and cost savings, we also see the benefits of running larger brands. Therefore, brands should also be examined. ” Mr. Fan said the same review would be carried out in assets such as factories and logistics providers.


 

French media echo said Danone needed to readjust its organizational structure, restructure its management and sell some assets in order to cope with a large amount of uncertainty under the epidemic situation. In the future, Danone’s organization will be more geographically based rather than business as it used to be.

 

Danone is in the process of overhauling its management and structure and plans to sell underperforming businesses in an effort to recover from the impact of the pandemic, the Financial Times said today. Danone’s shares have fallen 28% since this year, lagging behind big consumer goods rivals such as Nestle, PepsiCo and Unilever, which are up 2%, 3.5% and 11%, respectively.

 

“These changes indicate novel coronavirus pneumonia, and the sales of yogurt and bottled water in restaurants, cafeterias and convenience stores are affected, but sales at online and grocery stores are also stimulated. At the same time as the global economy is in recession, consumers are buying cheaper brands, and border closures and travel restrictions are putting pressure on the supply chain. ” According to the financial times.


 

Reuters said there was constant speculation that Danone’s drinking water and beverage business would be one of the assets to be sold. Jeffery analysts said they welcomed Danone’s latest announcement of the review plan as a “step in the right direction” on the expected difficult recovery path. Analysts at Danone have named several Danone brands as potential non core businesses.

 

However, xiaoshidai noted that in response to an analyst’s question at the meeting whether pulsation is on the list of Danone’s strategic review, fan Yimou said that although the epidemic has impacted on outdoor consumption, pulsation still “gives Danone reasonable hope”.

 

“(pulse) this year’s re listing has been welcomed by consumers. In terms of brand preference, our market share is actually much better than we expected. Moreover, our distribution level is now back to pre epidemic levels again. ” Fan Yimou said that after China lifted the epidemic blockade, pulsation is expected to achieve profitable growth again.

 

“So, before we come to the conclusion that Danone is not the right pulser, I will be more patient with the pulse and give it another year.” Fan Yimou said at the meeting.

Fan Yimou (Photos)

Powdered Milk

 

After watching the series of adjustments, we will review the latest “report card” that can be handed over today. According to the report, the company’s net sales in the third quarter of 2020 was 5.821 billion euro (now about 45.65 billion yuan), a year-on-year decrease of 2.5%.

 

In terms of channels, Danone reported that there were obvious differences among the channels. Among them, the sales of outdoor channels in the third quarter decreased by about 25% year-on-year, but it has improved compared with the second quarter. This channel accounts for 11% of the global sales of Danone in 2019, mainly in the drinking water and beverage business. On the other hand, Danone’s growth pace of global e-commerce sales in that quarter was significantly accelerated.


 

Let’s focus on the milk powder and pulse in the Chinese market.

 

According to the report, the sales of milk powder in the special nutrition sector in the third quarter was 1.698 billion euro (now about 13.339 billion yuan), with a year-on-year decrease of 5.7%.

 

Specific to the Chinese market, C é cile disclosed at the meeting that the sales of this market recorded a double-digit decline in the third quarter, “this is because of the high comparative base of last year, and our growth in the same period last year exceeded 20%”.


“The adverse factors affecting the Chinese market are also related to channel logistics, which is caused by the cross-border channel contraction and de stocking caused by the epidemic,” she added It is reported that due to the continuous closure of ports in Europe, Oceania and Hong Kong, China, the early life nutrition business (i.e. infant milk powder) of China’s cross-border channel fell by 60% in the third quarter. According to C é cile, these channels include indirect channels (e.g. purchasing on behalf of others) and account for 40% of Danone’s infant nutrition business in China.

 

Faced with the uncertainty of the epidemic situation, Danone did not have much confidence in the recovery of milk powder purchasing agent.

 

“If the indirect channel business in China will continue to shrink in the next few months, I think my answer is yes.” In addition, in the next fourth quarter, China’s professional special nutrition business will continue to face a higher base of comparison last year, fan said.


 

On the other hand, the milk powder business of direct channel has a good performance. According to C é cile, the direct channel accounts for about 60% of Danone’s milk powder business in China, including modern trade channels, mother and baby stores and e-commerce. “The performance of this channel in the third quarter was relatively good, and the market share of altamic and Nuo yoneng improved.”.

 

“Driven by the platinum series of high-end products, the altamix brand continues to be favored by consumers in China, and its market share in e-commerce platforms and mother and baby stores has maintained a good upward trend in the quarter,” the notice said


 

However, as C é cile had previously “forecast”, due to the impact of destocking, direct channel demand became weaker in the third quarter. But in the previous second quarter, some of these channels have achieved 50% growth.

 

C é cile said at the second quarter performance meeting that the quarterly performance of China’s milk powder business in the second half of this year will depend on the de stocking situation.


 

Let’s look at the pulse again. According to C é cile at the meeting, although outdoor channel demand continued to be weak, sales in the third quarter continued to improve, with a year-on-year decline narrowed to 10% from 25% in the second quarter. However, the pulsating market share has not returned to normal.

 

“However, we are optimistic about the new positioning (pulse), good feedback from consumers and improved distribution indicators.” C é cile said. Xiaoshidai introduced that pulsation launched the largest brand upgrade in recent years this year. It not only launched the new manifesto of “pulse by me”, but also upgraded the product formula, carried out taste innovation and adopted a new packaging design.

 

Looking forward to 2020, Danone said its business focus in the fourth quarter was to maintain the growth momentum of market share and continue to promote the year-on-year growth of sales revenue, but the growth rate is expected to slow down. The company expects a full year operating profit margin of 14% and free cash flow of 1.8 billion euros.


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