After more than half a year of preparation, Danone’s new strategy, which has attracted the attention of the industry, has finally been released. Now, the French food giant with altami, pulsation, Evian and other brands is hoping to start again.
Xiaoshidai noticed that at the end of Danone’s 2022 capital market day tonight, Danone CEO Antoine de Saint affrique announced a new strategic plan called “renew Danone”. At the same time, the company also announced performance guidelines from 2023 to 2024, including year-on-year sales growth of 3% ~ 5%, and the growth of recurring operating revenue is higher than that of net sales.
“It’s all about patching, nurturing and accelerating. For us, this game is called the first step towards the next two or three years. During this period, we need to achieve from falling behind to being consistent with the performance of our market.” Sheng Ruian said at today’s meeting.
Antoine de Saint affrique, CEO of Danone
Xiaoshidai also noticed that Xie Weibo, President of Danone Greater China and Oceania, who attended the same meeting, also spent a lot of time introducing China’s business development plan and milk powder investment priorities. Next, please take a look at the live news sent back by Xiaoshi Dai.
“I want to start by sharing what I’ve seen in the past five months.” Sheng Ruian, who took office in September last year, pointed out at the meeting that after communicating with hundreds of Danone employees, front-line sales, suppliers and customers, investors and analysts, he has fully understood Danone’s advantages and unavoidable problems.
In terms of advantages, Sheng Ruian said that first of all, the categories operated by Danone are in line with the current trend and growing, of which 90% of sales come from health categories. According to the data presented at the meeting, Danone is at the forefront of dairy products, plant-based products, infant nutrition, adult nutrition and drinking water market in terms of value share.
Xiaoshidai noted that from the above ranking, dairy products and plant-based are the two areas where Danone has obvious advantages. Sheng Ruian revealed that in the dairy sector, more than 60% of Danone’s revenue comes from functional products, and its main selling points include immunity, gastrointestinal health and so on. In terms of plant base, beverage products contribute 60% of its revenue, while yogurt, ice cream and cheese account for 40%.
Secondly, Sheng Ruian pointed out that Danone has a strong local and global brand portfolio, covers a wide range of regional markets and consumer groups, and its business distribution in developing and developed markets is also relatively average. In addition, Danone has also accumulated rich professional ability and knowledge, including intestinal health, dairy fermentation, infant nutrition and so on.
“Having said that, we also have some places that should be done well but are far from being realized.” Sheng Ruian pointed out that this includes backward category and overall growth, lack of consistency between performance guidance and final results, frequent adjustment of organizational structure and so on.
Taking growth as an example, it said at the meeting that from 2017 to 2019, Danone’s sales increased by an average of 2.7% year-on-year, while the average growth rate of its category in the same period was 3% ~ 4%. The reasons for the weak growth include the lack of focus on the core business, the launch of a large number of innovative products with poor performance, insufficient investment in brands and so on.
“Our last increase of more than 3% was in 2014. This shows that the poor performance is structural, and we lose share in the competition, providing opportunities for new entrants in various categories and markets.” Sheng Ruian said.
“So the problem is not only our growth level, but also the growth structure.” He said that Danone’s sales have not increased in the past few years, and there is also the problem of relying too much on a few markets or categories.
So, how does the new coach plan to lead Danone to “return to the peak”? “The categories we operate have no problems. They have increased by 3% ~ 4% in the past few years, but we haven’t (kept up), so the only problem is how to narrow the gap.” Sheng Ruian said at the meeting.
To this end, Danone today released a new strategic plan called “renew Danone”. The four pillars of the strategy of restoring competitiveness in the region include:; Selectively expand influence in market segments, channels and regions; Actively cultivate future growth opportunities; Actively promote the rotation of product portfolio.
First, in terms of restoring the competitiveness of core categories and regions, Sheng Ruian divides Danone’s existing business into three types: healthy fundamentals and in the growth stage, great challenges and poor performance, rapid growth and established structural advantages. At present, the proportion of the three in Danone’s income is about 55%, 25% and 20% respectively.
Sheng Ruian said that Danone will give more support to the core business with healthy fundamentals and in the growth stage, including increasing advertising promotion and R & D investment. As for businesses that are growing at a high speed and have established structural advantages, such as OIKOS yogurt, which focuses on high protein, Danone will systematically expand its product portfolio and speed up innovation.
For the challenging and underperforming sectors, Sheng Ruian said the company would try its best to repair them. “If it cannot be repaired, we will study other ways to create value.”. Xiaoshidai noticed at the meeting that although pulsation is also listed as needing repair, Sheng Ruian stressed today that he believes that the recovery of pulsation has been effective.
Secondly, in terms of selectively expanding influence in market segments, channels and regions, Sheng Ruian pointed out that first, it covers more categories. For example, its mineral water brand Evian has launched new products containing gas. Second, improve the diversification of product income, such as the introduction of Ganmai probiotics in response to the trend of healthy aging in China. In addition, Danone will cover more channels to reduce dependence on retail channels and accelerate and expand digitization.
In addition, in actively cultivating future growth opportunities, Sheng Ruian said that Danone will take a step-by-step path from exploration, testing to large-scale, and use partnerships and its venture capital funds to capture opportunities.
Finally, in promoting the rotation of product portfolio, Sheng Ruian said at the meeting that the volume of products to be adjusted by the company would account for about 10% of net sales.
“We will stick to our commitment to all categories and plan to divest our structurally declining businesses in the next few years.” He pointed out that at the same time, Danone will enhance its core competence, enter the blank market and expand future strategic categories through acquisition.
Xiaoshidai noticed that foreign power also paid a lot of attention to Danone’s new strategy today.
Bloomberg said today that Danone Xinshuai’s strategy released this time has been eagerly awaited by the outside world for a long time. Bloomberg noted that there will be more acquisitions when the new strategy is issued, and Sheng Ruian said “there is no restricted area” when talking about the business that needs to be repaired.
The financial times pointed out today that this is the first time Danone’s new coach has released the strategy. According to the plan, the profit margin in 2022 will be significantly reduced, which will help release funds for products, innovation and advertising. Some analysts believe that whether the strategic plan can actually promote the growth of the three major businesses will become the standard for judging Danone’s new CEO. Some analysts believe that the new growth target is moderately and wisely designed, but others think it is more cautious.
The newspaper also quoted Sheng Ruian as saying in an exclusive interview that he had no intention of selling major assets, but would take more initiative in asset portfolio management than before, with the goal of adjusting the portfolio accounting for about 10% of net sales.
In addition, for a quarter of the businesses whose performance is “not as expected”, he believes that they need to be repaired as soon as possible, otherwise they will create value in another way, and various possibilities are not ruled out. According to the analysis of the financial times, because some investors want to see a more radical strategy, the statement that they have no intention of major asset disposal may not be in line with their assumptions.
Finally, let’s focus on China business. Today, xiaoshidai fanchadaneng reported that in 2021, the sales of the region where the Chinese market is located (Note: composed of China, North Asia and Oceania) was 3.008 billion euros (about 20.633 billion yuan).
Last year, the sales of plant-based drinks and special dairy products amounted to € 2.637 billion, accounting for € 2.637 billion, or about € 2.637 billion, of which the sales of plant-based and nutritional products in the region was about € 2.637 billion.
As for the Chinese market, Xie Weibo said at the conference that Danone has established three businesses here, including early life nutrition, beverages and medical nutrition. Among them, the early life nutrition products belonging to altami and other infant matching brands have the largest scale, and medical nutrition products have continued to achieve double-digit high growth in the past few years.
In the subsequent links, as a “c-person”, early life nutrition undoubtedly became the focus of attention. “From a pure e-commerce start-up 10 years ago to now, we have become the largest multinational enterprise (in China’s baby matching market). Among them, aitamei’s market share has reached 9%.” Xie Weibo said at the meeting.
At the same time, he also admitted that China’s infant distribution market is facing challenges such as the decline of newborn demographic dividend and the transition period of the new national standard. It is expected that the industry will face a decline in sales from 2022 to 2023, but thanks to the three child policy and other benefits, the sales volume is expected to return to stability in 2024.
In order to stabilize the market share and layout the future during the fluctuation period, Xie Weibo said at the meeting that Danone had delineated several investment priorities, including maintaining and improving the share of altami, introducing innovative products with foreign labels, local supply capacity and new product development.
“Local production is becoming more and more important for accelerating the launch of new products, and we have taken action to speed up the establishment of local supply networks.” For example, the recently announced strategic cooperation between Danone and obijia will enable it to speed up the provision of Chinese label products in line with the national standard of milk powder, he said.
Xiaoshidai also noticed that Xie Weibo also talked about pulse development planning today. He said that pulsation has become China’s largest vitamin beverage brand and the fifth largest non-alcoholic ready to drink brand.
“We have noticed the discussion on pulsation. Let me first introduce that pulsation has resumed growth in 2021 and its market share has remained stable. This brand has shown great resilience.” Xie Weibo said at the conference that this year, pulsation is ready to expand its dealer network and will invest in 0 sugar and bubble drinks to attract new consumers and set foot in new scenes, so as to achieve sustainable growth.