Danone to Cut Workforce as Part of Restructuring to Meet New Goals -- Update
--Danone plans to reduce up to 2,000 positions in its local and
global headquarters, and implement a "local-first" strategy
--The food company is targeting savings of EUR1 billion by 2023
and recurring operating margin in the mid-to-high-teen levels in
the mid term
--The reorganization of its structure will lead to one-off costs
of around EUR1.4 billion between 2021 and 2023
By Giulia Petroni
Danone SA on Monday said that it would cut up to 2,000 jobs as
part of a newly set mid-term growth strategy and structural
reorganization aimed at boosting profitability and increasing
The French food company said its shift from a category-led to a
local organizational model will lead to reducing around 1,500 to
2,000 positions in local and global headquarters.
Danone is targeting cost savings of 1 billion euros ($1.19
billion) by 2023, part of which will be reinvested into its growth
plan and the rest to secure margin expansion, it said.
Recurring operating margin is expected at more than 15% by 2022
and at mid-to-high-teen levels in the mid term.
The focus on margins and cost is being questioned by some
analysts, who fear Danone might be doubling down on a strategy that
has been in place for years.
"Danone's focus on rapidly enhancing its operating margin seems
to mirror the group's strategy of the past four years," UBS said.
"However, we worry that Danone's trading environment will prove
more challenging this time around."
The company also expects to return to profitable growth as soon
as the second half of 2021, and confirmed its expects to reach 3%
to 5% profitable revenue growth in the mid term on a like-for-like
The total one-off costs related to organizational activities are
expected to be around EUR1.4 billion for the 2021-2023 period.
Danone last month said that the company would be organized in
two macro-regions, Danone North America and Danone International.
To ensure decisions are pushed down to a local level, the company
said Danone International will be organized under five
zones--Europe, Asia/Africa and Middle East, Greater China and
Oceania, Commonwealth of Independent States and Turkey, and Latin
The new "local-first" plan, however, is expected to cause a long
period of organizational turmoil, according to Bernstein. The
reorganization also implies the company was unhappy about how
brands have been managed under a more centralized structure, but
doesn't provide a detailed analysis on how local teams will be able
to run them more effectively, according to the bank.
"What really did go wrong? And why will the new organization
deal with that better?" Bernstein said.
Danone confirmed its guidance for the full year, saying it
targets a recurring operating margin at 14% and EUR1.8 billion in
free cash flow in spite of challenging market conditions in the
At 1141 GMT, shares traded 2.4% lower at EUR51.22.
Write to Giulia Petroni at email@example.com
(END) Dow Jones Newswires
November 23, 2020 07:03 ET (12:03 GMT)
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