Danone
- In which year did the Company first invest? 2022
- % Holding: 1.6%
- Where is its head office? Paris, France
- What is its web address? www.danone.co.uk
Business Fundamentals
Danone is one of the world's largest dairy food and water producers. The company is organised around three core activities: Essential Dairy and Plant-Based Products (EDP), Specialised Nutrition and Water.
What’s Changing?
Senior management has had a complete strategic overhaul and consumers are becoming increasingly focused on sustainable, healthier eating habits. Danone had been a serial underperformer relative to its peers for a decade. Eventually, shareholder pressure resulted in the board replacing the former CEO and Chairman Emanuel Faber with Gilles Schnepp, formerly of Legrand Group, as chairman and Antoine de Saint Affrique as CEO from Barry Callebaut. In 2022 Danone's new and strengthened leadership team presented a new strategic plan: "Renew Danone" to enable the company to reconnect with a sustainable, profitable growth model. This plan followed a complete strategic review with the company's partner and other stakeholders worldwide and from all parts of the business including farmers, customers, and investors. The scale of the governance overhaul is unique and this is Danone's best chance of transforming itself.
Valuation & Investment Insight
Danone plans to focus on an end-to-end step-up in the quality of execution, a strengthened innovation model geared for scale and impact, increased investments in consumer value, brands and commercial development and to dispose of low returning assets. Danone could represent a very compelling turnaround story. The market is potentially under-appreciating the growth potential, led by attractive dynamics in around 60% of its portfolio, which should be higher growth such as plant-based, probiotics, premium waters and medical nutrition. The valuation at the point of initiation was close to the historical discount to peers, pricing in a worst-case scenario. The stock offers a free option for the turnaround story while offering an attractive yield of almost 4%.
ESG
Danone's board has undergone many changes following the decision taken in July 2021 to refresh the entire board over the 2022 and 2023 AGMs. Much of the abrdn engagement has been with the chairman and the lead independent director to get a better sense of the future size, shape and skill-set of the board. These meetings have been reassuring; Danone now has a far stronger board in terms of independence, diversity and experience. Danone is a leader in water management, food safety practices and environmental programmes that focus on engaging and supporting farmers in transitioning to regenerative agricultural practices. Danone's growing offering of plant based dairy alternatives and healthier food products has the opportunity to play a part in environmental and social themes, including responsible production and consumption and good health and well-being.