At Danone, internal discord matures in favor of militant funds: sources


PARIS (Reuters) – Brutally ousted at the head of Danone, the yogurt group he has turned into the flagship of eco-responsible companies, the dismissal of CEO Emmanuel Faber is a rare victory for militant funds in France who are campaigning for his dismissal.

FILE PHOTO: A company logo is seen on a product displayed ahead of the 2019 annual results presentation of French food group Danone in Paris, France, February 26, 2020. REUTERS / Christian Hartmann

Faber’s struggle to cope with the latent malaise among board members, after some of the former CEO’s strategy changes led to internal strife in recent months, has suddenly laid the groundwork. ‘State before the intervention of investors, said two people close to the group, who declined to be named. due to the sensitivity of the subject.

In an interview, Bluebell Capital, one of the funds that broke in in January to criticize Danone’s stock returns and called on Faber to leave, also said recurring rumors of contention in local French media had partly triggered his investment.

“We were very interested last summer to see that there seemed to be a high level of discomfort on the board,” Giuseppe Bivona, co-founder and chief investment officer of Bluebell, told Reuters. The fund did not disclose the size of its stake, although it was well below the 3% held by another critic and outspoken shareholder, Artisan Capital.

Activist investors have started targeting European consumer goods companies, including French companies previously seen as difficult to tackle due to strong family farms and a comfortable corporate culture. Few campaigns have resulted in such rapid or dramatic changes.

Danone’s board on Sunday voted to oust Faber just two weeks after backing a March 1 plan to quell criticism that Faber would step down as CEO.

Once a protégé of his predecessor Franck Riboud, whose family founded Danone and who remains on the group’s board of directors, Faber had broad support for his vision of a company in which environmental and social goals mattered as much as returns.

The charismatic executive, who became CEO in 2014 and assumed the presidency three years later, also led the $ 10.4 billion acquisition of WhiteWave, a U.S. alternative dairy brand, in 2016 as part of a desire to position the group in a growing trend for organic. food.

But a sometimes rigid leadership style has cost him allies and contributed to senior manager turnover in recent years, people familiar with Danone said, while the company’s performance has been disappointing on some fronts.

Danone’s share price has risen about 11% since Faber took over, but that’s lower than the more than 50% rise of Unilever, which also sells baby food and beverages like the tea.

In the past year, sales growth has fallen more sharply in some units affected by the COVID-19 pandemic, such as its bottled water brands like Evian, compared to Perrier maker Nestlé.

Activist funds, meanwhile, highlighted the market share gains of competitors selling milk alternatives in the United States and Europe at Danone’s expense, saying the company had not invested enough in marketing and innovations.

STRATEGIC DISPUTES

The introduction by Faber in November of a strategy dubbed “Local First” – a reorganization of the group and its brands into regional hubs, alongside a broader desire to reduce costs – notably gave rise to disagreements at the level of the board of directors. administration, people close to the group said.

His insistence on defending “Local First” in public statements even after the March 1 board meeting, in which there was no vote on the issue, angered some directors even more, said one of the people.

Faber did not respond to requests for comment.

A Danone spokesperson declined to comment on the board discussions, but said the “Local First” plan, which will involve up to 2,000 job cuts, was still relevant.

The company postponed its March 25 capital markets day after Faber’s departure.

The former financial director Cécile Cabanis, who remains on the board of directors, left her post in October before the announcements of “Local First”. She had also clashed with Faber over the strategy, said one of the people close to the group.

Cabanis could not be reached for comment. His departure sparked new tensions within the group, several people close to Danone said, while his continued role on the board drew questions and criticism from activists.

Danone said on Monday that it had now hired headhunters to find a new CEO, and that it should look to an outside candidate. Danone appointed a transition management team on Monday, led by Gilles Schnepp, the former boss of the Legrand electrical group.

“We want an external candidate for the CEO position, someone with strong international experience with a proven track record in the industry,” said Bivona of Bluebell.

Reporting by Gwenaelle Barzic and Sarah White; Editing by Vanessa O’Connell and Aurora Ellis

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