BN Danone

By Carol Ryan 

Investors have soured on the maker of Dannon yogurt. A proposed management change isn't enough of a sweetener.

After a board meeting on Monday, Paris-based Danone said that Chief Executive Officer Emmanuel Faber will step aside. The boss has been trying to save his job since Wisconsin-based investor Artisan Partners last month declared a 3% stake and said it wanted him out. Danone also has activist hedge fund Bluebell Capital Partners among its unhappy shareholders.

The new CEO may not have a free rein. Mr. Faber will stay on as chairman and wants to push ahead with a restructuring -- his second major attempt at an overhaul in seven years -- that is unpopular with certain investors. The company's shares fell 1% in early European trading Tuesday, perhaps a sign that shareholders don't believe much can change under this setup.

The person who takes on the role needs to fix years of poor performance. During Mr. Faber's tenure, which began in late 2014, Danone has delivered total annual shareholder returns of 3% in dollar terms. That is less than half what European food peers Unilever and Nestlé managed over the same period and below what Campbell Soup delivered with a far less wholesome portfolio of brands.

Danone's lucrative baby-food business is under pressure in China, where competition from local brands is heating up and birthrates plummeted 15% in 2020. Artisan Partners have also argued that Danone should sell off its cheaper water brands -- a step Nestlé has taken -- and traditional dairy business. Both categories are becoming commoditized as private-label rivals muscle in.

In Danone's defense, when Nestlé's current CEO Mark Schneider took over in 2017, investors wondered whether he could really shake up the business while his predecessor stayed on as chair. Yet he has since successfully revamped the Swiss food giant.

Danone may not get the benefit of the doubt. The current management team has lost investors' trust. Despite overpaying for U.S. dairy-alternative player WhiteWave in 2016, the company has been losing share to upstarts like oat-milk maker Oatly in the booming plant-based food and drink market. This may be part of a pattern: Dannon was also slow to react to the threat posed by Greek yogurt brand Chobani in the U.S. several years ago.

Danone may feel that it has come up with a fair compromise, but it will likely leave investors hungry for more.

Write to Carol Ryan at carol.ryan@wsj.com

(END) Dow Jones Newswires

March 02, 2021 08:07 ET (13:07 GMT)

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