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BUILD A BALANCED MODEL OF GROWTH
Danone has set its goal to build a balanced, profitable and sustainable growth model.
Growth, at the core of the business model
Positioned in the most dynamic categories of the food and beverage industry, Danone has a strong leadership position in all its markets.
The Company relies on a unique portfolio of strong brands, solid execution capabilities in terms of innovation, brand activation and the development of new distribution channels.
Generating profitable growth
In an increasingly volatile and complex environment, Danone strives to strengthen its model of growth through disciplined resource allocation, efficiency gains and cost optimization with a permanent balance in managing the short, mid and long-term horizons.
The company therefore favors strategic growth opportunities that create long-term value over tactical short-term allocations.
Launch of an efficiency program: generate cost savings to fuel growth
In that context, Danone launched an efficiency program called Protein on its selling, general and administrative expenses. The program aims to strengthen the Company’s competitiveness by generating cost savings of €1 billion by 2020. The program consists of incorporating sustainable efficiency into the Company’s business model, and creating the best conditions to spend better, buy better and work more efficiently. Danone will reinvest a significant portion of the gains in growth to support the implementation of its strategy and mission.
Responsible business stewardship: continuing the dual economic and social project with B Corp
Collaboration with the international non-profit organization B Lab to receive B Corp certification represents a major new milestone in Danone’s dual economic and social project, first expressed by Antoine RIBOUD in his 1972 speech in Marseille.
As part of this approach, which creates value for consumers and shareholders, Danone is transforming the way in which the food and beverages of its flagship brands are designed and produced, notably by reducing the number of ingredients, and proposing new organic and non-GMO product lines. The Company also commits to promoting sustainable agriculture, encouraging the circular economy, conserving water, reducing waste, reducing its carbon footprint, promoting animal welfare and investing in the community.
A new approach to management of strategic resources
As a further example of its approach to act as an engaged and responsible company, Danone is transforming the upstream of its business (environmental management, raw materials supply and manufacturing processes and logistics) to optimize its costs, protect the lifecycles of its strategic resources and create a lever for value creation and differentiation from competition.
One of Danone’s key strategic orientations is therefore a new approach for managing its strategic resources (milk, water and plastic). These resources are essential for Danone, not just from an economic but also from an environmental and social standpoint. Danone’s key raw materials come from nature and must therefore be protected by creating and sharing value for ecosystems and communities where Danone operates. These resources are therefore managed as cycles in order to ensure their long-term viability, limit their volatility and, lastly, gain a true competitive advantage.
As part of its transformation plan aimed at ensuring a safe journey to deliver strong, profitable and sustainable growth, Danone set objectives for 2020 that include like-for-like sales growth between 4% and 5%, which include the following performances at the Reporting entity level:
• strong like-for-like growth above 5% for EDP Noram, Specialized Nutrition and Waters; and
• like-for-like growth of between 3% and 4% for EDP International.
Danone aims for a recurring operating margin of over 16% in 2020, driven primarily by:
• a structural improvement of margin in all categories, via more discipline and a stricter resource allocation process to guarantee profitable growth;
• the Protein program, which will generate over €1 billion savings by 2020, with at least €300 million net of reinvestment falling through into margin expansion by 2020 (€100 million per year from 2018);
• a $300 million synergies program generated in 2020 at recurring operating income level through the acquisition of WhiteWave.
Finally, Danone will continue to focus on growing its free cash flow, which will contribute to financial deleverage with an objective of a ratio of Net debt/EBITDA below 3x in 2020. Danone is committed to reaching a ROIC level around 12% in 2022.