Danone has warned its European business faces two years of “transition” as the dairy and baby food group reshapes its operations in the region to boost sales and profits.
Last month, the Activia and Cow & Gate owner announced plans to cut 900 jobs in Europe in a bid to revitalise its business there after a year in which revenue and margins fell. Europe, excluding the former CIS countries, accounts for over 40% of Danone’s sales. It is also the region where margins are highest but where they fell by 190 basis points last year.
The company is shaking up its management structure in Europe to be more responsive to demand. It is, for example, taking its businesses in neighbouring markets and combining shared functions. The company also sees ways of cutting costs in the way it sources ingredients, for example.
However, speaking at the Consumer Analyst Group of Europe conference, Danone co-COO Emmanuel Faber said the impact of the company’s shake-up will not appear until the end of the year at the earliest.
“We have shared already … there will be continued decline in sales and margins in 2013. Only at the very end of this year will the savings plan start to kick in. This plan will be fully engaged by the end of 2014. 2013 and 2014 will be years of transition for our European business,” Faber said.
Danone has invested in what it called the “right price point” in Europe, has launched products and changed packaging on certain lines. Faber said those moves were paying off, citing a bounce in Danone’s sales in Portugal.
Looking at the business as whole, Faber was upbeat about Danone’s prospects. He said Danone’s “growth markets” – which also include the US – would “deliver superior top-line growth and margin improvements overall” while the company reshaped its European operations.
He said the group would be “back to our historical equation in 2014, when we will deliver strong, profitable and sustainable growth”. He added: “I hope you keep with us until 2014.”