Danone has announced that it will shed 900 jobs across 26 countries and undertake a significant restructure in response to what the company believes is a lasting downturn in the European economy and consumer trends that have led to a significant decline in its sales in the region.
The company had earlier reported that, while worldwide sales were up 5.4% on a like-for-like basis in 2012, European sales were down 3%, with operating income down 10%.
The cost saving program also calls for three major changes. The first is a reduction by approximately half of management units, achieved by combining teams from several countries into multi-country units. Danone will continue to do business in the same number of countries and maintain a division-based structure to make best use of features specific to each business line.
Second is the combination within subsidiaries of several management functions that currently operate separately.
The last sees Danone focusing each level of management (corporate, division, region, etc.) on missions and projects that have a direct impact on business growth. This will also involve simplifying key management processes.
The company believes that this model will boost responsiveness and speed up decision-making, and will also generate savings on general and administrative costs that will contribute to the cost-reduction plan.
Job losses – which will occur over a two year period - will, said the company, emphasise internal mobility and voluntary departures.
“2012 was an important year for Danone in many respects,” said chairman and CEO Franck Riboud. “Important in that we achieved some major milestones: our sales exceeded the €20 billion mark for the first time, reflecting our ability to bring health through food to an ever-increasing number of people. And for the first time, too, our cash-flow topped €2 billion—double the 2008 figure. Finally, even as our Group grew rapidly from 2008 to 2012, our CO2 emissions held steady. Which means a 35% reduction in the carbon intensity of our business.”
“Most of these achievements were due to our operations outside Europe,” he continued, “which now generate 60% of our total sales and reported profitable growth averaging over 10% in 2012. We must make every effort to pursue lasting expansion in these markets.”
“But 2012 also saw some of our business in Europe come under pressure from a severe deterioration in overall consumer demand, which led to a 3% decline in our revenues in this region and a decline of over 10% in our operating income. Clearly this situation is not sustainable, and we will overcome it. In December we set a €200 million target for savings and announced that we intended to launch a plan to adapt our organization. Today we are initiating discussions with our Works Councils over the plan’s main measures, which are designed to win back our competitive edge and achieve greater efficiency in Europe. We will also continue to revamp the product ranges offered by our business lines.”
“So 2013 will be a year of transition, with vigorous development in business in our growth markets and a drive to strengthen operations in Europe,” concluded Riboud. “A year aimed at returning our activities as a whole to strong, profitable growth by 2014.”
