Published on September 21, 2024
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Two large food companies, Danone and Nestlé, have been subject to changes in management that call their management into question. In both cases, we find the same pressure from financial markets dissatisfied with their performance. These two large companies thought they were safe. And yet, the harsh law of customers has reminded them that for a private company, customer satisfaction is their primary mission. In the process, their directors have decided not to renew the mandates of their CEOs.
Danone: from a mission-driven company to the search for profitability
The news broke on November 23, 2020: between 1,500 and 2,000 jobs will be eliminated at Danone, including nearly 400 in France. The announcement made by its CEO, Emmanuel Faber, fell like a guillotine. It is part of an adaptation plan drawn up by the head of the French agri-food group, keen to return to growth and profitability.
“The challenge for Danone is to regain shareholder confidence, as Danone shares have lost more than a quarter of their value in 2020. It was during an impromptu investor meeting that he revealed a little more about his strategy and delivered quantified objectives.”
But this return to basics by the CEO of Danone did not allow him to save his seat. On March 14, 2021, Emmanuel Faber was dismissed from his duties by a majority vote of the directors.
Thus, the emblematic boss of the CAC 40 had to bow to the group’s poor performance since the Covid-19 pandemic with a share price down 25% in 2020, and sales down one billion euros due to the health crisis. In short, customers and investors got the better of this boss, a fervent campaigner for the mission-driven company. As long as profitability was there, and even if his moral lessons tended to irritate business circles, Emmanuel Faber could indulge in his passion for socially responsible business. But here’s the thing, any private company must above all think of its customers and shareholders. And the latter are demanding! In short, The myth of the nice mission-driven company is in trouble.
Emmanuel Faber’s successor is Antoine de Saint-Affrique who has been CEO of Danone since September 2021 and a director since April 2022. His career path is typical for a large multinational: previously, he held the position of CEO of Barry Callebaut from October 2015 to September 2021. From September 2011 to September 2015, he was Chairman of Unilever Foods and a member of the Unilever Group Executive Committee. His mission at Danone is clearly to improve the group’s margins and turnover, while taking up the ambitions of his predecessors in health: healthy products, medical and infant nutrition. However, this renewed momentum within the group’s ranks is struggling to materialize on the financial markets. Normalization has not yet produced all the expected results. Chart 1 shows the lag of Danone shares (in blue) on the CAC 40 (in red) over the last five years.
Chart 1: Danone shares compared to the CAC 40 over 5 years (2019-2024)
Also read:
Danone, an illustration of the fragility of the status of a mission-driven company
Nestlé: starting to win back customers
Mark Schneiderwho had been at the helm of the food giant Nestlé for seven years, was also dismissed from his position.
He will therefore hand over, at the beginning of September 2024, to Laurent Freixewho headed the group’s Europe zone, then the Americas zone, for many years. Here again, we find the stock market underperformance of the share compared to its indices. Chart 2 shows this underperformance of the Nestlé share compared to major Swiss stocks.
Since January 2022, the stock has underperformed major Swiss stocks by 27.5 points. Deutsche Bank notes that the stock’s stock market status has deteriorated compared to its European sector.
Nestlé, for example, promises to reduce salt and calories in its products, and to increase the nutritional value of foods, through significant investments in research and development. Interestingly, this is in fine the pressure from the financial markets which will lead this agri-food giant to adopt more responsible behavior to regain the trust of its customers.
Chart 2: Nestlé shares compared to major Swiss stocks
Conclusion
Danone and Nestlé must transform themselves to meet customer demand and improve their financial performance. In doing so, these two large companies must rediscover the fundamentals of any private company in a competitive market. Their size is not a guarantee of survival. Far from their more or less sincere societal communication and their arrogance, they simply need to regain the trust of their customers and shareholders.
