Danone will cut as many as 2,000 jobs, including one in four positions at its global headquarters, as the world’s largest yogurt maker attempts to revive profitability after getting hit by the coronavirus pandemic.
The company said Monday it’s considering moving global headquarters for its various businesses closer to the base of its French operations in Paris. Annual cost savings should reach 1 billion euros ($1.2 billion) by 2023 after the measures, also fueled by more efficient purchasing. The job cuts represent about 2% of Danone’s total staff.
Chief Executive Officer Emmanuel Faber is shifting the organization to focus on geographical areas rather than product categories to become more agile. Competitors like Nestle SA have long followed a regional strategy. Danone shares were little changed in Paris trading.
“This year has shown our businesses could be hurt significantly in their competitiveness by external shocks,” Faber said on a call with reporters. “In this very volatile world for the next several years, we need to create a safety margin.”
One-time costs related to the changes will be about 1.4 billion euros for the 2021-2023 period. Danone has global headquarters across in the world in locations such as Amsterdam, where it has historically focused on medical and infant nutrition, and Singapore. About 400 to 500 jobs will be cut in France, a spokesman said.
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Bruno Monteyne, an analyst at Sanford C. Bernstein, pointed to worries about a long period of organizational turmoil.
“These are major shifts that will absorb lots of corporate energy for at least 12 to 18 months,” Monteyne wrote in a note. “It also implies the center failed to run the brands effectively. What really did go wrong? And why will the new organization deal with that better?”
Danone also said its adjusted operating margin should exceed 15% in 2022 and reach mid-to-high teen levels later, which would be a record. The company in 2017 said it aimed for an operating margin exceeding 16% this year, pointing to cost cuts and synergies from its WhiteWave acquisition.
The credibility of the new targets will be questioned given Danone’s failure to deliver on the previous one, Martin Deboo, an analyst at Jefferies, wrote in a note to clients.
(Updates with analyst comments from sixth paragraph)
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