Internal Discord At Danone Helped Ripen Case For Activist Funds, Say Sources

By Maev Martin
Internal Discord At Danone Helped Ripen Case For Activist Funds, Say Sources

Abruptly ousted as head of Danone, the yoghurt group he turned into a standard bearer for green-friendly businesses, chief executive officer Emmanuel Faber's dismissal is a rare win for activist funds in France campaigning for his removal.

Faber's struggle to address simmering unease among board members, after some of the former CEO's strategy shifts led to internal disputes in recent months, laid the groundwork for a coup before the investors' intervention, said two people familiar with the group, who declined to be named due to the sensitivity of the matter.

In an interview, Bluebell Capital, one of the funds which broke cover in January to criticise stock market returns at Danone and called on Faber to leave, also said that recurring rumours of discord in local French media had partly triggered its investment.

"We were very interested last summer to see that there seemed to be a strong level of discomfort within the board," Giuseppe Bivona, Bluebell's co-founder and chief investment officer, told Reuters. The fund has not disclosed the size of its stake, though it is far smaller than the 3% held by another vocal critic and shareholder, Artisan Capital.

Legacy Issues

Activist investors have begun taking aim at European consumer goods companies, including French firms previously perceived as complicated to grapple with due to strong family holdings and a cosy corporate culture. Few campaigns have resulted in changes this rapid or dramatic.


Danone's board voted to oust Faber on Sunday barely two weeks after backing a plan on March 1 which was meant to appease critics, according to which Faber would relinquish the CEO role.

Once a protégée of his predecessor Franck Riboud, whose family founded Danone and who remains on the group's board, Faber had a broad buy-in for his vision of a business in which environmental and social goals counted as much as returns.

The charismatic executive, who became CEO in 2014 and took on the chairmanship three years later, also led the $10.4 billion acquisition of WhiteWave, a U.S. dairy alternative brand, in 2016, part of a drive to position the group in a growing trend for organic food.

But a sometimes rigid leadership style cost him allies and contributed to turnover in top management levels in recent years, the people familiar with Danone said, while the firm's performance has underwhelmed on some fronts.

Performance Metrics

Danone's share price has risen some 11% since Faber took over, but that lags the more than 50% rise at Unilever, which also sells baby food and drinks like tea.


In the past year, its sales growth has fallen more sharply in some units hit by the COVID-19 pandemic, such as its bottled water brands like Evian, compared to Perrier-maker Nestlé.

The activist funds, meanwhile, have underscored market share gains by rivals selling milk alternatives in the United States and Europe at Danone's expense, saying the firm had not invested enough in marketing and innovations.

Strategy Disputes

Faber's introduction in November of a strategy dubbed 'Local First' - a reorganisation of the group and its brands under regional hubs, alongside a broader drive to cut costs - in particular sparked disagreement at board level, the people familiar with the group said.

His insistence on championing 'Local First' in public statements even after the March 1 board meeting, during which there was no vote on the matter, further irked some directors, one of the people said.

Faber did not respond to requests for comment.


A Danone spokesman declined to comment on board discussions but said the "Local First" plan, which will involve up to 2,000 job cuts, was still on the cards.

The company postponed its March 25 capital markets day after Faber's departure.

Former financial chief Cecile Cabanis, who remains on the board, quit her role in October before the 'Local First' announcements. She had also clashed with Faber over strategy, one of the people close to the group said.

Cabanis could not be reached for comment. Her departure sparked further tensions within the group, several people familiar with Danone have said, while her enduring role on the board sparked questions and criticism from the activists.

CEO Search

Danone said on Monday that it had now hired headhunters to find a new CEO, and it is expected to lean towards an outside candidate. Danone on Monday named an interim management team, led by Gilles Schnepp, the former boss of electrical group Legrand.


"We want an external candidate for CEO, someone with a strong international background with experience and a proven track record in the industry," Bluebell's Bivona said.

News by Reuters edited by Checkout. Click subscribe to sign up for the Checkout print edition.

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