Danone 2016 results: New cost-cutting plan after drop in sales

Danone announced a new cost-cutting plan on February 15, at its full-year group results presentation. The plan, called “Protein”, is aimed at reducing costs by EUR 1 billion by 2020 in order to improve the group’s operating profit margin.

Following on the heels of the “One Danone” project (2015-2017) which consisted in the pooling of support functions and the creation of administrative “clusters”, this new plan will focus on SG&A (selling, general and administrative) expenses.

Despite an increase of 34.1%, to EUR 1.7 billion in net profit, Danone saw its sales drop by 2.1 percent, to 21.9 billion. The company referred to the disappointing performance of dairy in Europe and issues with water and infant nutrition in China.

Danone said it would review its financial goals after closing its acquisition of WhiteWave, which is expected in the first quarter of 2017.

While analysts have welcomed the focus on sustainable profit growth through its new efficiency programme, Danone workers and their unions will be facing the next in a series of restructuring exercises which began in 2012. No details on how the savings are to be achieved have yet been revealed.