(News Bulletin 247) – The agri-food group has unveiled the new chapter of its strategic plan, including an acceleration in nutritional health. But the objectives of growth and profitability, unsurprisingly, hardly transcend investors.

Danone’s roadmap apparently lacks flavor to appeal to the market. The French agri-food group’s action dropped 4% around 3 p.m., the biggest drop in the CAC 40, after the company unveiled the new chapter of its “Renew” strategic plan.

“Renew” was launched in March 2022, a few months after the arrival at the head of the agri-food group of Antoine de Saint-Affrique, defector from Barry Callebaut.

This plan, with a first stage over two years, was to restore the competitiveness and growth of the company, after years of underperformance compared to its Swiss peer Nestlé.

As Antoine de Saint-Affrique recalled this Thursday, this strategic impulse led Danone to carry out asset sales, which overall concerned the equivalent of 9% (in revenue) of its entire scope. For example, the company sold Michel & Augustin, and the dairy product brands Horizon Organic and Wallaby in the United States. It has also revitalized the growth of its products, such as the Mizone mineral water range in China (14.1% growth in 2023). Antoine de Saint-Affrique also congratulated himself on having “broken down the category silos” at the R&D level.

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Health before all

The company has since posted nine quarters of growth, with figures higher than or in line with expectations, while volumes returned to green over the last two published quarters. From a stock market point of view, the market remains cautious. But Danone outperforms Nestlé a little, its action gaining 3% over one year while that of the Swiss group drops 12%.

The fact remains that “the work is far from finished”, assured Antoine de Saint-Affrique, with certain activities which have not yet reached the desired level of performance. The manager cited plant-based drinks and dairy products in emerging countries “even if we are making good progress” on the latter activity.

His group thus presented the new part of “Renew”, which this time covers the period 2025-2028. To improve its performance, Danone focuses in particular on the virtues of its products in terms of health and well-being. Antoine de Saint-Affrique notably highlighted, with studies cited in support, the benefits of consuming yogurt to combat obesity. He also highlighted the rise of certain distribution channels that better promote the group’s products, such as pharmacies and hospitals.

The group sees promising prospects in medical nutrition (for example with its Fortimel brand), where it estimates that the addressable market will increase from 20 billion euros to 30 billion euros “tomorrow”. Antoine de Saint-Affrique spoke of “one of the most important long-term opportunities for Danone” with a “little penetrated market”.

Targets that feel like déjà vu

The company also intends to further capture, through its products, the global market for intestinal health (120 billion euros), with for example Activia yogurts, and that of products rich in proteins (60 billion euros). , with the Oïkos brand.

Danone also considers acquisitions, provided they meet strict criteria, i.e. the presence of synergies and a positive impact on growth and margins.

In terms of numerical prospects, Danone has indicated that it is targeting growth of 3% to 5% per year over the period 2025-2028 with current operating income which will grow “faster than revenues”. These are exactly the same indications as those which were communicated for the first phase of the plan (2022-2024).

The company also indicated that it is targeting a return on invested capital of more than 10%, compared to 9.5% currently, and an annual free cash flow of around 3 billion euros compared to around 2.5 billion euros in 2023.

For Bernstein, the outlook provided by Danone is not enough to push the consensus to raise its expectations, even if the bank judges that the company is making “a wise decision” in giving such targets. “There are not yet enough elements to confidently deliver increased objectives to investors,” explains the financial intermediary.

Oddo BHF, for its part, evokes “achievable and unsurprising objectives”. “However, we believe that the most important point is that the group is committed to a model of long-term value creation,” writes the research firm.

“We continue to see Danone move more and more into the strategic nutritional beverage territory, which means mobility, momentum and health, better value for innovation and much better rotation,” he continues. Oddo BHF still sees potential for appreciation in the company’s valuation multiples, with Danone strengthening its resilience after years of volatility in its financial results.

Stifel, for its part, appreciates “solid” targets which send, according to it, a “sign of confidence” in its newfound vigor. Although the bank thinks it would have been appropriate to give a medium-term margin target.