Danone SA said Thursday it is considering whether to cut jobs in Europe as part of a plan to save about €200 million ($260 million) over the next two years, as the world’s biggest yogurt maker contends with weakened sales in the recession-hit region.The job cuts are to be limited to managerial and support functions and will be based on voluntary departures, while factories are excluded from the layoffs for now, said Danone, producer of Activia yogurt and Evian water. It declined to say how many positions would be affected. More details on the cost-saving plan will be given in March, after executives meet with workers’ unions, Danone said.
The move is the latest evidence of the challenges to large companies posed by Europe’s three-year-old, sovereign-debt crisis. Danone, along with other corporations, has been struggling, particularly in southern Europe, as shoppers cut spending even on food as unemployment soars and governments impose austerity measures.
Companies have moved operations out of parts of southern Europe, including French retailer Carrefour SA, which has pulled out of Greece and is focusing on high-growth emerging markets. Carrefour is the world’s second-largest retailer, after U.S.-based Wal-Mart Stores Inc.
In the third quarter, Danone posted a 1.5% drop in third-quarter like-for-like sales for Europe, dragged down by a 10% decline in its fresh-dairy business in southern Europe.
«We aren’t accepting the idea that Europe is doomed to a decline. We want to find a new dynamic,» said Laurent Sacchi, a Danone spokesman. «The aim of the plan is to give us room for maneuver to reinvest.»
In addition to job cuts, Danone is seeking to simplify decision-making processes across Europe and cut costs on areas such as travel and back-office work. The plan adds to the €500 million in annual production-cost savings already in place. In an effort to boost sales in Spain, a key market for Danone, the group has lowered prices and launched products and promotions in the market during recent months.
Out of Danone’s global workforce of roughly 100,000 people, about 27,000 are in Europe and approximately 9,000 are in managerial positions.
«The decision to reduce staff—which is quite exceptional for the group—highlights the seriousness of the situation on European markets,» said Jean-Marie L’Home, an analyst at brokerage Aurel BGC.
The savings plan might not be enough to get Danone back on track though, analysts said.
«They probably aren’t being as aggressive as they could have been and there is a big question mark over how much of the savings will be reinvested and how much will go to the bottom line,» said Jamie Isenwater, an analyst at Deutsche Bank .
Danone has faced pressure from activist investor Nelson Peltz, who last month said he took a 1% stake in Danone through his investment firm Trian Fund Management LP, and called on the group to improve profitability. Mr. Peltz couldn’t be reached for comment.
Mr. Sacchi said the decision to pursue a cost-cutting plan had nothing to do with Mr. Peltz’s involvement in Danone. «We have thought for several weeks, if not months, about a way to regain a competitive edge,» he said.
He declined to comment further on Mr. Peltz’s holding.
Source: Wall Street Journal
