At the intersection of corporate profit and social impact, French food industry giant Danone is shifting its focus to the greater good.
Cynicism towards “big food” is widespread, particularly amongst younger consumers in rich countries, who factor not only taste but health, ethics and sustainability into their buying decisions. The trend has been fuelling fragmentation in the food industry for years as consumers increasingly favour smaller brands that make organic, plant-based and GM-free products. Emmanuel Faber, CEO of Danone, shares consumers’ views. “People are walking out of brands that they’ve been consuming for decades,” he points out.
Danone launched its “One Planet. One Health” vision last summer, pledging healthier and more sustainable practices. The rebranding followed its 2016 acquisition of WhiteWave Food Company, a maker of plant-based foods and beverages, organic dairy products and produce. Faber said at the time that Danone had comprehensive, farm-to-table plans, influenced by shifting consumer tastes and attitudes. Apart from being aligned with Danone’s new direction, the deal boosted its presence in the organic foods market and heightened its profile in America. Danone earned €25 billion ($28 billion) in revenues in 2017.
Faber’s vision for Danone goes beyond satisfying more current consumer tastes and adopting more sustainable practices, to the “motivating idea of the company”, as The Economist explains. “That means rejecting the Anglo-Saxon idea that a firm exists primarily to maximise the welfare of its owners, the shareholders.” Faber says that rather than create shareholder value, the goal is to “get healthy food to as many mouths as possible, benefiting everyone from suppliers to consumers to owners.”
In addition to acquiring healthier brands, Danone has shed subsidiaries that produced biscuits, chocolate and beer. The company is addressing the problem of plastic by working to make its Evian bottled mineral water carbon neutral. Danone also runs non-profit “social businesses”, and is looking to certify more of its for-profit businesses as “B Corporations.” The legal status is granted to for-profit firms in the U.S. whose defined goals include positive social and environmental impact as well as profit. So far about 30% of Danone’s subsidiaries are certified as B Corps, and it hopes to certify them all within a few years.
Danone is not the first big firm to declare that food industry leaders should also take the lead on environmental, social and corporate governance matters. But analysts agree that Danone goes further. On the business side, Martin Deboo of Jefferies International notes that Danone has a mixed record with European investors. Its returns of around 8% on invested capital are relatively low; however the tide could be turning in Danone’s favour if its approach becomes more mainstream – as many long-term asset managers, banks and other financial partners believe it will.
