Danone announces plan to generate €200m savings in Europe

French dairy firm Danone has announced a cost reduction and adaptation plan to generate €200m savings in Europe in the next two years.

With this move, the company is seeking to address a fall in sales in the region and regain its competitive edge.

As a part of the plan, Danone will lower general and administrative costs, and implement changes at organisational level by reducing jobs.

The job cuts will affect management and support functions, and will be based on voluntary departures; however, the company has not yet disclosed the number of cuts it intends to make.

Danone noted that the cost cutting plan in combination with the ongoing productivity initiatives would enable it to better use its resources to make the company’s brands and products more competitive.

The company plans to discuss the new cost-cutting plan with the trade unions in March 2013.

Danone has been affected by the decline in consumption in Europe, where the company generates 42% of its sales.

It reported a 1.5% drop in European sales for the third quarter of 2012, compared with the previous year, with dairy sales in Spain and Italy falling by more than 10%.

Of the company’s total workforce of 100,000, it employs 27,000 in Europe, with 9,000 in managerial roles.

Danone is under pressure to boost performance after US investment firm Trian Fund Management acquired a 1% stake in the company last month.

Activist investor Nelson Peltz, who heads Trian Fund Management, noted that Danone shares were undervalued, and having a leaner cost structure and avoiding dilutive mergers could lead to significant shareholder value.

Danone, based in Paris, France, has four divisions: fresh dairy products, waters, baby nutrition, and medical nutrition; it operates primarily in France, Russia, Spain, Germany, the UK, China, Indonesia, Mexico, Argentina, and the US.