Emmanuel Faber, Danone CEO: on the alert for blind spots
The head of the French foodmaker says the discipline of rock climbing improves his judgment
Emmanuel Faber does not like the way the global food industry is going. He considers “a major risk” the fact that just one of thousands of species of plant accounts for 40 per cent of North America’s tomato consumption, even though management books teach that standardisation equals efficiency.
He rejects the textbook strategy of using size to squeeze more profit from small-scale producers. “If your assumption is that by growing and growing, you will be able to hit your small suppliers even harder . . . ultimately, that is a dead end,” he says.
Neither of these opinions would seem misplaced at a meeting of slow-food proponents celebrating local produce or a rally against Big Business. But as chief executive of Danone, the world’s biggest yoghurt maker, Mr Faber is striking out over terrain rarely visited by his peers.
Then again, Mr Faber does not entirely fit the executive stereotype. On a spring afternoon, he sits in a small room at Danone’s Paris headquarters wearing jeans and a white shirt open at the neck. His fingertips are covered in plasters, the consequence of a recent rock-climbing trip in the French Alps.
As Muhammad Yunus, the Bangladeshi social entrepreneur and Nobel Peace laureate, who has worked with Danone on social investment projects, says: “I was surprised to see a person like him in a big multinational company.”
Danone’s corporate social responsibility programme was well under way by October 2014 when Mr Faber, who had been at the company for 17 years, took over the top executive role from Franck Riboud, long-time chief executive and chairman, and son of the founder.
But as only the third chief executive of the group in 60 years — the other two were Ribouds — he appears determined to help define his leadership by pushing deeper. He talks about reforestation in Kenya, one of dozens of projects that have sprung from the Danone Ecosystem Fund, the €100m fund that Danone shareholders created in 2009 out of group profits.
Recycling is a second big theme for Danone. “We need one day to recycle more plastics than we are producing,” he says. He advocates multiple supply models, from contracts with big agro-business to small-scale farmers, to protect local production and community: “Big Food shouldn’t threaten biodiversity through standardisation.”
Failure to act would amount to having blind spots, such as “things that come from competition, regulation, politics, foreign exchange, input prices, inflation, food safety, consumer trends, everything”, he says. “I have learned to become very alert to blind spots . . . so I try to maintain a balance in my schedule to connect myself with a very wide array of people.”
In 2009, the approach took him not to Davos, the annual meeting of the World Economic Forum, but to Belém in Brazil, host of the World Social Forum, the anti-globalisation gathering.
“I got slammed for it but at least I got a different point of view,” he says. “You don’t need to go to Davos to know what is going on in Davos; if you don’t go to the WSF, you just don’t know.”
Mr Faber is trying to make his mark as chief executive in other ways too. Shortly after taking over, he reshuffled the board, including the position of chief financial officer, which he once occupied himself.
He moved quickly to quash old but persistent rumours by confirming that Danone was keeping its medical nutrition business which, alongside fresh dairy, bottled waters and infant nutrition, make up Danone’s four main divisions, with household names such as Actimel or Volvic.
The sound of drilling and the odd hammer blow as he speaks are reminders that physical change is also under way. Each floor of Danone’s once-standard interior is now dedicated to — and decorated in the style of — a region.
On the brightly painted Africa floor, yellow and black lounge chairs adorn the area by a coffee machine, and there are lockers — named after Danone products — where visiting regional staff can stow belongings.
Employees using the Dream Room, a silent space with fake grass for carpet and no furniture, are invited to remove their shoes.
Mr Faber admits he cuts a different figure from the gregarious Mr Riboud, with whom the Danone brand has been associated for decades. For a start, he considers himself less spontaneous than his predecessor, who remains in the role of chairman, having split the chairman-chief executive post when Mr Faber was appointed.
“He is probably quite extrovert and I am quite introvert,” he says. “I am probably more about organising the collective work and designing processes to create the result as opposed to going for the result myself.”
But he is unfazed by the size of shoes he has to fill. “Franck loves golf and I climb — and that’s fine.”
Born and raised in the French Alpine city of Grenoble, Mr Faber practises rock climbing at least once a week when he is in Paris, and says the discipline influences his management style.
“Climbing involves huge mental focus, commitment, risk calculation and a sense of here and now,” he says. “It helps me with everything I do and also at Danone. It is about making judgment calls under pressure. You can’t lie to yourself when you climb and you can’t lie to yourself in a job like this one.”
Mr Faber, who worked at Bain & Co early in his career, oversaw solid results during his first full year in charge. With sales of €22.4bn and like-for-like growth of 4.4 per cent, Danone met its targets, pleasing analysts and investors.
“The new CEO/CFO management team has done what it said it was going to do, and seems intent to do the same again in 2016 . . . manage the business sensibly and sustainably for the long term,” Andrew Wood, analyst at Bernstein Research, wrote recently.
Still, questions remain. One concerns its baby-nutrition business in China, which has seen multiple problems in recent years. Another, perhaps bigger question hangs over fresh dairy, which accounts for almost half group sales but where sales growth has slowed from 4.6 per cent in 2011 to 0.6 per cent last year.
The depressed European market has been the main problem for Danone, and fresh dairy sales there shrank again last year in spite of promises that they would be flat. Mr Faber is confident that 2016 will break the negative run. Sales of Actimel, one of Danone’s biggest brands, have stopped shrinking; Activia, another big name, will be stable by December, he says.
One reason for the optimism is that a long period of falling milk prices, which competitors used to cut prices to consumers, is coming to an end, he says.
Another is a new approach to spending, which he calls “beyond budget”, that has led to Danone replacing the traditional annual plans with a flexible quarterly spending plan guided by a rolling forecast projected over five quarters. “We can work tactically on a three-month basis or strategically, looking at capital expenditure over the next 12 months,” he says. “It is the notion of not even being interested in the budget but having a constant ability to reallocate your non-fixed resources.”
Rumours have swirled recently that Danone is looking closely at Mead Johnson, the infant-formula maker, and shares in the US company jumped 10 per cent one day this month when a blog suggested that a deal with a European buyer was in the offing.
“You are badly informed,” he responds to questions about this, adding only: “We don’t need to go for a major acquisition to do what we want to do.”
