The food industry is at a "tipping point" due to changes in demographics, consumer preferences and scientific advances, according to the chief executive of French yoghurt maker Danone.
"You just have to look at demographics -- there are more elderly people not in an amazing state [of health] and you look at the impact of food on health, and look at the science," Antoine de Saint-Affrique told the Financial Times.
Danone, the maker of Activia yoghurt and Evian water, has been investing heavily in gut health research in-house and through acquisitions, as well as in growing its medical and specialised nutrition business.
Many diseases were the "consequence of not taking care of the microbiome -- it's too many antibiotics, it's not the right kind of [dietary] regime", said Saint-Affrique.
The push in the US under health secretary Robert F Kennedy Jr to counter obesity and food additives aligned with Danone's initiatives, which were already reducing sugar content and removing dyes from its products.
"That is exactly what Maga is advocating," Sainte-Affrique said. "The logic that food can have a positive impact on health if properly designed is something that we've been advocating forever."
Danone invested close to €500mn in research and innovation last year, up 10 per cent year on year, and plans to keep spending. It also had record free cash flow.
Danone was in dire straits four years ago when Sainte-Affrique joined from Swiss chocolate maker Barry Callebaut after Emmanuel Faber was ousted under pressure from activist investors.
Shares lagged its peers amid a sales slump, a stalled restructuring and a deeply and publicly divided board. "The company was challenged, that's the one word for it," Saint-Affrique said. "We moved extremely fast."
The board was almost completely replaced and new company targets set. Saint-Affrique changed Danone's financial guidance to focus on longer term growth instead of the old model of hitting margin targets by a certain date.
The previous approach led to taking "shortcuts" to get results, he said: "You stop investing in R&D, you stop investing behind the brands and your people."
Danone has reshaped its portfolio, eliminating underperforming product lines and selling non-core assets such as Horizon Organic, a US dairy company, last year, with headcount cut by about 1,600 globally.
Saint-Affrique requires top management to make time to meet with groups of younger workers without their bosses every time they visit Danone's operations. "In about five minutes, once the stress is gone, you get everything about the company from people," he said.
Danone has returned to consistent sales growth led by volume increases, rather than price rises. Like for like sales gained 4.2 per cent in the first half of the year. Shares have also gained ground compared with competitors such as Nestlé, Unilever and PepsiCo, rising almost a fifth this year for a market value of €52bn.
Analysts at Bernstein were among those to upgrade annual sales expectations, "reflecting the more positive outlook".
Saint-Affrique said share buybacks were possible but not the main priority as the company focuses on paying down debt and potential deals.
Danone recently bought US-based organic medical nutrition company Kate Farms and the Akkermansia Company, a Belgian biotech company focused on microbiome science, though an attempt to buy Kefir maker Lifeway foods fell apart in September. "We have the flexibility for acquisition," Saint-Affrique said.