However they are more offensive on Accor

It's a beautiful story as love them fellows. Ten years ago, Danone decided to separate considered non-strategic assets to reposition itself on three trades: water, dairy and biscuits. If the group still completes the restructuring of this industry, this strategy allowed him to range to offer products with higher margins his famous evil while regenerating its growth, including winning market share on mature yet deemed countries like the United States. Hailed by investors, this strategy is now in "case" to illustrate the merits of a repositioning on products with higher margins in a same trade.

As explains Romain Boscher, Manager actions in Groupama Asset Management: "these shifts are often the only way to survive in mature markets to pressure on prices exerted by emerging countries and the profound technological changes." PagesJaunes, for example, chose early to focus on the Internet, where the potential for growth is higher than on paper directories and where operational costs are lower. That decision confirmed its leading position when Spanish and Italian competitors have strongly suffered from competition from new entrants through the Internet.

In the news, these examples of repositioning on higher margin products abound. Among the most prominent, the interviewed managers cite loose PPR and its transition to luxury, Mediterranean Club and its closure of the villages of the less profitable holiday for the benefit of more luxurious complexes, or Accor. Its particularity is instead redeploy economic hotel, where the return on capital employed is better than on luxury hotel. On the squares European are mentioned, among other things, Bulgari, the Italian jeweller, which offers a range of still more luxurious watches, and Cadbury Schweppes, with the acquisition last year of Green & Black's, brand of bio chocolate and fair trade.

On the stock market, these values have however known difficult passages. As these transitions always open a phase of uncertainty and do not always operate is as successful as that of Danone. The unfortunate example in recent years is the large distribution. If hub begins to straighten the bar, Upselling attempts resulted across a takeover of Safeway by Morrisson and accelerated loss market share of Sainsbury's for the benefit of Tesco, which has delighted its position as leader in Britain.

To the risks of failure, management professionals generally welcome these relocations with caution. To begin with, they draw a distinction between changes in anticipation, as was the case of Danone, or under duress. The clearest illustration comes from SEB, which undergoes head-on competition from Asian appliances. If the managers consider that repositioning on products with higher margins is inevitable, they expect indeed tangible signs of improvement to return en masse on the title, in view of the history of the sector. Because Moulinex, its former competitor, had in the past attempted to reposition on products above range by Krups, although this shift allows him to save his activity.

Managers are wary of simultaneous relocations within an industry. "With the decline of registrations, several car manufacturers have expressed their desire to range, notes Pierre-Alexis Dumont, Manager for Ofi Asset Management". This segment is certainly expanded, but it remains too close to the final consumer demand, and is already occupied by major players engaged a fierce competition. It is therefore obvious that part of the promises made to the market are not required. "In the community, this vigilance is also appropriate for medical imaging, a trade that Siemens, Agfa-Gavaert and Philips is looking to develop at the same time.

For all of the managers, the essential criterion is the credibility of the management, sitting on its successful restructuring and acquisitions, which offers the best guarantee for the quality of execution of these transitions.

Study of risk

To do the sorting phase of repositioning companies, managers are first and foremost priority to visibility. "These changes in strategy are quickly integrated into the expectations of analysts, that they give rise to expectations too ambitious or that they pay in excess of pessimism." They are a mine for hedge funds, who are tempted to buy rather than the "shorter" (selling short) on effects of ads, while these transitions are always long to implement. "This is why I prefer consistently simple with clear strategies records, crossing with serenity the possible phases of turbulence", said Olivier Faramond, Manager of the mutual fund SVS Europe wide in Swan Capital.

More importantly, they define different strategies depending on the risk profile or the degree of progress of projects. On records deemed still "early", SEB or Club Med, interviewed managers preferred to be lines limited in the portfolios they can eventually cut for disappointment or expand over the publications of results.

However, they are more offensive on Accor. As summarised Eric Bleines, Manager at JRC Actions: "all the lights are finally green." After several months of conflict, the management team is again strong and relies on a stable shareholder. On its activity, company is on its core business where it has expertise and offers better visibility to the shareholders, economic Hotel being less cyclical than luxury hotel. Finally, this transition will operate by disposals of non-strategic assets, and not by acquisitions, which will allow a better allocation of the cash.

Similarly, managers are just as confident on PPR despite the many twists and turns that have dotted its repositioning on luxury. "A virtuous circle is finally engaged and its margins should continue to increase quarter after quarter," says Anne Meniel, Director of management actions in MMA Finance. "With its cash reserves and its real estate assets, the group will now be able climb power through acquisitions." Potential targets include Bulgari, who himself made significant efforts to remedy its margins.