Published: Nov 08, 2012 5:46 PM EST
Updated: Nov 09, 2012 7:30 AM EST

NEW YORK (AP) - A key investor in Danone says the French food company should change its approach to improve its profitability.

Trian Fund Management L.P. CEO Nelson Peltz said at a conference in Chicago Thursday that he believes Danone's shares are trading below their true value. He suggested the company could benefit from a leaner cost structure and from refraining from dilutive mergers to improve shareholder value.

Funds managed by Trian have about a 1 percent interest in Danone.

Danone makes products like Activia yogurt and Evian bottled water. Peltz said it is one of the best positioned global food companies and should generate above-average margins but it lags behind its peers.

Peltz said Danone should adopt a more balanced approach to growing not only sales but profitability.