* Danone to separate chairman and CEO functions
* Emmanuel Faber appointed CEO
* Franck Riboud remains chairman of the board
* Changes will take effect Oct. 1 (Adds analyst comments, background, details)
By Dominique Vidalon
PARIS, Sept 2 (Reuters) - Danone said on Tuesday that Chairman and Chief Executive Franck Riboud would split his role after 18 years at the helm of the world's largest yoghurt maker, which is grappling with a series of setbacks in Asia and in Europe.
Riboud, 58, who took over from his late father, Antoine Riboud, in 1996, will remain as chairman and focus on the group's long-term strategy while Emmanuel Faber, 50, the chief operating officer, will become CEO, effective Oct. 1.
The change comes as Danone faces falling earnings due to weak baby food sales in Asia as a result of a health scare and sluggish dairy sales in Europe due to slow consumption and a spike in milk prices.
The group's lacklustre performance notably attracted criticism from U.S. activist investor Nelson Peltz, who suggested in 2012 that Danone, whose products include Evian water and Activia yoghurt, could benefit from a leaner cost structure.
Danone's woes recently refocused investor attention on whether the group, which competes with the much larger Nestle and Unilever, can survive on its own.
In July, Danone, which has annual revenue of 21 billion euros and a market value of 34 billion euros, said it was working on a plan to ensure long-term growth but denied the project was a strategic review, involving any major deals.
The change reflected Riboud's "desire to concentrate on the key strategic issues facing Danone in the medium and long term and to lay the groundwork for a smooth succession," the company said in a statement.
Natixis analyst Pierre Tegner said the move would "help improve operational execution" and reflected "the great lucidity, pragmatism and above all courage of Franck Riboud."
"This may also indicate that the top management takes seriously the threat to Danone's independence," he added.
Riboud is credited with turning Danone's focus to the health sector with a portfolio ranging from baby food to water, dairy and medical nutrition, having over the years ditched the beer, biscuit and glass-packaging businesses.
In 2005 the French government stepped in and deemed Danone as being a "protected" industry amid rumours that Pepsico could make a bid for the company.
"Riboud did a fantastic job in terms of transforming the company over the last couple of decades, but now it is probably time to pass on the torch," Kepler Cheuvreux analyst Jon Cox said. "Danone is in a difficult stage of its evolution and by moving solely to the chairmanship he can focus on the strategy."
Faber is a company insider who has worked closely with Riboud in his 17 years at Danone and will continue to work with him as part of a strategy committee that Riboud will head.
As part of the governance overhaul, Danone also said it was ending the mandate of Bernard Hours, who has been co-chief operating office with Faber since 2007.
Danone shares closed up 0.34 percent at 53.73 euros on Tuesday ahead of the announcement. Year to date, the stock is up 2.35 percent, lagging its European sector, which has gained 8 percent.
Reporting by Dominique Vidalon; editing by Astrid Wendlandt, David Evans and Leslie Adler