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Overview of activities, risk factors

2.3 Strategic growth areas

DANONE

REGISTRATION DOCUMENT 2015

15

2.3 STRATEGIC GROWTH AREAS

True to its mission of “bringing health through food to as many

people as possible,” Danone reaffirmed and translated this mission

into a Manifesto.

This Manifesto is the core of the transformational “Danone 2020”

five-year plan, which focuses on three main streams:

•

Alimentation: encourage healthier eating behaviors;

•

Strategic resources: strengthen Danone's ability to protect and

optimize our essential resources—water, milk and plastic— and

secure its license to operate in a cycle-oriented way;

•

People and the organization: the goal is tap into the full range of

talent at Danone to give its corporate architecture more solidity

and more relevance for today's world.

Alimentation

Danone does not limit its mission to simply satisfying nutritional

needs. It also includes a cultural, social, emotional and physiological

dimension linked to local eating habits in each region around the

world. Danone has chosen to provide food that takes into account

each community's own way of life while using pleasure as means

to get people to adopt and maintain healthy eating behaviors. The

idea is therefore not to focus exclusively on the sale of food prod-

ucts but to adopt a broader vision and promote dietary practices

by offering a superior product and services experience as well as

a healthy alternative that is adapted to the communities while still

retaining the goal of building, fueling and protecting health capital.

In that context, demographic trends and the major nutrition chal-

lenges generate new growth opportunities for Danone. A balanced

diet is in fact a genuine challenge in a world where 25% of the world's

population suffers frommalnutrition and 10% of adults are obese. In

this context, each of Danone's businesses – Fresh Dairy Products,

Waters, Early Life Nutrition and Medical Nutrition – contribute to

this mission and play a role in the profitable and sustainable growth

strategy that Danone has set. Danone is thus developing its activities

in all of the world's regions, notably in emerging countries. They

constitute a key lever for Danone to successfully carry out itsmission

while ensuring its long-term growth. In 2015, emerging countries

accounted for 52% of the Company's sales.

To implement its strategy, Danone relies first on major growth

markets in which it enjoys strong positions such as Indonesia, China,

Russia, the United States, Mexico and Brazil. In these countries,

the Company continues to develop the consumption of its product

categories, especially through innovation.

Danone is also pursuing its expansion in new countries in order to

develop new sources of growth. Since 2013, Danone has accelerated

its growth in Africa, with the increase of itsmajority stake in Centrale

Danone (Fresh Dairy Products, Morocco) and the purchase of an

equity interest in Fan Milk (Fresh Dairy Products, West Africa) and

Brookside (Fresh Dairy Products, East Africa). Danone's goal is to

take advantage of all of the growth opportunities Africa has to offer

in the near and medium term.

With a presence in more than 130 markets, Danone is committed

to developing and optimizing its organizational model to make

the most of its global size while providing strong support to local

businesses. In the near term, Danone's priority is to strengthen its

various supply, distribution, manufacturing base and quality control

platforms and to fuel future growth by relying in particular on its

ability to innovate. Innovation plays a key role in the implementation

of this strategy in order to adapt the products and distribution to

the local conditions and consumption patterns.

A new approach to managing strategic resource cycles

Danone has decided to focus increasingly on the upstream segment

of its activity (environmental management, raw materials supply,

manufacturing processes and logistics), not only to optimize costs

but also to create a lever for value creation and differentiate Danone

from the competition.

Thus one key stream of the transformational “Danone 2020” plan

is a new approach for managing strategic resources (milk, water

and plastic). For Danone, these resources are essential not just

from an economic standpoint but also an environmental and social

standpoint. Danone's key rawmaterials come fromnature andmust

therefore be protected by creating shared value for ecosystems and

communities where Danone operates. These resources are there-

fore managed as cycles in order to ensure their long-term viability,

limit their volatility and, lastly, gain a true competitive advantage.

•

in the milk industry, the Company is working closely with lo-

cal producers to improve animal husbandry practices in both

developed and emerging countries. Collection entities and

cooperatives open to small producers were created in several

countries (Egypt, Indonesia, India, Mexico, Turkey, Ukraine, etc.)

in order to help members manage their farms, optimize their

purchases, improve the herd's feed or get veterinary treatment;

•

in the area of water, Danone has made commitments to protect

resources, particularly where they are scarce, and uses water

in harmony with local ecosystems and communities. By 2020,

Danone plans to deploy a new tool for measuring its water

footprint in all its subsidiaries. The Company is also committed

to reducing water consumption in its factories by 20% between

2010 and 2020;

•

in the area of plastics, Danone is striving to reduce its weight and

excess packaging and to use recycled materials. In that regard,

Danone contributes to the development of recycling channels

for its packaging in many countries.