DANONE - Registration document 2015

Overview of activities, risk factors

2.4 Description and strategy of the Divisions

DANONE

REGISTRATION DOCUMENT 2015

People and the organization

As part of its transformational “Danone 2020” plan, Danone has

adopted a new administrative organization that is more robust and,

more importantly, better adapted to an environment that will remain

politically and financially complex, unstable and fragmented. Danone

has therefore launched several initiatives in order to enhance its

efficiency, expertise and flexibility, notably

One Danone

and

Beyond

Budget

projects.

•

One Danone

: this project seeks to make a lasting and positive

contribution to the success of Danone and its employees. Its

objective is to build a solid framework for Danone that supports

its unique spirit and culture. Danone's goal is to make a bigger

impact and improve its consistency and efficiency by sharing and

strengthening its expertise and using resources across business

lines to an even greater extent. These efforts will support the

development of its activities, while the Company remains close

to its markets. On the one hand, Danone needs to optimize its

organizational entities by pooling certain support functions,

and on the other it needs to invest in key functions, which are

essential to ensure the long-term viability of Danone's model;

•

along with One Danone, Danone has also reviewed how it steers

its performance, time frames and activity cycles in its

Beyond

Budget

initiative. This initiative marks a radical shift in how

Danone plans to allocate resources going forward. Danone is

thus replacing the traditional budget process with a rolling fore-

cast,

i.e

. a dynamic forecasting process based on new forecasts

determined at the end of each quarter with the aim to strengthen

discipline, flexibility, agility and the organization's precision in

terms of resource allocation.

Towards a strong, profitable and sustainable growth by 2020

Danone's ambition is to generate strong, profitable, sustainable

growth by 2020, meaning a growth greater or equal to 5% including

the following dynamics:

•

between +3% and +5% for the Fresh Dairy Products Division;

•

between +7% and +10% for the Waters and Early Life Nutrition

Divisions;

•

between +6% and +8% for the Medical Nutrition Division.

Danone also commits to a yearly margin increase to which the main

lever is the structural recovery of the Fresh Dairy Products Division

margin. Danone anticipates an improvement of the Fresh Dairy

Products Division margin of more than 200 bps between 2015 and

2020 compared to 2014 with like-for-like exchange rates.

2.4 DESCRIPTION AND STRATEGY OF THE DIVISIONS

Danone implements its strategy in a specific manner for each of its four Divisions.

Fresh Dairy Products

The Fresh Dairy Products Division produces and markets yogurts,

fermented fresh dairy products and specialized dairy products.

The Division's strategy consists of developing consumption of these

products in all regions around the world. The strategy is based

notably on:

•

strengthening the Division's main growth platforms such as

the United States, Russia, Brazil, Mexico, Morocco and South

Africa, where consumption of fresh dairy products offers strong

growth potential;

•

maintaining business volume in mature European countries,

notably through product quality, constant product line renewal

and innovation;

•

the development of new regions, in particular in Africa (for example

in Egypt, Nigeria and Kenya) or Asia (notably in China through

the strategic alliance forged with Mengniu in 2013).

The Division continuously renews its product lines in terms of fla-

vor, texture, ingredients, nutritional content and packaging. This

innovative capacity enables it to reach new consumer segments

and develop new consumption moments while adapting to the local

tastes and dietary preferences of each market and making sure to

cover the full range of price points.

To promote the consumption of fresh dairy products, the Division

also strives to build a consensus around the central role of its

products as part of a balanced daily diet. Fresh dairy products

certainly do provide essential nutritional benefits for the human

body, notably proteins, carbohydrates, calcium, phosphorus and

vitamins B2 and B12.

The Division relies on a solid portfolio of international and local

brands benefiting from a high profile and good reputation.

The Division's main brands and product lines are as follows:

•

so-called core business brands, which include basic fresh dairy

products such as plain and fruit yogurts;

•

Greek-style yogurt lines such as

Oikos

and

Danio

, which contain

twice as much protein as standard yogurt;

•

the

Activia

line, which has been marketed for more than 20 years

and is now present in more than 70 countries;

•

brands aimed at children and pre-adolescents, such as

Danonino

which have been replicated in more than 50 countries (notably

under the

Fruchtswerge

Danoninho

and

Petit Gervais

brand names),

as well as

Danimals

in the United States,

Serenito

in Argentina

Tëma

in Russia;

•

functional brands such as

Actimel, Danacol

Densia

;

•

indulgent lines such as

Danette

Fantasia

Danissimo

YoCrunch

;

•

Vitalinea

, also marketed under the

Light & Fit

Taillefine

Ser

brand names, which comprises the low-fat product lines.