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Overview of activities, risk factors
2.7 Risk factors
DANONE
REGISTRATION DOCUMENT 2015
29
RISK IDENTIFICATION
RISK MONITORING AND MANAGEMENT
Economic situation in Danone's principal
markets
Danone's activity and in particular its sales, trading operating
income and cash-flows depend on the economic conditions in
its principal markets.
Aside from the currency risks discussed hereafter, in periods
of slowing economic growth and/or deficit and public debt
reductions that may occur in some countries, Danone may
have to contend with the following phenomena:
•
contraction in purchases by consumers, whose purchasing
power has diminished, and/or change in consumption pat-
terns as a result of economic conditions;
•
increase of existing taxes or establishment of new taxes
on consumers and/or companies, especially in heavily-
indebted countries;
•
specifically in the case of the Medical Nutrition Division,
a reduction in the insurance reimbursement of medical
products and/or pressure on prices and contraction in
healthcare expenditures.
These changes could have a negative impact on Danone's
activities and results.
Also, as described in section 2.3
Strategic growth areas
, in order
to ensure its long-term expansion, Danone's growth strategy
is based primarily on a limited number of countries in which
Danone has strong positions in rapidly growing markets.
If Danone's activity in one or more of these countries were
subjected to adverse trends, it could have negative effects on
Danone's growth.
Finally, given their economic and/or monetary situation, cer-
tain countries, such as Argentina, experience very high and
potentially very volatile inflation, which may affect Danone's
activities and results.
Danone's international growth results in a geographical
distribution that diversifies and, to a lesser extent, limits the
concentration of risk to economic conditions for a given country.
Danone also relies on (i) its reporting system to monitor its
activity and the potential impact of economic conditions in
countries where it is present, and (ii) its organization to take
the necessary measures (adaptation of Danone's activity, its
organization and, if necessary, restructuring plans).
Weather conditions and seasonal cycles
In some cases and for certain Danone products, sales may be
tied to weather conditions and seasonal cycles. In particular,
beverage consumption typically peaks during the summer
months, such that relatively cool summer temperatures may
result in substantially reduced sales of beverages, especially
bottled water, in the corresponding area compared to a normal
year. Seasonal consumption cycles pertaining to certain Danone
products and weather variations could adversely affect the
Group's activities and results.
Weather conditions can also have an impact on the prices and
the availability of certain raw materials, and as a result on
Danone. This risk is described in the section above
Rawmaterial:
price volatility and availability.
The intensity of the seasonal impact varies depending on
Danone's business lines. Moreover, Danone's international
growth results in a geographical distribution of its activities
that helps to diversify and limit the concentration of this risk of
weather changes for a given region. Lastly, Danone relies on
its operating experience (notably through the development of
its product lines and management of its markets) to limit the
impact of weather conditions as much as possible.