DANONE - Registration document 2015

Overview of activities, risk factors

2.4 Description and strategy of the Divisions

DANONE

REGISTRATION DOCUMENT 2015

Waters

The Waters Division comprises the natural waters business along

with

Aquadrinks

(waters flavored and vitamin-enriched with natural

fruit juice extracts, fruit juice and vitamins).

The Division has international brands such as

evian

Volvic

and

Badoit

and very strong local brands:

Aqua

in Indonesia,

Mizone

in China,

Bonafont

inMexico

, Villavicencio

and

Villa del Sur

in Argentina,

Fontvella

and

Lanjarón

in Spain and

Zywiec Zdroj

in Poland.

The Division's strategy is based primarily on the development of

bottled water and

Aquadrinks

consumption, notably through the

following measures:

•

promotionof hydration-relatedhealthbenefits: Danone is establish-

ing initiatives to promote healthier hydration through partnerships

with public health authorities and scientists and by communicating

directlywith consumers in order to inspire healthier hydrationprac-

tices. In particular, the Company runs the “Hydration for Health”

scientific platform. For the past seven years, 150 scientists and

public health authority researchers from around the world have

met annually to share and promote the advances in the area of

hydration science and its positive effect on health;

•

long-term management and environmental protection of water

resources: Danone strives to preserve the unique quality and

sustainable nature of its natural waters products by strengthen-

ing the protection of its springs and respecting the water cycle.

Danone is also committed to getting all socio-economic players

involved through associations and partnerships that promote the

development of non-polluting activities and the establishment of

agricultural practices that do less harmto the environment around

the catchment areas;

•

the development of a line of light andnatural beverages, alternatives

to sodas and other sweetened beverages. The challenge is to facil-

itate the adoption of healthier hydration practices for consumers of

sweetened beverages. Many of the Company's water brands also

come in flavored versions or mixed with fruit juice,

i.e. Aquadrinks;

•

packaging innovation: in order to reduce its environmental impact,

the Division has substantially reduced the weight of its bottles over

many years and uses newpackagingmaterials such as onesmade

from plant-based or recycled materials.

Early Life Nutrition

The Early Life Nutrition Division focuses on the first 1,000 days of the

child,

i.e.

from the first day of pregnancy until age 2. The Division's

activity consists of specialized foods for babies and young children to

complement breast-feeding while always complying with the World

HealthOrganization (WHO) Code and local laws. It also offers products

and services to pregnant women and nursing mothers.

Theinfantformulasegmentaccountsformorethan80%ofthisDivision's

activity, witha special emphasis on the development of second and third

stage follow-up milks (designed for children at least six months old).

Supplementary foods for babies, also known as “weaning food”,

account for more than 10% of the activity and are marketed mainly in

European countries such as France, Italy and Poland.

The Division's development strategy is built around a singlemain area

of focus, namely developing products suitable for a child's first years,

and consists of three priorities:

•

demonstrate the relevance of this category of Early Life Nutrition

brands as an answer to the specific needs of pregnant women,

nursingmothers, babies and young children by raising awareness

amongparents, opinion leaders andhealthcare professionals about

the importance of nutrition during the first 1,000 days;

•

associate health and flavor as two indivisible qualities in baby food.

The Early Life Nutrition Division is very active in research on taste

acquisition in the youngest children and prepares products offering

awide range of flavors, in close collaborationwith sensory experts;

•

determine local nutritional needs, notably in the new regionswhere

the Division is growing by studying local dietary practices as well

as the state of nutrition in order to provide answers to local public

health challenges in accordance with the requirements of health

authorities and local associations.

The Division deploys its local brands from international brand plat-

forms, thereby enabling the global and rapid dissemination of best

practices from each country. For example:

•

the “Blue House” platform includes in particular the

Aptamil,

Nutrilon, Almiron

and

Gallia

brands;

•

the “Heritage Brands” platform includes mainly the

Bebelac,

Cow&Gate, Blédina, Malyutka

and

Dumex

brands.

Medical Nutrition

The Medical Nutrition Division focuses mainly on dietary manage-

ment of patients receiving medical treatment, babies afflicted with

certain illnesses and frail elderly people. The Division's products are

designed primarily to treat malnutrition due to disease in order to

satisfy special food needs. These products –most of which are eligible

for insurance reimbursement – are recommended or prescribed by

healthcare professionals (doctors, medical personnel in hospitals,

clinics and pharmacies).

Under the umbrella brand

Nutricia

, the Company has a large portfolio

of brands marketed in several countries, including for example:

•

Nutrison

: tube feeding for dietarymanagement of patients who are

not capable of feeding themselves normally or who suffer from

illness-related malnutrition;

•

Fortimel/Fortisip

: liquid oral nutritional supplements;

•

Neocate

: hypoallergenic products aimed at babies and children

with dairy or multiple food protein allergies;

•

Nutrini/Infatrini

: oral and feeding tube food products adapted for

the dietary treatment of babies and children who, due to illness,

are incapable of feeding themselves normally or sufficiently or

suffer from malnutrition.

Danone's strategy consists of increasing its global coverage by

establishing in new countries and developing various distribution

channels. The Company estimates that themedical nutritionmarket's

growth potential is significant, mainly as a result of (i) the aging of

the population in some countries, (ii) the increased awareness of

the role of nutrition in health, (iii) the emergence of new illnesses

and allergies, and (iv) the growing number of screening procedures

enabling early management of afflicted patients. Moreover, current

research to accompany certain illnesses and allergies could con-

tribute to this growth potential.