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Overview of activities, risk factors
2.7 Risk factors
DANONE
REGISTRATION DOCUMENT 2015
28
RISK IDENTIFICATION
RISK MONITORING AND MANAGEMENT
Competition
Danone conducts its business in highly competitive markets
that include largemultinational companies and numerous local
players of different sizes:
•
in Western Europe and North America, Danone's markets
tend to be relatively mature, and competition is therefore
particularly intense, both in terms of pricing and innovations;
•
with respect to Danone's activities in the rest of the world, a
few international food and beverage groups also hold strong
positions in some emerging markets and seek to expand
such positions or enter new markets.
In addition, certain retail and grocery chains, having developed
their own brands, could reduce the shelf space occupied by
Danone's products in favor of their own products.
Danone is thus facing national and international competitors,
which are described in section 2.5
Other elements related to
Danone's activity and organization
related to Competition
.
This
competition could lead Danone to increase its advertising and
promotional expenditures, reduce its prices in order to defend
its market shares or prevent it from raising its prices in order
to overcome cost increases, which could have a significant
adverse effect on Danone's strategy and results.
Danone limits the effects of competition from the leading players
in its markets, notably through its strategy of (i) differentiation
relative to its competitors, especially in terms of product lines,
price/quality ratios and positioning, and (ii) development through
organic and external growth. These elements of Danone's stra-
tegy are described in sections 2.3
Strategic growth areas
and
2.5
Other elements related to Danone's activity and organization
.
Geopolitical environment
Danone's activities and employees can be subject directly or
indirectly to the effects of a period of economic, political, social
or military instability in countries susceptible of experiencing
or having recently experienced such a period, in particular in
Africa, Argentina, and CIS countries.
Also, some countries where Danone operates have regula-
tions that are not very developed and/or not very protective (in
particular with respect to intellectual property rights), and are
often unstable due to the influence of powerful local interests.
Some of these countries maintain foreign exchange controls
and/or control the repatriation of profits and invested capital,
impose taxes and other payments and impose restrictions,
sometimes retroactively, on the activities of multinational
groups. In some countries, national and/or local authorities
may also have recourse to laws and regulations, or to any
other measure having a similar effect, notably to foreign
interests, that restrict the ownership rights and/or access to
liquidity and assets availability and/or the freedom to exercise
its activity and/or equivalent to confiscation, nationalization or
expropriation of assets.
Lastly, Danone conducts business in certain countries, notably
Iran and Russia, which may be targeted by economic and
financial sanctions imposed in particular by U.S. or European
regulations. These regulations prohibit notably transactions
with certain financial institutions and require prior authorization
with the proper authorities before executing any fund transfers.
If the Company and/or its subsidiaries do not comply with these
regulations, Danone could be the subject of criminal penalties
and/or significant financial penalties. Any period of political or
economic instability in a country in which Danone operates or
any economic, regulatory or political measure such as the ones
described above that may be implemented in some countries
could have a negative impact on Danone's activities, results
and reputation.
Danone's international growth results in a geographical distri-
bution that diversifies and limits the concentration of this risk
for a given country. In addition, Danone prepares action plans
and implements measures aimed at reducing the potential
impacts of this risk in the areas of human resources, finance
and legal affairs.
Depending on the situation, Danone's Safety Department may
participate in the development and implementation of these plans
and measures. In certain regions, it creates or consolidates
relationships with State or private partners, whichmay be called
upon if necessary. The Safety Department also gets involved
in situations where the safety of the State and/or international
crisis may affect the activities of the Company's subsidiaries.
However, Danone cannot guarantee that its results will not be
significantly affected by a disruption in economic, political or
regulatory conditions or by a crisis in some of the countries
where it is present.
Sales by geographic region and Danone's top 10 countries in
terms of sales are presented in section 2.2
Presentation of Danone
.