MGT512 - Case 1 - Danone 2023-09-01 08 - 18 - 39

MGT 512.
Strategic Management
DANONE, 15 YEARS OF STRATEGY

Danone is a French food-products company. In 2017, Danone has generated € 24.7 billion net sales and
was employing 100 000 people. From 1996 to 2015, Danone’s Chairman and CEO was Franck Riboud. Under
Franck Riboud’s leadership, Danone refocused on a limited set of businesses and developed a global
presence. In 2015, Emmanuel Faber was appointed CEO while Franck Riboud remained Chairman of the
board. The following interviews are excerpts of Danone’s annual reports. After having formed a team of 3-4
students, select one of the following documents and try to answer the following questions.
Questions
 What is Danone’s mission statement?
 What are the consequences of Danone’s mission statement on the company’s strategic choices?
 Identify Danone’s strategic business units.
 What are the key strategic choices made by Danone? Use appendix 1 to develop a rigorous analysis
of Danone’s strategy.
 Share your insights with other students. How does Danone’s strategy has evolved over-ti me? Bui l d
a timeline to represent the evolutions of Danone’s strategy. Appendix 2 provides a template for
building such a timeline.
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MGT 512. Strategic Management
Danone 2004: The Danone adventure

Interview with Franck Riboud (Chairman and CEO)
DANONE’s business model is based on organic growth, driven by geographical expansion, innovation and
the rapid progress of brands that stand for health.
You have described 2004 as an historic year. Could you tell us more about that and about the Group's
business over the year?
By “historic” I was simply referring to the fact that we posted the strongest organic growth in our history—
7.8%, which is not only our best ever, but also one of the best showings in the food industry worldwide.
Obviously, we feel very satisfied with that, especially as we have run into some headwinds here and there.
But looking beyond that result, I think it is important to emphasize two things. Firstly, that we have
consistently met our targets and commitments, year after year. And secondly, that we have the capacity to
maintain strong growth.
What do you consider the main sources of growth potential?
Last year, our three businesses all increased their sales. But to understand the dynamics of our Group's
growth over recent years, you need to look at things a bit differently— not necessarily in terms of individual
business lines, even though our growth strategy is clearly founded on the strength of our three core
businesses.
Firstly, there are what we call our blockbus ters— product concepts that each generate several million euros
in sales around the world and achieve double-digit growth. Most of these are in Fresh Dairy Products, and
their succes s reflects the health benefits they offer consumers with the support of consistently high spend i ng
on researc h and developm ent. To take some examples, Actimel, Activia —sold as Bio in France—and Taillefi n e -
Vitalinea have all seen sales rise by over 25%.
Then there are beverages in Asia, which are a very powerful source of growth momentum. We are market
leader for water in China and Indonesia, and we are working hard to expand our business in beverages with
health and functional benefits. All told, sales were up 14% last year.
Which brings me to the third driver for growth—g eog ra phica l expansion. We are building the Groupe DA NON E
of tomorrow in markets that include not only China and Indonesia, but also Mexico, Russia and, in Fresh Dairy
Products, the US. Excluding the blockbusters I mentioned and beverages in Asia—so as not to count them
twice—these markets accounted for 16% of our growth last year.
These three drivers are showing truly impressive results and the potential remains enormous. And of course
that makes them strategic priorities for DANONE.
Leading positions worldwide
No. 1 in fresh dairy products / Tied for No. 1 in bottled water (volume) / No. 2 in biscuits
How do the health benefits you talk about fit into your growth strategy?
Concern for health is practically built into our genes. Health is part of the identity of our top brands such as
Danone, Evian and LU, and we have always empha sized the connection between food, beverag es and health .
That is reflected in surveys consistently showing that our brand portfolio is recognized as the most health-
related in the entire food industry.
Which in a way is hardly surprising, since health has been a constant focus of our development for the last
ninety years. Our strategy aims to maintain that lead with the continued development of tasty, appealing
products winning recognition for proven health benefits. Our research and development center, Danone
Vitapole, which pools the expertise of several hundred scientists and specialists around the world, gives us
the resources we need to develop new products with a continued focus on health and nutrition. In that, it is
playing a crucial role in building our future.
Obesity is regarded as one of today's main challenges for public health. What is your view of that?
The trends are definitely worrying. Obesity affects around 300 million people and numbers are particularly
alarming in some countries. But the problem is complex, and diet is just one aspect. While our products are
on the whole nutritiona lly balanced, we certainly do not want to sidestep the issue. Yet prevention of obesity
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is not the only challeng e, as the scientific community and consum ers will recognize. There is also the questi o n
of promoting the healthy growth of children, particularly in developing countries, as well as preventing
deficiencies and boosting immunity. Not to mention well-being in terms of digestion, water intake and so on.
DANONE aims to provide effective responses as far as possible. Not only with our products, but also through
research and the work of Danone Institutes and other initiatives to prompt public awareness.
In tackling these complex issues, we place special emphasis on dialog with the scientific community and
consumers, continuing our long tradition of concern for health.
To return to 2004, what do you think were the least satisfactory developments?
Well, clearly the impairment of our assets in home-and-office (HOD) water delivery in the US and, to a lesser
extent, Europe, was a blow. Our performa nces in this area remain very strong in emerging markets like Mex ico
and Indonesia. But the going has been much tougher in the US, where the model is very different and the
business is not really the same, except that it also involves sale of water in large containers. DS Waters, a
company in which we have a 49% interest, is facing rapid changes and we probably failed to properly
anticipate their importance. And that led to a sizable exceptional charge on 2004 accounts to recognize the
decline in the value of HOD assets over the previous two years. We now have to find appropriate ways to
make up for that, which will probably mean adjusting our business model in this area.
Your Biscuits business line has returned to growth. Could you tell us more about how that was achieved?
The results for Biscuits in 2004 were good news. A few months back, we undertook to counter loss of pace
in the business and we have succeeded in doing that. Action included selling our subsidiaries in the UK and
Ireland, where our share of the market was too small to hold much promise, and creating a joint venture in
Latin America alongside a major local contender to back rapid regional expansion. But our main focus was
on efforts to put new life into our brands and markets in continental Europe. The result was a 3.9% overall
rise in 2004 sales after flat trends in 2003, with margins now nearing 10%. Growth has been particularly
strong in Asia and Russia, but performances have also been healthy in Western Europe, especially the
Benelux countries, Spain and France, where LU is regaining ground.
We still have a lot of work ahead of us, but we have laid the foundations for a full-blooded recovery—our
teams are highly motiva ted and are ready to make the most of product innova tions, improvements in qualit y
and the nutritional value of our offering.
Turning to geographical spread, it’s clear that conditions have been more difficult on the French
consumer market. Isn't that a worry?
I mentioned headwinds earlier on, and the situation in France is one of the things I was talking about.
Consumer demand is soft, relationships with retailers are sometimes strained and government pressures on
prices are not being offset by rises in volumes. We are certa inly not very happy about that, but rapid expansi o n
in other parts of the world means that we are less and less dependent on the French market. The fact that
our sales grew by nearly 8% in 2004, despite weakness in France—still our largest single national market—
shows that we are making good progress towards a better geographical balance.
China appears to be an important part of that new balance.
Definitely. China now accounts for nearly 9% of our sales and we have over 24,000 people working for us
there, which is around a quarter of our total workforce.
We have been operating in China for fifteen years now and we are market leader for both packaged water
and biscuits. We produce locally for local people. And we are making money, which is more than a lot of
businesses can say.
Our margins there are even slightly above the Group averag e. But China isn't our only new frontier. Our growth
is just as impressive in Mexico, in Indonesia, in Russia—and even the US for our Fresh Dairy Products. We are
also consolida ting beachhea ds around the Mediterra nea n from Morocco to Turkey, a region that will open up
new horizons for growth in the future. These developments are something all of us at DANONE are very excite d
about.
You often talk about your Group's culture and your special way of doing things. Doesn't geographical
expansion threaten that?
There was that risk. But we have taken steps to spread and share our culture across the Group in its expanded
form, ensuring a degree of overall consistency.
Our DANONE Way program makes an important contribution to that.
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But we have also learned to welcome the influence of the developing countries we work in, because it enable s
us to take a fresh look at our differences and develop innovative and exciting new ways to move ahead, to
move forwards. The opportunities that offers us are practically limitless. I very much believe that our new
frontiers are not just about new sources of growth. They also help us to ask new questions, look for new
solutions, find new ways of working and new ways of thinking. What we do in Indonesia or in Russia should
help us to improve our operations in Western Europe and North America, keeping us on the move. And staying
on the move is very much a part of our culture.
1994-2004 Once BSN, now DANONE
The name change marked a turning point for the business as a whole. By assuming the name of its strongest
international brand, BSN—long one of Europe’s leading producers of glass—signaled plans to step up its
international growth and confirmed its focus on the food industry, while emphasizing healthy eating.
On July 7, 1994, the General Meeting of shareholders approved the shift from BSN to DANONE. And a new
logo—a child looking up at a star—became the banner under which this new international food company was
to sail. In the ten years that followed, DANONE pulled out of all non-food business and divested beer,
confectionery and other food activities not in keeping with its focus on healthy eating. Over the same period ,
sales of dairy products doubled and those of beverages tripled, while business outside Western Europe
jumped from under 15% of the total to over 40% today.
Isn’t it sometimes a bit difficult for an organization made up of nearly 90,000 people to be quick on its
feet?
That is something I keep a very close eye on. I don’t want us ever to get complacent or feel too comfortable
with the way things are. In this, it is vitally important that responsibility for doing business should be as close
to local markets as possible—that is the only way to preserve our capacity to adapt and anticipate. I also
believe that we have to favor the rapid circulation of ideas across borders. Which can often best be achieved
outside the usual hierarchies.
To conclude, could you say something about DANONE’s prospects and strategic priorities this year?
We have confirmed our medium term targets for the fourth year running— organic growth between 5 and 7%,
a rise in operating margin between 20 and 40 base points and a 10% rise in earnings per share. We feel
confident of success and we are very determined to deliver, althoug h the first half is likely to be a bit diffic u l t
for several reasons, putting us nearer the low end of those ranges.
As for strategic priorities, organic growth remains at the top of our list. Our business is all about getting
consumers to buy more of our products. And to do that, we have to develop products that deliver value for
those consumers. We have to move into new markets, invent new opportunities. Because that is how we can
create wealth for all our stakeholders. Which is the fundamental mission of every business.
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Danone 2006: Building the future

In 2006, DANONE posted continued growth, beating targets for the year. This strong performance will
underpin management’s drive to build the business of the future, accelerating moves into new markets and
stepping up the pace of innovation, while at the same time testing new business models. CEO Franck Riboud
reviews highlights of the year and looks at what the future holds.
How would you sum up 2006 at DANONE?
It was another excellent year for Groupe DANONE. Organic growth was well ahead of target at close to 10%,
a performance that really sets us apart in the consumer goods sector and in our highly competitive market
environment.
Did temporary factors drive this performance, or do you see a more lasting basis for it?
Market ups and downs always play a role. In 2006, for example, exceptionally strong fourth-quarter growth
in China certa inly had an impact, which is unlikely to last. But even allowing for that, and even if you re-we ig h t
fourth-quarter growth in China on the basis of normal levels of activity, we would still have beaten the 6 to
8% range which we announced as our target for organic growth. That indicates that our performance was
soundly based and not the result of some special event or clearly exceptional situation in one part of the
world or another. A special reason for satisfaction with 2006 results is that all regions and all business lines
made a positive contribution to growth, even those that have recently run into temporary difficulties. One
example is our Biscuits line, which has suffered from slack market trends but is now back to firm growth in
many countries. And looking at the geographical breakdown of sales, markets as important for us as France
and Spain showed renewed pace in 2006 after going through a troubled patch.
You have revised your target for organic growth, setting it higher for the medium term. What are the
reasons behind such confidence?
Feeling confident doesn't mean that we can take anything for granted. We're going to keep our eye very much
on the ball. But there are also good reasons for confidence.
First of all there is the geographical balance in our business, with half of our sales outside Western Europe
and a third on emerging markets. That means that our growth is not dependent on ups and downs in any one
part of the world—with our broad geographical base, we can make up for the temporary lulls that are
inevitable on any market. Secondly, a growing number of countries are reporting very strong growth. When
you look at DANONE's markets you see that the subsidiaries posting the strongest growth— that is, above the
8% at the top end of our target range—are making an increasingly important contribution to sales. In 2006
they accounted for over half the total. That will automa tica lly generate momentum over time, which is cause
for confidence. And our shareholders and investors appear to share our feeling, since DANONE shares gained
over 30% last year.
Pushing into new markets and stepping up organic growth—doesn't that weigh on profitability?
Well, our operating margin was up for the 12th year running in 2006, which I think speaks for itself. It is a
clear sign of a lastingly sound business base; proof that our growth, however strong, is under firm control and
is not at the expense of profitability. Which is essential—if growth weren't profitable it couldn't be lasting,
since we wouldn't be able to fund it for long. That said, our business model is deliberately designed for growt h.
We are not going to sacrific e growth, and with it our future, so as to give margin a temporary, artificial lift. Not
that it would be hard—we could add a few basis points simply by cutting a few weeks' worth of advertising at
the end of the year. But that would be putting our future at risk. What we have to do is strike the right balance
between improving our profita bility and growing our sales. I think we have been successful in doing just that,
and it shows in our financial targets for 2007. We expect sales to grow 6 to 8% and operating income to rise
by between 7 and 10%. We are thus looking forward to firm sales growth and a slightly higher rise in earnings.
Which shows, first, that we are not growing at the expense of profitability and, second, that improved
profitability is not hampering growth and investment.
What are the main priorities in Danone's strategy?
We have a responsibility to build on the good results we've achieved. It would be a real waste if we now sat
back and failed to make the most of the leeway and confidence this strong performance has given us. We
need to harness current momentum to build the future. DANONE is now benefiting from the efforts we made
ten years ago, and if we don't want to find ourselves empty-handed ten years from now, we have to invent
new reserves for future growth today.
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That means providing vigorous support for our brands, setting up new production facilities, making major
investments in research, accelerating geographical expansion and opening up future frontiers.
So moving into new countries is a major priority?
Absolutely. Because there is enormous room for progress. Take the example of Activia. You can rightly see it
as a magnificent success, with sales running at €1.3 billion and showing strong growth even on mature
markets such as France and Spain, while margins are holding high with the support of a steady flow of
innovation. All that is true. But if you set your sights a little higher, you see that Activia is present in only 30
countries and only a small part of its potential has been realized. If we can double the number of countries
where the Activia brand is sold and maintain the pace of organic growth, you're looking at annual sales of
potentially €5 billion a few years from now. I don't believe that is beyond reach.
Do you have definite targets in mind when vou talk about geographical expansion?
Taking all our business lines together, Groupe DANONE is now firmly established in only around 40 countries.
I think we should be able to double that number in years ahead. We have the financial resources we need to
make several acquisitions every year, especially because our potential partners are generally small to
medium-size operations serving local markets. Over recent months, we have moved in this direction with
investments totaling €600 million. In some cases, we have reinforced our existing positions—an example
being China, where we acquired an interest in Hui Yuan, the leader for fruit juices, and set up a crucial
strateg ic partnership with Mengui, number one for milk. Simila rly, in Algeria, we set up a new bottled water
operation and built a new biscuit factory. At the same time, we have moved into new countries including
Egypt, Thailand and Colombia for fresh dairy products and Denmark for biscuits. And there's more to come.
Can we expect some major acquisitions?
Not necessarily, as I've always said in the past. As I just noted, local businesses in our sectors are no more
than medium-sized. On top of that, we now have the capacity to start out in a new country from scratch, or
almost. Which means buying or partnering with the local leader isn't the only path to rapid success. We can
start out with nothing or buy the number-three or number-four business, as we did in Egypt, where our ma rk et
share jumped from nil to over 12% in only a year. We also need to use the markets where we have a strong
presence as regiona l platforms for expansion into neighboring countries. As an illustration of this, over recen t
months we have made a successful move into Chile from our base in Argentina.
How fast are you planning to expand?
We're talking about three to five new countries a year. We have the expertise, the marketing concepts, the
organization and the financial resources we need for that. As is often the case, pace will depend to a large
extent on our success in finding the people we need to lead expansion. That's a challenge, but it's a positive
challenge and one we are well equipped to meet.
Your markets are fiercely competitive. What special strengths does DANONE have to deal with that?
I believe that DANONE has truly unique expertise in its businesses. We are the uncontested world leader for
fresh dairy products, and—even more importantly— we are the only business in this sector present in some
40 different national markets, whereas our competitors are content with four or five or ten. We are also the
only one to line up four dairy-product brands boasting sales of over €1 billion each—A c tivia, Actimel, Taillefi n e ,
Vitalinea and Danonino, or Petit Gervais aux Fruits as it is called in France. We also have outstanding
expertise in natural waters, especially minera l and spring waters, with top brands such as Evian, Volvic, Aqua
and Bonafont. And we are now leveraging that expertise, the strength and the credibility of our brands, to
widen their scope to new bevera g es that match the expecta tions of society and strong consum er demand for
naturally healthy products.
Don't all food companies claim to sell healthy products?
To that, I would say that our health positioning is genuinely distinctive and gives us a real lead on the
competition. For DANONE, this isn't about changing our advertising in response to social concerns that we've
only just become aware of. It's a longstanding commitment that you can trace back to the discovery of the
benefits of Evian water in 1789 and the first sales of Danone yogurts in pharmacies in 1919. At DANONE,
commitment to health is structural and ten years ago led to the most radical strategic decisions ever seen in
the food industry.
We sold off operations in confectionery, packaging, ready-to-serve dishes, beer, and other segments that
then accounted for 30% of our sales to focus on three core businesses, each with a special relationship to
health and nutrition. That move has given us the widely recognized credibility that we now enjoy. Our
approach to health also sets us apart. At DANONE, health isn't just about limiting some types of ingredient to
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make for better nutritional balance in our products. We do that too, of course—and our biscuits have made
specta cula r progress in that direction—but it's an essentially defensive strateg y, and we look beyond it. Our
goal is products that offer added health and well-being by fueling growth, for example, or by regulating
digestion, what we call active health.
It sounds as if you are moving into pharmaceuticals.
No. Medical treatment is completely beyond our scope. Our expertise is in prevention and comfort. And, of
course, we are in the food industry—not chemicals or pharmaceuticals. Our concern is with natural good
health, which for us is inseparable from taste and pleasure. Our researchers, biologists and development
teams throughout the world look for natural ingredients that offer real benefits, as do certain cultures and
fruit varieties. They then find the best way to put these benefits to work and develop recipes for tasty,
appealing products that people will enjoy. We have no desire to make pills.
In many parts of the world, there are plans to tighten regulation of the food industry. Do you consider
that a risk?
On the contra ry. We favor strict standa rds, in particula r as regards health claims, which we believe should be
backed by clinica l trials. The structure and scale of our resea rch teams reflect our conception of responsibi l i t y
in this area. We have dozens of specialists working on these questions because scientific evidence for the
health benefits of our products is absolutely essential to lasting credibility with consumers and society at
large. We take the same approa ch to communica tions and consumer informa tion, for example in nutriti o na l
labeling. Strict standards are our responsibility—but they're also in our interest.
You have often described corporate responsibility as a source of competitive differentiation for DANONE.
Corporate responsibility is in our genes. A look at Antoine Riboud's speeches, which have recently been
republished in France, will show you that it has structured our business philosophy for the past 40 years. At
that time, when people hadn't yet begun to talk about sustainability, DANONE had already adopted a dual
project aiming for both business success and social progress. I stress the word "both" because what is
involved is a truly integrated approach and not looking after business on the one hand and social
responsibility on the other. Without that integra tion, corpora te responsibility and sustainability wind up in the
hands of a few specialists with a marginal place in the business and no leverage to effectively influence its
operation. We have long been convinced that a demanding approach to corporate responsibility can be a
source of strength for the business, leading to the adoption of solutions that benefit everyone.
To take a concrete example, reducing packaging volumes reduces both the environmental impact of our
operations and, in a very direct way, our production costs. This integrated approach is also behind DANONE
Way, a program we launched seven years ago to help our subsidiaries assess their own performance in the
field of socia l responsibility. DANONE Way is based on the belief that our teams will be more motivated if they
make their own diagnosis and identify room for progress themselves.
This year the same commitment led us to set up a Social Responsibility Committee within the Board of
Directors. This Committee, opera ting at the highest level in our organiza tion, has exactly the same status as
other Board Committees with more traditional business and financial concerns —for example, the Audit
Committee. We are among the first to have a committee of this kind.
Presumably, this Committee's job is to oversee compliance with essential principles.
Yes, but its scope goes beyond compliance in the strict sense of the word. Obviously we have to unfailing ly
abide by the most demanding rules in areas of corpora te responsibility. But that alone is not enough. DA NON E
owes it to itself to take things a step further, aim higher, work in new directions.
We want to do more than meet requirements, we want to take the initiative for progress. In keeping with this
approach, we have extended DANONE Way to include social innovation in our fundamentals, thus
encouraging our subsidiaries to explore new possibilities. We have also launched danone.communities, a
highly innovative program that doesn't really fit into any of the usual categories.
Could you tell us more about it?
The project started out with thinking about our mission—bring ing health throug h food to a maximum numbe r
of people— and our growing experience in developing countries where that mission is often a huge challe ng e .
How can you bring products to a majority of people when a third or a half of the population live below the
poverty line? Thinking along those lines has led us to launch successful initiatives with our Affordability
Programs, putting our products and the health benefits they provide within the reach of people with very
limited resources in China, Indonesia and other countries.
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But cost-cutting has its limits, and we're still unable to reach many people at the bottom of the social
pyramid—the families that have to live on two euros a day or less. We realized that achieving that requires a
new busines s model, very different from our existing one, with different ways of doing things, different rules
and different priorities. That is the thinking behind the project we launched in Bangladesh alongside
Grameen, the group headed by Nobel Peace Prize winner Muhammad Yunus. Considering the interest the
project has attracted and its encourag ing prelimina ry results, we've decided to move ahead, promoting this
type of initiative on a larger scale, with the participa tion of all interested parties. That is the idea behind the
project danone.communities. In concrete terms, it involves setting up an investment fund dedicated to
support and ongoing assistance for a new kind of business that makes the social impact of its operations the
first priority —by reducing malnutrition and poverty, for example, or creating jobs in the local community. This
fund will be open to anyone who wants to make a prudent, meaningful investment that will contribute to
social development.
What are Danone's reasons for launching the project? What do you expect to gain?
Looking at the long term I would say that it is in the interest of any firm to help promote development and
raise standards of living. But that's not the immediate consideration for us. This kind of initiative helps us to
better understa nd some types of market and, most importa ntly, it keeps us from getting complac ent. It force s
us to be more innova tive, more agile—a nd to acquire new expertise for a broader vision. It also gives us closer ,
more meaningful relationships with our employees and shareholders. Perhaps this will sound naive, but I
would like to think that people could choose to work with us or invest in Danone not only because of our
growth potential, the power of our brands, the quality of our staff or our commitment to health, but also
because we want to be more than an international business, because we want to make ourselves useful in
other ways too. That's certainly naive, but I think you need to be at least a little naive to move an enterprise
forward.
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Danone 2007: The beginning of a new venture

In 2007, Danone integrated Numico and sold its Biscuits business, completing deployment of a health -
through-food strategy. Franck Riboud look s back at this latest stage in the history of Groupe Danone.
How would you sum up 2007 for Danone?
It was an historic year. That is no overstatement, since we had a really major divestment with the sale of our
Biscuits business line and, almost simultaneously, acquired the Dutch company Royal Numico—our biggest
strategic acquisition ever. We also ran into some fairly strong headwinds with a spectacular leap in
commodity prices and a cool summer in Europe, which was a setback for our bot-tled-water sales. And there
was the dispute with Wahaha, our partner in China. Despite all that, we were able to post a rise of over 7%
in sales—a vigorous performance that many of our rivals will envy—as well as a further rise in our operating
margin, up for the thirteenth year in a row. Our results are once again excellent, confirming the quality of our
model for growth, which has proven effective whatever the trend in our business environment. And the
commitment of our staff members is total. Altogether, we are on a very positive track and this is really a
wonderful period in the history of Danone.
Your decision to sell the Biscuits line and acquire Numico appears to have been made very quickly. What
was the logic behind it?
The same logic that has applied for over ten years—which is an increasing focus on food for health. I am
certainly not saying that there was no future for our Biscuits business. We had strong positions and powerful
brands, and our teams had succeeded in reviving sales growth on what is a fairly sluggish market. But given
the slower growth in the sector and the difference in positioning, which naturally has much less to do with
active health, there was a real risk that Biscuits would become a lower priority for the Group.
Which is why Kraft's interest offered a twofold opportunity that we could not afford to miss. For the teams in
our Biscuits business, it was a chance to contribute to the development of the world leader in the sector and
play a key role in the strategy of one of the food industry's largest groups. For Danone it meant an opportunity
to accelerate growth in food for health. And we wasted no time in doing just that by asking Numico to join the
Danone family.
Why Numico?
I would say that Numico was a natural choice. Its two businesses, Baby Nutrition and Medical Nutrition, are
clearly linked to food for health, and both benefit from high margins and vigorous growth worldwide. They
round out our brand portfolio perfectly and are completely attuned to our mission of bringing health throug h
food to as many people as possible. And we are already well acquainted with baby nutrition: for the past 30
years we have successfully managed Bledina, the uncontested market leader in France, where per capita
consumption of baby foods is higher than in any other country in the world. Acquiring Numico gives us real
global leverage in the sector. And the company is a real jewel—sales growth is vigorous, and its research
capabilities have a well-deserved reputation for excellence. Moreover, it has a dedicated, highly-skilled
workforce and an outstanding line-up of local brands. Finally, its form of business culture is close to Danone's
own.
The strategic value of the acquisition is generally recognized, but some observers consider the price
a bit high, especially as regards scope for synergies.
I don't agree. To be sure, Numico was the most sought-after target in the sector. But you can only judge the
price of an acquisition against its potential, what it allows the buyer to build and achieve. If we succeed with
our growth objectives, as 1 think we will, talk about price will be quickly forgotten and the return on
investment will be unquestionable. As regards synergies, we have consistently said that most of them
wouldn't come from rationa liza tion, since our presenc e on Numico's markets is limited to baby food in France .
So there was not much to be expected in the way of merger savings. Instead what we are looking for are
positive synerg ies, synergies for growth— mea ning that the growth potentia l of Numico and Danone combi n e d
will be greater than if the two businesses had remained separate. To take an example, Numico brands will
be able to benefit almost everywhere from Danone's expertise from our strong ties with major retailers.
Another example is the potential for coopera tion between resea rch teams, which should quicken the pace of
innova tion and proba bly also make for more advanced solutions. Combining Numico's expertise in prebio t i c s
with Danone's know-how in probiotics should make for new leverage in health innovation.
How is the integration process going?
We are making rapid progress, and the process is going smoothly. Numico's managers are highly
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professional, very pragmatic - and they are perfectly well aware of the opportunities that are generated by
integration with a business that has the size and reputation of Danone. We have had only very few unwanted
departures, and in every single case a replacement has been found.
Our aim is to avoid any disruption of momentum for growth and keep the impact of the merger on subsidiaries
to a minimum. There are around 50 people working on integration, with managers from the two companies
paired up for the job. The synergies identified earlier have been confirmed, and teams are all working well
together, whether you look at research, purchasing, or information systems. As I said, the process is going
smoothly. That is borne out by performances over the first few months of the merger, which show that there
has been no negative impact at operational level.
How would you define the difference between Danone in 2008 and Danone before 2007?
You might say that the Danone now taking shape is a sort of "Danone Plus"—Danone with its existing strengths
moved up a gear. Which means, first, more growth. We have always been obsessed with growth—it's in our
genes, and fundamental to our whole approach. But Danone Plus also means greater cohesion—there is no
other business of comparable size that focuses exclusively on health through food. Or that has a more
balanced geographical presence, since no single country now accounts for more than 14% of our total Group
sales. That means risk is more broadly spread, reducing our dependence on this or that market. Another plus
is that more science means greater focus on health. That is critically important. The pooled research
resources of Danone and Numico will give us clout and breadth of scientific expertise that are unrivalled in
our sector. And with a very, very strong emphasis on "nature". Our research business is focused on identifying
the health benefits of natura l ingredients and making those benefits available to consum ers in food produ c t s .
That will add up to more innova tion, added credibility and greater consum er trust. And, finally, the Danone
we are building today will mean even more demanding standa rds of societa l responsibility. We will be feeding
people in all parts of the world, at every stage of life, with specia l attention to the most fragile groups: infant s
and the aged. That is a huge and, I believe, an inspiring responsibility. It is something that we can be proud
of, and which will enable us to make a truly positive contribution. And that, in turn, will naturally lead us to
make even stronger societal and environmental commitments.
Thirty years ago, Danone took up the challenge of combining social progress and business success. Is
that still relevant?
Naturally. The mission that we have set ourselves—bringing health through food to as many people as
possible—is every bit as much about social progress and societal goals, as it is about business success. Our
goal is sustainable growth, which entails a broader responsibility for sustainability in general. That
responsibility is built into our business, whether we like it or not. And I am not only talking about food safety.
For example, when you are a world leader in baby nutrition, you also have to understand that breast feeding
is still the best solution in the first few months of an infant's life. Which naturally affects the way you go about
your business. Similarly, when you sell a fragile resource like mineral water that you get from a spring, you
are natura lly more aware of the need to protect the environment—especia lly around that spring . More broadl y ,
when most of your raw materials are natural, you cannot put nature at risk without endangering your own
resources, your own business. We recently took two importa nt initiatives which highlight this close connec ti o n
between our day-to-da y operations and issues with broader societal significa nce. Firstly we have integra t e d
societal criteria into the calculation of bonuses for management teams, with these criteria determining at
least one-third of variable compensa tion. At Danone, simply meeting business targets isn't enough to deser v e
a full bonus. Secondly, at the end of last year, we set up a specialized Socia l Responsibility Committee within
the Board of Directors, at the highest level of corporate governance. This
Committee has been assigned the task not only of ensuring strict adherence to the fundamentals of social
responsibility but also of stimula ting societa l innova tion. Because today's societal and environmental issue s
are of such complexity we really have to invent new solutions.
Do you already have some examples of effective innovation in the interest of sustainable development?
R: One is that we're encouraging the farmers that supply our milk to use flax in cow feed. Flax not only
improves the quality and quantity of milk per cow, it also significa ntly reduces gas emissions. We have alread y
implemented a sweeping program for this in France, and it's making a significant impact. To take another
example, we have launched educa tional initia tives in countries including Thailand and Nepal to help people
protect and manage water resources more efficiently. In a completely different area, we are experimen t i ng
with new business models that could make health through food accessible for some of the world's poorest
people. The business we set up with Grameen in Bangladesh is off to a good start, and we are getting ready
to build our second factory there. The danone.commmunities investment fund, which we launched to
contribute to the development of social businesses, has already started work on some very innovative
projects in Asia and Africa.
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Of course, these are pilot ventures, and they might appear fairly marginal to our main businesses. However,
as test centers they are already worthwhile sources of inspiration, because they compel us to look at things
in a way that is completely different.
What about prospects for 2008? Some of the headwinds you mentioned —commodity prices, for
example— are likely to persist.
As I have explained, our business model is all about accelera ted growth. And we are certainly very confide n t .
We have committed ourselves, for this year and even over the medium term, to achieving even stronger
growth than over the past two years, ranging between 8 and 10%. That is probably the most ambitious target
for any large business in the food industry.
But we believe it is achievable, despite current uncertainties. At the same time, we will be continuing to
improve margins. On these points, results for the first three months of 2008 support our confidence. Of
course, there is the rise in the price of raw materials, and it will continue to weigh heavily. But that is part of
our business and we know how to respond by improving our efficiency and adjusting our prices. In recent
months, Danone has demonstra ted its capacity to win accepta nce for modera te price increases, in partic u la r
because consumers recognize the significant added value offered by these products in terms of innovation,
research and benefits. Our focus on health is paying off.
But isn't "healthy eating" an area where competition is heating up?
It's true that major public health challeng es linked to nutrition are looming ever larger, and true, too, that an
increasing number of players are trying to make that shift in their image. Even if they often do so for purely
defensive reasons, I view this as an encouraging trend—a growing awareness that we should all applaud. Is
it a threat for Danone? I think it's first and foremost an incentive to press ahead with our current strategy and
step up the pace of change. We were the first major food producer in the world to make health the main
focus of our strategy. And above all the only company to draw radical conclusions and renovate our entire
portfolio of brands and business lines to bring them into line with this priority.
Today consumers, medical and scientific experts, financial analysts and investors all agree that we are well
out in front of the pack. JP Morgan's latest Insight Investment survey, published in April 2008, continues to
rank Danone first in health issues, citing our comprehensive approach, our commitment to public health
issues and our scientific expertise. But we have no intention of resting on our laurels—we will continue to
invest heavily to enhance the specific strengths that make us unique.
So you are now setting growth targets higher. What makes you so confident?
Our business model. Our brands. Our people. And our enthusiasm! Whatever vantage point I take when I look
at our businesses, all I can see is potential for growth. Let's come back to the example of Activia, our leading
brand for dairy products. Today, it generates sales of €2 billion and growth is running at over 20% a year. And
there is still enormous untapped potential. On the mature markets where Activia has been present for a long
time, a regular flow of new flavors has constantly enhanced our line-up, and increasingly cutting-edg e
scientific research is winning over new consumers every day. The results speak for themselves—in France
and Spain, where Activia has been on the market for 20 years, sales growth is still in double digits. Add to
that markets where Activia is a new arrival, as in the US, where it only really began to make headway at the
beginning of 2007. And we are moving into four or five new national markets a year. That illustrates how our
model works—we start by investing in research, development and innovation in order to create value and
drive growth, reaching out to new consum ers, even on our traditiona l markets. We then take these success i ii l
results and deploy them in new countries as part of ambitious programs of geographical expansion. That
approach is also particularly promising for baby nutrition. For example, the most successiiil products
developed by Bledina, which have long been available only in France, will now find new outlets in Russia,
Germany, the United Kingdom, and Indonesia, with teams from Numico adapting them to local markets.
You have often stressed the importance of staff engagement as a key to success.
Yes, I have. And that brings us back to our dual project, which is based on the simple truth that there can be
no lasting business success without progress for people. If you believe that—and at Danone we do— the issue
of individual and collective engagement is critical. Strong performance comes from engagement. Our in-
house surveys show that very clearly— there is a very close correla tion between the business performance of
individual subsidiaries and the level of staff engagement within each, as measured by a set of indicators. But
engagement in turn hinges on people. Engagement at every level of the business is only possible if individ u a l s
feel they are recognized, and that they have gained stature with training , responsibility and the trust place d
in them.
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Personal development is also essential. Antoine Riboud, the founder of our Group, stressed the importance
of that 40 years ago, when he argued that "we must not lose sight of the fact that growth for its own sake is
meaningless. Growth must have a purpose, and that purpose is the increased well-being of people."
Page 12
Danone 2009: Using the crisis to accelerate

Danone responded to a year of crisis with an aggressive strategy to strengthen positions and accelerate
growth. A look back at a challenging year-and ahead to the cautious yet resolute ambitions announced for
2010.
What was Danone's strategy for getting through this year of crisis?
At the end of 2008, we decided to go on the offensive: we weren't willing to just sit there and take it, waiting
for the storm to blow over or simply weather it out. Instead we wanted to turn the crisis into an opportunity—
a chance to speed up or initiate changes that would give us a lead on the competition. With that in mind, we
defined our priorities very early on, at the end of 2008, and did so far more quickly and clearly than many
others.
Still, 2009 didn't get off to a very good start.
You're right. And you really could describe the first three months of 2009 as "in crisis"—it was one of the
slackest quarters in Danone's history. But we used it to prepare for a rebound, taking the first steps in
deploying our strategy for the downturn. Which paid off very quickly: positive signs appeared in the next
quarter and sales began growing again, especially in volume, for all our businesses. The rebound was
confirmed and gathered strength in the third quarter. And we did even better in the fourth quarter, with
organic growth over 5% and volumes up nearly 9%—some of the strongest quarterly gains in volume in our
history. So for Danone, the business dynamics for the year were actually positive in 2009, lifting our
performance.
What about 2010?
We're cautious. Visibility is still low, and I haven't got a crystal ball. The financial crisis could return. The
economic crisis isn't over yet, and the social crisis linked to rising unemployment may not even have begun.
Still, if we focus on Danone, 2009 gave us some grounds for satisfaction, bearing out some of our thinking.
And we can now be pretty definite about our targets for this year—sales growth of at least 5% like for like,
margin equal to last year's record level and a 10% increase in cash. Being cautious doesn't prevent us from
being ambitious.
You've made volumes a clear priority. What does that mean exactly?
Right from the end of 2008, we decided that the important thing in a slump is to maintain demand for our
products—to ensure that consumers remain loyal and keep buying Danone products, perhaps even increase
their purchases. And win over new consumers. Our experience of the local downturns we have been through
in a number of countries over the past ten years has taught us that the best indicator of good health in a
slump is sales volume—quite simply, how many kilos of yogurt or infant formula , or how many liters of minera l
water you're actually selling . If you succeed in holding volumes steady or increa sing them, you win a lead that
you can't lose when business rebounds.
On top of that, for an industrial business, the focus on volume means keeping factories running and
preserving jobs. In an economic downturn, I see safeguarding employment as the prime responsibility of a
business. And that responsibility has its rewards—restructuring is expensive, and closing a plant is very
expensive. Especially in a downturn. It's in everyone's interest to do everything possible to avoid it.
In practical terms, how do you go about boosting volumes?
The crisis has brought a change in consumer behavior. Or, more accurately, it has accelerated changes that
resulted from an increasingly complex set of underlying trends. Keeping step with those new trends, which
vary from one market to the next and even from quarter to quarter, is not simple; there's no single surefire
solution, such as price cuts across the board. On that point, consumers have certainly shown a taste for low
prices in the downturn, but they have also been very partial to premium products, even when these are
relatively more expensive than those of our competitors. So, adapting isn't just a matter of tweaking one
variable—you have to be willing to start from scratch and question all of the standard wisdom. You have to
aim for the right combination of solutions, and be ready to change quickly if the results don't live up to your
hopes. At Danone we've called that a "reset"—because in a way, we've started all over.
Could you give us an example?
One of the best comes from our Dairy Product operations in Mexico, where we've staged a spectacular
rebound after going through a very tough time at the end of 2008. Our teams in Mexico adjusted their prices,
sometimes drastically, slashing them by as much as 25% for certain ranges, while at the same innovating
Page 13
with new offers such as Activia in family-size containers and a very simple new line targeting the heart of the
market— something that didn't really exist in Mexico before, and that has got off to an extremely vigorous
start. We have also continued to innova te with our premium lines, an example being the new "shot" of Activi a —
a mini-portion in a small bottle that is already a big success. We've deployed this multi-pronged strategy—
with variations, of course—on a dozen of our main markets over the past few months.
And what about the overall result?
Our success in Mexico isn't the only one. In Poland, for example, we recorded double-digit volume growth in
2009. And an important point is that momentum has not been confined to emerging markets: our business
has shown plenty of pace in the United States, in the United Kingdom and in Germany. In France, volumes
are also trending up again, and in Japan annual growth rates are over 30%. The result is that our market
shares were on the rise in the vast majority of countries, including in value, in the fourth quarter. Which was
our main aim.
Sales volumes grew much more quickly than sales revenues in 2009, in keeping with your priorities.
Some observers might see that as a change of strategy.
They would be wrong; that idea is based on a misunderstanding. Given the emphasis we place on R&D and
the way our premium brands like Activia , Actimel or Aptamil in baby nutrition have been market drivers over
recent years, many observers have drawn the false conclusion that we've been aiming for higher prices all
the time. But we've articula ted our funda menta l strateg y very clearly for a good number of years. Our missi o n
is to bring health through food to as many people as possible. Obviously enough, the health aspect means
added value in food. But let's not forget the end of the sentence—if you want to reach as many people as
possible, you can't be running after higher prices all the time. Over the past ten years, we've expanded our
affordability strategy with very low-priced ranges and products selling for less than 10 eurocents. The
economic crisis has simply led us to accelerate a process we were already engaged in. The fact that we
haven't had to adopt a completely new strategy is certainly one reason for our resilience.
When volumes rise faster than revenues, isn't profitability at risk?
The two things aren't necessarily at odds. To start with, Danone's margin has been rising for 15 straight years.
Of course we benefited from lower raw material prices last year, but that isn't the only explanation. We've
managed things very carefully, and we keep a very close watch on productivity—which is a habit at Danone.
That's all to the good, but I repeat that margin isn't my constant concern. My primary concern is to create
more value by selling more Danone products, and doing that as efficiently as possible. There is a
mathematical limit to margin rates, but not to the number of Danone product we can sell. So it's really good
news that we sold more in 2009 than ever before.
In all four divisions?
Yes. I've talked a lot about Dairy Products, which account for nearly 60% of our sales, but sales volumes and
revenues were up in all four of our business lines in 2009.
Some people are saying your water business is shaky.
It's not Sales and profita bility continue to rise. The fact is simply that there is still a big gap between emerg i ng
markets, where our organic growth is topping 10% and volumes are surging, and mature markets where
conditions are still difficult but improving. You have to learn to live with that But there is nothing inevitable
about the way business works on mature markets. While we are obviously not expecting to achieve the same
rates of growth in France, which has the highest per-ca pita consumption of still waters anywhere in the world,
as in, say, Indonesia or Mexico, we can find a way ahead. As an example, the UK was our toughest market
over the past few quarters, with double-digit drops in sales, but it was back on a positive track in 2009 for
both volumes and revenues. And in France our Evian brand is gaining market share again, thanks to
innova tion, particula rly in advertising. Its most recent TV spot got over 90 million views—the biggest audien c e
ever for a commercial on the internet. More generally, innovation holds great promise in the sector,
particularly for packaging and environmental concerns.
Are your two newest divisions, Baby Nutrition and Medical Nutrition, still driving growth?
Yes. Which shows again that the acquisition was soundly based and that integration has been a success.
Sales growth topped 7% for Baby Nutrition and was over 10% for Medical Nutrition. Those are exceptional
results in current conditions, and our teams deserve to be congratulated. They also illustrate the resilience
of the two sectors, even though they're obviously not completely immune to economic troubles.
Still, growth rates are no longer in double digits. Would it be fair to say they are leveling off?
I'm sure a lot of businesses would like to be leveling off as nicely, if that's what you want to call it! In Baby
Nutrition, our business in China is continuing to grow at a rate of around 15%. And while we're cautious on
Page 14
Russia, where some distribution networks are fragile, we're seeing growth of 15% in Indonesia, 9% in Poland
and 7% in Germany. In France, our market share has risen to a record high of over 50%, beating our closest
rival by 25 percentage points. So Baby Nutrition is still a very strong driver for growth. Our offering of milk
products meets essential needs for the health of children that have stopped breast-feeding . And we are very
well positioned in this area, particularly on geographical markets with high rates of population growth.
And what about Medical Nutrition?
With sales now close to €1 billion, our Medical Nutrition division is starting to carry real weight Not only
financially, but also from a strategic point of view. We are only beginning to see how it will affect Danone—
and how Danone will affect it.
Are you going to tie it in with other businesses?
Let's not get ahead of ourselves. Medica l nutrition has its own logic—products are often reimbursed by publi c
health insurance organizations, R&D lead times are very long, and distribution is through pharmacies and
hospitals. It would be a dangerous mistake to try and impose a mass-market model in this area. I've heard
talk, for example, about the work of our Medical Nutrition teams on Alzheimer's disease, with people saying
that Danone is preparing to launch a yogurt for sufferers from the disease. Thatis obviously ridiculous and it
would certainly be irresponsible for us to attempt anything of the kind. As well as counterproductive. What
we can say, though, is that the discoveries made will certainly be factored into mass-market products one
day or another. Note I say one day—I want to be very careful not to rush things.
Danone's strategic focus on health has been a powerful lever for growth over recent years. But isn't it
increasingly questioned? For example, there is the EU regulation that imposes more stringent conditions
for health claims about food.
That's another area where there have been misunderstandings. People often seem to think that our health
strateg y concerns only functiona l foods, products that have a specific effect on a given function of the body,
such as intestinal transit. It's true that we tend to advertise those products actively. But when we talk about
health through food at Danone, we're talking primarily about fundamental issues of public health, which in
most countries center on nutrition. So we're talking about basic nutrients and healthy, appetizing and
afforda ble products. We're talking about giving people easy access to the one absolutely essential bever ag e :
water. So believe me, there are no doubts about our strategic focus on health. It has the support and
encouragement of health officials, nutritionists and public authorities—and we place a lot of emphasis on
continuing , constructive dialog with all of them. About the EU regulation on health and nutrition, the princi p l e
behind it is clearly right—stricter standards for heath claims about food are a very good thing. And over the
medium to long term, it's not a threat—on the contrary—for a business like Danone that invests massively in
research, with results borne out in dozens of publications in leading scientific journals. It's even a great
opportunity.
At the same time, it's only normal that there be some teething problems to start: the system will need some
time to hit its stride. The EU authority is swamped with applica tions for approva l and the assessment crite ri a
aren't always clear. These will no doubt be more clearly defined in the months ahead, and the procedure
itself could perhaps be improved. So we're likely to see a period of uncertainty and debate ahead of us. But
we'll be able to deal with that. And if we have to do without health claims for some of our products for a few
months, well, we'll manage. The success of Activia, for example, is built on many other factors, too.
Is Danone's strategy for dealing with the current crisis a sound basis for its Ions -term development?
Our current strateg y isn't just about the near term or simply a reaction to events. On the contrary, it's all about
building the business. By focusing on volumes and market share, we are reinforcing our positions and
creating new momentum. We've also consolida ted our finances with a capita l increase, and have positi o n e d
ourselves to take advantage of small and medium-size acquisition opportunities. At the same time, we are
continuing to invest on a huge scale. Despite the slump, we haven't cut advertising; we've continued to
support our brands and invest in opening up new markets. In 2009 we moved into South Korea and
Mozambique and started up a first operation in India. In Thailand, we built a new dairy products plant, and in
Brazil we started up in water. In China, we've acquired new capacity for yogurt production and started work
on a new mineral water plant near Shenzhen. We have projects just about everywhere.
About China, is it still a priority for Danone after the sale of your interest in Wahaha?
One of the reasons we decided to put our involvement with Wahaha behind us and not get bogged down in
a dispute that could have gone on much longer is that we wanted to be free to put all our energy into building
our future there. We have some great companies in China in all four of our business lines, with leading
positions across the country or in their regions. Overall growth has been very strong, reaching nearly 20% in
Page 15
2009, and prospects are very promising. So China is very definitely a strategic market for Danone, in the
same way as Brazil, Mexico, Japan and Russia.
More generally, there is recurrent talk of you making massive acquisitions.
We haven't changed our thinking on that. We're not looking for acquisitions on a scale to transform our
business, as was the case with Numico. We are on the lookout for smaller or medium-size opportunities in
each of our four business lines.
In 2009, societal commitments were also very much in evidence at Danone, particularly with
environmental initiatives, and including the creation of your Ecosystem Fund. What's the logic behind
these very different initiatives?
Investment in areas of societal concern is also an investment in the future of Danone. It's what we do when
we invest in a voluntary program to cut C02 emissions, direct and indirect, by 30% in five years, or when we
invest in dialog with employees and their representatives at a time when there are serious risks of tension.
Or when we maintain high training budgets when the first temptation could be cut them. Or when we draw
on the support of our shareholders, in the thick of the economic crisis, to set up a €100 million fund to back
social and economic progress in regions where we do business. All that is certainly about responsibility, but
as I said, it's a way of investing in our own future. In facing up to the big issues of the day, we are better
attuned to society and make ourselves more useful. And that helps put continued meaning into our
operations, making Danone stronger and placing us at the forefront of our industry. Which helps ensure that
we'll be able to continue what we think of as a unique adventure.
Page 16
Danone 2010: Growth first

With sales up 6.9% lik e-for-lik e — one of the best performances in the food industry — Danone got back on
course for strong growth in 2010, harnessing new strategic mark ets with huge growth potential.
How do you account for Danone's healthy results in the troubled context of the past year?
I don't want to sound presumptuous, but I am convinced that Danone has the right business model. We have
four business lines perfectly attuned to needs and long-term trends in consumer demand, we have robust
brands backed by quality R&D and effective advertising, and our products are made with extreme care to
ensure better taste and nutritional content. And then there is our geographical reach: with our worldwide
presence, we can make the most of growth momentum anywhere. Not to mention our culture, which
emphasizes pragmatism, adaptability and local decisions — what I have called being "quick on your feet." In
testing times, when you need to take a fresh look at things, that is a huge advantage.
Have all your business lines contributed to this growth?
We have held to our strategic course for all our business lines, although we have not hesitated to change our
ways in response to much tougher conditions. And that is what I think has enabled Danone to return to the
sort of growth we had been used to — putting us consistently ahead of others in the food industry.
Figures show that all our businesses are growing. Without exception. Fresh Dairy Products scored a very
sound 6.5% rise, which is particularly important because the division accounts for nearly 60% of our sales.
Medical Nutrition and Baby Nutrition again posted gains of close to 10%, thanks in part to our geographical
expansion. And our Waters division, which was hit hard by the economic downturn on mature markets,
showed renewed pace with rises of 5.2% in value and 7.3% in volume. Its growth was always impressive in
new economies, but sales in the developed world, particula rly in Europe, had flagged. Our brand teams made
really remarkable efforts to inject new life into the French and German markets and restore the appeal of
natural waters — beverages that offer consistently high quality, that are stored naturally and are naturally
good for health, and that are environmentally sound. In 2010 their work began to pay off.
As regards geography, 2010 appears to have been something of a watershed.
I think that's right. In a way, you could say that Danone moved into the economy of the future, at least
symbolica lly. It was the last year that the developed world accounted for a higher proportion of our sales than
new economies. In 2000, these economies contributed under 30%, but that was up to 49% in 2010, and it
will automatically pass the 50% mark in 2011. In the near term, Russian will move ahead of France and
Spain — where we have our roots and launched our bid for world leadership — and an emerging economy will
thus become our argest market.
Because of your acquisition of Unimilk at the end of 2010?
Unimilk is a young company that already held third place on its market and is posting robust growth with a
brand portfolio and a geographical presence in sales and production that are perfect complements for
Danone Russia, the subsidiary we set up some 20 years ago. The reasoning behind the tie-up between these
two regional champions is very simple: it will give us the base we need to reach the whole of the Russian
market, which counts more than 140 million people and is growing fast. Combining Unimilk's broad ranges
and strong momentum with Danone's advanced expertise and operational know-how opens very promising
prospects. Now it's up to us to realize that potentia by getting the integration process right. That is a top
priority, and we are giving it all the energy and care it needs.
What are your priorities from the global perspective?
We will be sticking to our strateg y of focused efforts, investing first and foremost in markets with high growth
potentia and rapid returns. At Danone, and this may seem an unlikely combination, we call them the MICRUB
countries — for Mexico, Indonesia, China, Russia, the US and Brazil. We have been in all these countries for
a number of years now, patiently laying a solid foundation that is now rewarding us for our efforts. Our
businesses there are posting double-digit growth and they are now big enough to drive the whole group
ahead.
You call the US an emerging market. Isn't that a bit strange for the world's largest economy?
It certainly is if you are talking about GDP per capita. But we are perfectly serious about this. When you look
at our markets, particularly for fresh dairy products, you can see that the US really is an emerging market: it
is a country with a big population, where per capita consumption of our products is low — only a sixth or a
Page 17
seventh of what it is in France and Spain — but growing fast, making for enormous potential. There is real
demand for healthier foods among US consumers, and we are responding to that.
Isn't exposure to emerging economies a source of risk?
It might be if we didn't have the balanced presence we do. If, for example, one country accounted for 30% of
our sales. But our mode is the opposite of that. No single country accounts for more than 12%. And on top of
that, our main markets are now in countries with very different profiles — as you can see when you compare
Russia, France, the US, Spain, Indonesia and Mexico. As I said, our presence is soundly balanced. And the
biggest risk for any business is getting stuck in its comfort zone — there is no such thing as industrial
innovation or growth without risk. Of course you also have to keep control of it, measure it and manage it.
And our strategy for managing our geographical expansion does precisely that.
Are you turning your back on your historic bases like France and Spain?
It is true that they show less overall pace. But given their size and the strength of the brands we deploy there,
it would be a serious mistake to neglect them. It is vita to keep growth in Europe on a positive track. That is
just what enables us to make the most of growth in emerging markets. If that growth was only there to make
up for slackening in Europe, we would be playing a zero-sum game. The challenge for our European
businesses is to regain momentum with new business models to boost growth rates, basis point by basis
point. An interesting aspect of that is the way our emerging market operations are becoming a major source
of inspiration, especially as regards innovation.
Does that mean that emerging markets are now the drivers for innovation?
To a large extent, yes. And that is one of my objectives. Until recently we assumed that the richest countries
would be the main source of innovation. As I see it, it's the countries with strong growth that should inspire
us. Especially as we are having to deal with an economic downturn, resource shortages and a squeeze on
consumer purcha sing power. The streng th of emerging-economy businesses is that they have faced that sort
of thing for a long time and have come up with simple, economical and very inventive solutions. Building a
micro dairy-product plant in Bangladesh with the sort of budget youd have for a house in France forced us to
adopt radica lly new solutions, some of which can be applied perfectly well in our big traditional plants witho u t
compromising quality. You can find similar examples for product design, marketing and distribution.
You sound fairly optimistic about Danone this year.
I don't know whether "optimistic" is really the right word. But I am confident. Business conditions are still
tough, but that is true for everyone, and Danone stands fully prepared, fully armed and ready to meet our
growth targets and achieve our priority objectives. That is what makes me feel confident — the knowledg e
that our group is fully mobilized behind a clearly defined strateg y, and our mission of bringing health throug h
food to as many people as possible. And there is another reason: our people, their energy and engagement.
I travel a lot — in tough times, I think it is my duty to show direct support for our teams everywhere. Their
engagement is unmistakable, and the results of our n-house surveys are objective proof of it. I want to do
everything I can to preserve that, because it is the resource of Danone's strength. To sustain that
engagement, our work has to have meaning. In that, we are lucky to be in the food business, since our work
and our mission are meaningful in themselves. The same applies to the approach we have adopted to societal
issues, as illustrated by our decision to reduce our carbon footprint by 30% between 2008 and 2012, and by
our unstinting commitment to support our economic and social environment through our €100 million
Ecosystem fund. In all these ways, we lend meaning to our action. And that is enormously powerful, renew i ng
our capacity to build and grow, now and in the future.
Page 18
Danone 2013: The challenge

The challenge in 2013 was to overcome strong headwinds and lay the groundwork for 2014. And despite
difficult conditions we succeeded. In the food industry, 2013 was a complex year dogged by a slump in
consumer spending in developed countries, soaring commodity prices on world mark ets and major
fluctuations in many currencies.
How would you describe Danone's performance in 2013?
Danone ended the year with organic growth of 4.8%—higher than most contenders in our markets— despite
strong headwinds. Starting, of course, with the false safety alert issued by our supplier Fonterra about the
quality of its powdered milk, the resulting press covera ge and, above all, its impact on our sales. Even thoug h
the alert was false, it had a severe impact on Asian markets that was impossible to absorb in the short term
and led us to issue a profit warning last October. Without that entirely groundless crisis, our annual growth
would have reached 6-7%, since our European sales stopped falling at the same time and we recorded
double-dig it growth in Russia , our largest nationa l market. Factor in rising prices for commodities—particula r l y
for milk, which shot up +30% in some countries—currency fluctuations, and political instability in some
regions, and organic growth of nearly 5% is a strong performance.
What is driving your growth?
We've continued to grow because we've managed to offset a good part of these market swings with very solid
trends in sales. A quick review of our group's four business lines shows signs of solid but above all sustainable
growth. Fresh Dairy Products—our main business, generating over half of total sales— improved steadily
throug hout the year. By the fourth quarter, growth was back to nearly 5%, as high-potential markets in Russ ia
and the United States expanded by over 10%, and the slide in European sales came to a halt. Waters, which
some observers saw as a low-potential category a few years ago, reported 11.2% growth, in line with trends
observed over the past two years. Our teams did an excellent job of "reinventing" water—a simple, natural
and utterly essentia l product. They stepped back, took a fresh look and created new forma ts, new mater ia l s
for bottles, new ways to connect with consumers, and even new distribution channels. And our category
extension into aquadrinks—lightly flavored natural waters—now offers a very appealing alternative to
traditional sweetened beverages.
Aside from the impact of Fonterra's false safety alert on eight Asian markets, Early Life Nutrition has
maintained the very strong pace observed in recent years. In Latin America, Europe and the rest of Asia, our
market shares rose significantly. Discount the safety alert, and we would have recorded 12% growth in 2013.
Finally, Medical Nutrition was up 5.8% in 2013, the same as in 2012, and has proved very resilient in our
traditiona l strong hold, Europe, despite economic pressures that have prompted cutback s in reimbursem e n t s
for healthcare products in some countries. But we are extremely encouraged by vigorous growth in new
regions—China, Brazil and Russia, all heavily populated countries where rapidly aging populations are a
challenge for national health authorities.
Is Europe contributing to Danone's resilience?
Our operations in Europe—which account for nearly 40% of our revenue—are stabilizing and are no longer the
drag they were in past years, when sales fell 3-5%. This improvement clearly stems from our decision at the
very outset of 2013 to go on the offensive in a deflationary Europe plagued by sluggish consumer demand
and high taxes on both households and business. Once again, Danone needs to differentiate itself with new
recipes, as with Veloute in France; new packaging, like the new dinosaur-shaped bottle featuring a range of
interna tiona l chara cters for our children's brand, Danonino; and new communica tions strateg ies. Several of
our historic strongholds showed signs of improvement as the year drew to a close, and Portugal—where
growth was in double digits by year end—is proof that the economic crisis can be overcome.
The reorganization and adaptation plan that we announced in February 2013 is still being deployed and will
help us recover our momentum by reducing structural costs and simplifying our decision-making processes.
We centralized purchasing for fresh dairy products in a single structure, and at the end of the year we set up
an integra ted managem ent structure for all Europea n Fresh Dairy Product units that will generate econo m i e s
of scale and speed up our response times. Here as everywhere, our aim is to get European operations back
on a stronger, more competitive footing starting in 2014.
So emerging countries remain your growth drivers?
Since 2012 we've derived over 60% of our sales from high-growth countries.
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Which means we have the perfect geographical mix, with a solid base camp in stable countries where our
product categories are well established, plus new territories to conquer where we are poised to create
opportunities for fast growth. But it's importa nt to remember that the role of these emerging countries goes
beyond opportunities for local growth. They also inspire and stimulate growth in more mature markets.
Examples include the spectacular success of aquadrinks in China and Indonesia with Mizone, and waters
flavored with fruit juice such as Bonafont con Jugo in Mexico and Villa del Sur Levite in Argentina. Those
products were created in Latin America nearly a decade ago, and today they are sweeping Europe—without
stealing market share from natural waters. This is what Danone is becoming: our group is powered by all of
the regions where we do business, with innovation not—or no longer— restricted to any one specific region.
Which geographical regions hold the most growth potential for Danone?
This year we've been very active in the United States, working on complementary markets and products: we
acquired YoCrunch, a specialist in yogurts with toppings that appeal to both young-sters and their parents;
then Happy Family, one of the most innovative organic food companies in early life nutrition. Next came our
partnership with Starbucks. Why Starbucks? First, because of their impressive distribution network, which
offers many points of sale. Being present in Starbucks stores gives us an opportunity to connect with the 17
million Americans who stop in each day for breakfast. It's a powerful platform to help us convince those
consumers to make yogurt a regular part of their diet. Some Americans still eat yogurt only once every two
weeks; we want to make that once a day!
We've also stepped up our presence in Turkey with Sirma, a local leader in waters. And more recently we
signed an agreement with COFCO Dairy Investments that raises our interest in Mengniu, China's leading dairy
products company, to 9.9%. Why? Because China is a huge country, and we think joining forces with one of
the most powerful local players makes more sense—and is more efficient—than going it alone if we want to
build a category that is still largely foreign to consumer lifestyles.
Is Africa becoming a strategic priority?
We have to keep focusing on the 20 or 30 years ahead. And here we're convinced—and we're not alone—that
Africa is very definitely the next region that should be on our radar screen. We already have a solid presence
in French-speaking Africa through our early life nutrition products. Danone is number one in fresh dairy
products across North Africa and we've now consolidated our position in Morocco by acquiring a controlling
stake in Centra l Laitiere. We're also well established in South Africa —which has been an excellent spring bo a r d
for moving into markets to the north, where we have developed one set of new products that appeals to
budget conscious consumers and another that doesn't require refrigeration. Sub-Saharan Africa was our
weakest area, and we've opted to correct that through a partnership with Abraaj Group to acquire Fan Milk
International, now the region's leading vendor of frozen yogurt through a unique direct-to-consumer
distribution network . For Danone, this is an opportunity to understa nd how to connect with those custo m e r s
and how to sell to them. In that part of the world, products are distributed through large numbers of small
stalls. To meet the challenge, Fan Milk has developed a system of 31,000 vendors, with 25,000 of them on
bicycles. It makes more sense for us to build on these proven systems than to go out and create new ones
on our own. Fan Milk's geographical reach extends out into Ghana, Nigeria, Togo, Burkina Faso, Cote d'lvoire
and Benin, which is also a plus.
Can Danone maintain its corporate identity as it expands into more and more markets?
When I talk about Danone and its choices and model, I'm not just talking about our business model. I'm
talking about our cultural balance, which I want to keep. And that means asking one question before taking
any decisions: how can we do business in Danone's unique way, combining business success with social
progress and corpora te social responsibility? The answer is Danone's Ecosystem Fund, danone.com muniti e s ,
our Livelihoods fund and our Dan'Cares program—which already provides basic health insurance to 56% of
our employees—food safety and more. Those are Danone's values, our intangibles. And we will never abando n
them. The best way to ensure that everyone at Danone remains committed to balancing business success
with social progress is to involve as many employees as possible.
What are your priorities?
My role is to inspire our people to keep working towards our targets for profita ble growth, and simultaneo u s l y
lay the foundations for what Danone will be in 2020 and 2030: a group that goes back again and again to
its DNA and founding values to reinvent itself—and to remain the company most in touch with the main food
challenges facing the world today.
Page 20
Danone 2016: Inspires us

Interview with Emmanuel Faber (CEO)
2016 was a year of significant progress towards our 2020 goals of strong, sustainable, profitable growth.
Over the past two years we’ve streng thened the resilience and profita bility of our growth model. Last year,
our sales growth of 2.9% and a 70 bps increase in margin led to a very strong 9.3% rise in earnings per share.
I consider this a very solid founda tion for the future. Moreover, Danone has consolidated its leading positi o n s
in healthy diet categories that are among the fastest-growing in the world, underpinned by long-term
consumer trends for better, more nutritious and sustainable eating and drinking habits.
How did your different business lines perform?
Overall, 2016 was a year of robust performance. The Waters division reported sales up 2.9%, supported by
strong category dynamics related to consum ers switching to healthier hydra tion options and a constant focus
on brand innova tion and activa tion. Europe genera ted solid growth throug hout the year and did particul a r l y
well in the fourth quarter, supported by strong sales execution and a successful innovation plan at the end
of the year-the launch of Volvic Mascots for kids in Europe, and the new Volvic Juicy sugar-reduced range in
the U.K. On YouTube, evian was the top performing French brand. Its evian "Baby Bay" campaign was a
particular success, with more than 80 million views worldwide. The ALMA 1 region (excluding China) also
generated a strong performance in 2016, supported by various growth platforms such as Indonesia and
Mexico. In China, it is important that we continue to focus on protecting our market share through targeted
investments aimed at securing our future growth while protecting the profita bility of Mizone. Excluding China,
the Waters division's overa ll performa nce was at mid- to high-sing le digits. The Fresh Dairy Products divisi o n
reported sales up 2%, reflecting an acceleration in growth in the CIS and North America regions. In the CIS,
Danone demonstrated the resilience of our business model in a difficult economic environment. By
enhancing our brand portfolio's value through mix management, as well as the strength of our brands, we
have generated solid sales growth. In North America , we reinforc ed our leaders hip throug h successful brand
innova tion and activa tion. In Europe, Dairy sales trends have been impacted by Activia's performance, which
came in below expectations, as well as deteriorated market conditions in some countries like Spain. But we
are reworking our local execution plans for Activia, and teams have already started to implement them
country by country. The ALMA region generated strong growth, despite a fall in volume in Latin America, in a
difficult economic context with high inflation and fragile consumer spending.
Early Life Nutrition sales rose by 3.5%. We are one of the global leaders in the early life nutrition business
and by far the leader in Europe with around 50% market share. This takes into account a decline in indirect
sales in China due to a fast-changing regulatory environment inducing some volatility. However, we are
developing a new direct distribution model there, and our initiatives to ensure a growing presence and
visibility in specialized stores and direct e-commerce led to a very strong rise in 2016 local sales. The Medical
Nutrition business performed especia lly well, with more than 7% growth, sprea d evenly across geograph i ca l
areas. In Europe, Danone reported growth above mid-sing le digits, driven by solid gains in the United King do m
and Benelux. We also saw further strong expansion in China and Brazil. All segments helped fuel this
performa nc e, with pediatric and adult ranges delivering solid growth supported notably by the contribu ti o n
of our leading brands Neocate, Nutrison and Fortimel.
Which regions performed the best?
North America is a major growth market for us in all four categories. The Fresh Dairy Products business is
solid, despite a more competitive market, thanks to strong fundamentals. In the U.S., we plan to maintain
our lead in the yogurt category, with shelf space continuing to grow: it was 12% last year. Within the past two
years, bottled water consumption in the U.S. surpassed carbonated soft drinks for the first time, which is
excellent news. The premium segment where evian operates is actually growing twice as fast as the
mainstream segments of still water, and evian became a market leader in premium waters, growing 50% in
2016. In medical nutrition, where Nutricia is a leading player, we've built a focused portfolio addressing
pediatric allergies and metabolic disorders. We are also developing a 100% organic platform for Early Life
Nutrition, since organic food continues to over-perform in the baby food category. Happy Family was the
fastest-growing baby food brand in 2016, with 30% growth. In Russia, it was the third year in a row that
Danone demonstrated the resilience of its business model and the strength of its brands, despite a difficult
economic environment where inflation has been a factor. Since 2011, when we acquired Unimilk in Russia,
we have raised our margin from a very low level and it is now approximately in line with the Dairy division
margin. And the ALMA region, aside from China, generated a strong performance in 2016, notably in
Indonesia and Mexico.
1 Latin Amer ica, Afr ica, Middle East, Asia Pacific
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Why did you decide to acquire WhiteWave?

Our two companies make an ideal combination for strengthening the Danone 2020 plan, and for bringing
health through food to as many people as possible. The missions of the two companies are very similar. We
align in our ambition to support consumers who opt for more sustainable and healthier eating and drinking
habits. Like Danone, WhiteWave has focused on assembling a portfolio of incredible brands. And our
portfolios are most complem enta ry, especia lly when it comes to offering consum ers the choice between dairy
and plant-based food and beverages. This is a major asset, as there are more and more "flexitarians" who
are looking for different food options on different occasions.
We will double the size of our business in North America and become a top-15 food and beverage company
in the U.S. We will also be able to take advantage of significant synergies and combine our world-clas s
research on dairy and plant-based fermentation to take the sustainability of both of our companies to the
next level. We will reduce our agricultura l impact and improve the nutritional density of our global portfo l io .
We can leverage the power of these two leaders in dairy and plant-based products to create the food of the
future, for the consumers of today.
Danone created an Africa division two years ago. What's your outlook for this market?
In many ways Africa is the continent of the future. I'm thrilled that we created a dedicated strategic busin e s s
unit to address this opportunity. Throug h partnerships and acquisitions we have assembled a great portfo li o
of businesses. I also expect Danone to develop a specific inclusive business approach in Africa, which will be
the epicenter for Danone Communities to continue to develop innova tive market-based solutions for social
businesses to fight malnutrition and bring water access.
You announced in January 2017 that you were strenghtening regional leadership. Why?
The food industry has been able to drive down the cost of calories over the past 50 years by globalizing supply
chains and standardizing offerings. But I think this is coming to an end. The human population is growing,
and there are systemic risks in the reliance of the global food system on only half a dozen plant species to
cover 80 percent of our needs. A diversity of diets, cultures, and traditions is something that needs to be
fostered. This necessitates closer proximity to local markets, trends and consumers.
As such, two years ago we created a backbone of 30 regional clusters and have now aligned our category
organiza tions. Going forward, it will enable our Executive Committee to delegate significant decision-m ak i ng
powers to a new regional business leadership team, composed of all our regional business vice presidents.
This team will be the best point of leverage, closer to consumers and realities on the ground.
You also changed the Executive Committee structure. What will be the benefits? The delegation of power
allows me to reduce my direct team of Executive Committee members from 12 to 8, so we’ll have a much
closer, tighter, cost- and time-effective team. Each member now has a larger scope, combining a business
and/or functional role.
At the same time, we are creating two important new functions, which will support our mid-term growth
transformation agenda by focusing on efficiency. The first role concerns the resource efficiency function,
establishing an agenda for efficient resourc e use in the short, mid, and long term. This structure will fuel the
second function, which integra tes growth and innova tion, from R&D throug h to marketing , sales and digital.
Aside from a new organization, you also introduced PROTEIN, a new efficiency program. Could you
explain your vision?
Both the new organization and PROTEIN are part of a comprehensive, company-wide strategy to maximize
efficiency in the short, mid and long term. PROTEIN is about generating 1 billion euros in savings by 2020. It
is entirely focused on our indirect spend, i.e., goods and services that are not going into the product, but are
about the way we all work together, travel, buy transporta tion, logistic s, media, professional services and so
on. We will make disciplined choices in how we buy, spend, and work and we will consider how best to re-
invest part of those savings into relevant growth projects to fuel our strategy and mission.
But efficiency is not just about the short term. In addition to PROTEIN, our new function and organization of
procurement will ensure we also address the mid term. Our Strategic Resources Cycle organization will
continue to be an essential element of our long-term transformation.
You are calling for an alimentation revolution. How do you define this, and how does Danone fit into
this movement?
We believe that eating and drinking well contributes to better health, and we want to promote eating and
drinking practices that nourish the health of individuals as well as the planet. Consumers have different
Page 22
expectations of brands today: they have a desire for more transparency and want to be able to trust them.
I'd like Danone to be a catalyst of this alimentation revolution, a change agent, and one with substantial
impact. For me, success beyond 2020 would mean the alimentation revolution being a thriving community
of food and beverage entrepreneurs with Danone a recognized partner and leader. As for some of the
concrete steps we're taking, we are increasing the number of choices we offer our consumers through
initiatives such as the Dannon pledge on sustaina ble agriculture, naturality and transparenc y in the U.S., and
offering more choices about the use of GMOs-while also enhancing transparency with clear information on
the labels of products containing them.
Meanwhile, our partnership with B-Lab underscores our long-standing commitment to business success and
social progress, and is a clear move towards enhancing the transparency of our actions.
In 2016, you said the biggest global economic challenge is social justice. What did you mean by that?
I think that allowing for globalization without purpose leads to a concentration of wealth and a growing
number of inequalities. For me, social justice means giving people an equal chance to participate in the
community and making broader society available to all.
A company is an organization that is created with a purpose. And that purpose, in one way or another, is to
serve society. Everything starts and ends with people. Every day, a company employs and works with
hundreds of thousands of people who are part of its ecosystem, and addresses hundreds of millions of
consumers. If at any time we do not fulfill the needs of these consumers, they will stop buying our brands
and go somewhere else. The same goes for our employees, and farmers, if we do not deal with them in a
manner that is consistent and fair. And so the role of a business is one of balancing the needs of all of its
constituencies in the short, mid and long term. At Danone we have this dual commitment to business success
and social progress, which has long been the unique DNA of our company.
What are your expectations for 2017?
2017 is going to be a year of major transformation for Danone. We are opening a whole new chapter with the
expected acquisition of White Wave, merging our U.S.-based operations to create what will be the biggest
public benefit corporation in the world.
As we enter the next stage of our journey towards our 2020 goals, with the new efficiency management and
integrated growth and innovation process that we've just deployed, I have no doubt that we are going to
create the best possible conditions to fuel our model of strong, sustainable, profitable growth, and be able
to deliver consistent EPS growth.
Page 23
Danone 2017: Inspires us

Interview with Emmanuel Faber (CEO)
2017 has been a pivotal year for the execution of our transformation agenda through strategic actions. A
year of intense construction to streng then Danone as an even more resilient company. We are well-prep a r e d
to seize tomorrow's opportunities and can build on the right portfolio of products and brands to serve our
consumers meaningfully in a balanced array of geographies. We can count on the combined strength,
competencies and expertise of our fully committed teams.
Historically our company has always been one that is in motion and that has successfully transformed itself
while remaining faithful to its vision. Twenty years ago, we were a Europea n champion active in some twen t y
categories of products. Today, we have become a world leader in four businesses: EssentialDairy and Plant-
Based Products, Waters, Early Life Nutrition and Advanced Medical Nutrition. In other words: a unique health -
focused portfolio that allows Danone to be a key player in the Food Revolution.
From a geographical perspective, more than 65% of our sales are now generated outside of Europe,
especially in the U.S., where we have doubled the size of our business following the White Wave acquisition.
Globally speaking, we ended the year with a very strong set of results and delivery on all of our 2017 financial
objectives, despite volatile food and beverage markets and rising input costs. Serving our gradual
acceleration of sales growth along the year, the performance of our Specialized Nutrition activities in
particular has been consistently strong, especially in China—a market where our brands have responded
adequately and with great agility to rising consumer demand. Our Waters division, across plain waters and
aquadrinks, performed well in all regions both in terms of volume and value, benefiting from market trends
toward healthier hydration. We saw a strong acceleration in the category, with a return to growth in China.
Despite some headwinds, our Essential Dairy and Plant-Based division has shown resilience and its
performa nc e has been gradua lly improving. We're seizing opportunities, notably throug h the appeal of local
yogurt and dessert brands like Fes 2 Vaches in France or Light & Free in the U.K. which, though small, are
growing strongly. The plant-based business has seen an uplift in the second part of the year, with impressive
sales growth in the last quarter from brands like Vega, Silk, So Delicious and Alpro.
Overa ll, our 2017 performa nce reflects the streng th of our expanded portfolio of consum er-trusted brands ,
acceleration in product innovation and activation, and the solid execution of our strategy and financial
roadmap. The year 2017 was marked by the White Wave acquisition, positioning Danone as a global leader
in plant-based and organic products. The integration is going well and we are reaping considerable benefits
already in terms of synergies, ahead of plan. We closed the year with an accelerated sales growth,
outperforming the industry average, along with strong margin improvem ent, free cash flow above €2 billion
and double-dig it recurring earning s per share growth at consta nt exchange rate fully in line with our full year
guidance.
Protein, the €1 billion savings program by 2020 that was launched at the beginning of 2017, is on track and
will give us the momentum to reinvest part of the savings into relevant growth projects.
We aim to provide more choice for different moments of the day, while inspiring healthier and more
sustaina ble eating and drinking practices. This year, combining Danone and White Wave was a strateg ic step
in strengthening and diversifying our offer. We are now able to serve people looking for plant-based options
as part of their diet, whether for health reasons, or for social or environmental convictions.
We have a unique portfolio of brands across our four businesses that strongly connect with consumer trends
and demands. We truly believe that not only our global brands, but especia lly our strong local brands will help
us keep Danone closely focused on the eating habits of people and their communities, while providing locall y
relevant solutions to health and sustainability challenges.
We continue to inspire better choices by improving the nutritional quality of our food and beverages,
innovating with on-the-go formats and packaging adapted to new consumption patterns, and aiming to be
where our consumers are. We do this by combining the strength and innovation expertise of a global
organization with an in-depth understanding of local tastes and social habits. Today, more than 55% of our
portfolio consists of local brands such as ~La Serenisima in Argentina, Bledina in France, Prostokoashino in
Russia, Mizone in China or AQUA in Indonesia. We continue to expect those local brands to drive growth.
People today have quite different expectations for brands. They pay more attention to what they eat and
drink, how ingredients are sourced, and how food and beverages are produced, marketed and distributed.
They are mindful of a brand's environmental and social practices, and they want to know the people behind
the brand. Transparency is key.
Page 24
No other time has offered as many opportunities to rethink how we produce food. We want to be a catalys t
of this change. 'Danone, One Planet. One Health' is our vision that speaks directly to this generation of people
around the world who are looking to reclaim sovereig nty over what they eat and drink —the food generat io n .
It drives our strategic decisions to deliver the healthier, more sustainably produced food and drink choices
that people have come to expect from us. In addition, we'll continue our work to promote regenerative
agriculture, to encourag e a circula r economy and to offer a diverse range of nutritious, minimally proce s s e d
products.
We believe the food generation will request evidence of the intent of the people behind the brands. We
believe that B Corp certifica tion is an externa l recognition of our sustaina ble practices that will reinforce trust
with consum ers, retailers, civil society and governm ents while bringing us a crucial competitive advanta g e.
Beyond B Corp certification for a number of our small and large local entities (Happy Family, Danone Dairy
Spain, Danone Dairy U.K., Danone Aguas Argentina, Les Pres Rient Bio), we are working to become a B Corp
on a global level as a completion of our commitment to sustainable business and to Danone's longstanding
dual project of economic success and social progress.
To play a key role in the Food Revolution, our brands must first support the social and cultural values people
have about food. They must sharpen and share their point of view on how they impact people's health or the
planet's health—or both. We are consta ntly streng thening the sustaina bility of our brands, in addition to their
connection to and impact on local ecosystems— throug h responsible sourcing, production and distribut io n .
The inauguration of our carbon-neutral evian bottling facility in France in 2017 was a proud milestone-
moment for our company.
(...)
In line with our 2020 agenda, the priorities we are setting for ourselves are accelerating growth, maximizing
efficiency and pursuing disciplined capital allocation.
Our growth acceleration strategy will lean on the development of purpose-led, activist brands, which will
become the new standard across the company in line with our 'Danone, One Planet. One Health' vision. We
will also continue to disrupt our innovation, distribution and marketing models to better engage with
consumers. Finally, our continued shift toward new channels, including e-comm erce platform s, will be key to
driving new opportunities.
In the meantime, Danone is continuing to implement its transformation with the integration of White Wave
and the global roll-out of our ambitious €lbn savings program by 2020. We have started 2018 with stronger
foundations, giving us confidence that we will deliver double-digit recurring earnings per share growth.
To succeed on this path, I know I can count on the incredible energy of more than 100,000 Danoners, working
every day to bring our unique vision to life.
With your constant support, our commitment to social and economic progress, and passion for bringing
health throug h food to as many people as possible, we will continue to generate profitable sustainable growt h
now and for many years to come.
Emmanuel Faber.
Page 25
Appendix 1: Overview of strategic choices

The following table provides a quick recap of the most frequent strategic choices a company can make.
Level of strategy Strategic choice Definition

Corporate-level Specialization The development of a single SBU, the focus on a single industry,
strategy a single type of products or a single market.
Vertical integration The development of a SBU concerned with the distribution
of the organization’s current products or services (forward
integration) or with the organization’s supplies and inputs
(backward integration).
Related diversification The development of a SBU within the organization’s current
resources and competencies in order to develop synergies.
Unrelated diversi fi c ati on The development of SBU beyond the organization’s current
resources and competencies.
Business-level Low price Achieving a lower price than competitors whilst maintaining
strategy similar perceived product or service benefits to those offered by
competitors.
No frills Combining a low price, low perceived product /service benefits
and a focus on a price-sensitive market segment.
Differentiation Providing products or services that offer benefits that are
superior from those of competitors whilst maintaining the same
range of price (basic differentiation) or applying a substantial
price premium (focused differentiation).
Hybrid Combining low price and differentiation strategies, generally by
introducing an innovation.
International Simple export International strategy is developed through partnerships with
strategy local sellers.
M ultidomestic Strategy is adapted locally. Each international subsidiary is
considered as a distinct and autonomous business.
Global Developing the same strategy all over the world. M ost of the
time, products or services are the same in each and every
geographical market.
Transnational Some strategic features are the same all over the world (e.g.
components production can be centralized) while others are
different (e.g. R&D and marketing can be adapted locally).
Strategic vehicles Organic growth Developing strategy by building on and developing an
organization's own resources ands competencies.
External growth Developing strategy by grouping together several preexisting
organizations through a merger or an acquisition.
Alliance Developing strategy by sharing resources with a competitor
through a formal or an informal arrangement.
Partnership Developing strategy by sharing resources with a non-competing
organization through a formal or an informal arrangement.
Page 26
Appendix 2:
Timeline template
Page 27

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MGT 512.

DANONE, 15 YEARS OF STRATEGY

Danone 2004: The Danone adventure

Leading positions worldwide

1994-2004 Once BSN, now DANONE

Danone 2006: Building the future

Danone 2007: The beginning of a new venture

Danone 2009: Using the crisis to accelerate

Danone 2010: Growth first

Danone 2013: The challenge

Danone 2016: Inspires us

1 Latin Amer ica, Afr ica, Middle East, Asia Pacific

Why did you decide to acquire WhiteWave?

Danone 2017: Inspires us

Appendix 1: Overview of strategic choices

Level of strategy Strategic choice Definition

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