Fresh Dairy Products

business 34a41_baf2 24/05/05 15:02 Page 34 Nueva Font Vella Toque de Limón bus Products. Products, Beverages, and Biscuits & Cereal Fresh Dairy A review of our three worldwide business lines: 7.8% organic growth in 2004, the best ever for DANONE. 0 36 0 43 in ess 0 49 DANONE 20 > 04

5 business 34a41_baf2 24/05/05 15:02 Page 36 Dairy drives success Health a strategy structured for close relationships with consumers. success of product concepts and brands centered on health and DANONE’s world leadership in the field. Momentum reflects the Fresh Dairy Products posted record growth in 2004, consolidating United States: f momentum while giving so as to maintain and way of doing things, distinctive character to preserve Stonyfield’s its goal from the start was through Dannon. Instead, its existing business the new subsidiary with was not aiming to merge December 2003, DANONE this to a majority in organic yogurts, and raised number one in the US for interest in Stonyfield Farm, When it bought a minority Europe, also made healthy contributions, shape, traditional markets, mostly in the Fresh Dairy Product sector is still taking Russia. Alongside emerging markets where raging 25% overall and topping 50% in and central Europe,strong ave- in eastern place on the market. Growth was similarly Farm restored the Group’s number-one bined successes of Dannon and Stonyfield nued in North America, where the com- in sales volumes. Favorable trends conti- top place with a rise of 75,000 metric tons Argentina, where DANONE consolidated its tions came from both Mexico and sales rose 22% overall. Major contribu- r vigorous trends in several geographical operating margin at 13.7%. Results reflect u ted total. Operating income was up from u 2003, as did sales revenues, up 10.5% to close to 350,000 metric tons more than in strongest rise ever, putting on 8.8% or egions, in particular Latin America, where 845 million to 6.9 billion or nearly half the consolida- Sales volumes showed the driver for the Group’s growth. the business line’s place as the r r ecord year in 2004, confirming esh Dairy Products had a u 947 million, setting the developing its business own philosophy in continues to apply its causes each year, and of its profits to selected donating 10% concern, to its tradition of social Farm remains faithful same manager, Stonyfield and still headed by the Founded in the 1970s and purchasing. development, logistics including research and of resources in areas the company benefit a winning combination second quarter. concerted retail-price reductions in the initiative for the government-sponsored mass-market consumer goods as well formance suffered from soft demand for was something of an exception, since per- the UK and Germany to north. France other countries to the south as well from with strong showings from Italy, Spain and Petit Gervais aux Fruits in France, the immune system and Danonino, called digestion, while Actimel helps to reinforce Activia, called Bio in France, favors healthy names from one country to the next. Thus although they may be sold under different health benefits to people around the world, Each of these blockbusters offers distinct million euros and posting double-digit growth. —each generating worldwide sales of several commitment to research and development health benefits, backed by significant four powerful concepts structured around business line’s asset brands. These represent The main sources of momentum were the for global concepts local know-how Asset brands— US market. main competitor on the exceeds that of their risen steadily and now Stonyfield Farm has also share of Dannon and The combined market its sales and production. has more than doubled interest, Stonyfield Farm DANONE acquired its first for themselves: since Dannon. The results speak in cooperation with ••• Belgium, Ireland and Portugal. markets including Spain, deployed on other European Danacol has since been of cardio-vascular disease. effectively to the prevention this new yogurt contributes levels of bad cholesterol, ingredient that helps reduce with vegetable sterols, a natural for the French market. Enriched Danacol is already a benchmark FOR DANACOL A STRONG START emphasis on health. to expand its menus with more r yogurt, in 6,200 European Y McDonald’s has offered Fruit & PA ADDED SCOPE FOR it well ahead of competitors. mind awareness (33%), placing in terms of spontaneous, top-of- GFK rated Danone the top brand MCDONALD’S > > > BRAND AWARENESS Highlights and assimilated products * > > > > > > > > > WORLDWIDE* LEADING POSITIONS estaurants as part of its move ogurt, Europe’s first on-tap Based on sales volume for yogurts Launched in April 2004, Since March 2004, In 2004, research institute R No. 2: No. 1: No. 1: No. 1: No. 1: No. 1: No. 1: No. 1: No. 1: TNERSHIP WITH

B the Canary Islands Spain including the Middle East North Africa and Tu US France Europe Eastern Canada Belgium Argentina

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8 SALES BY REGION DANONE OPERATING MARGIN SALES GROWTH* * SALES BY SEGMENT like-for-like +9.4% 12.8% > 0220 2004 2003 2002 0220 2004 2003 2002

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E of World 25% 75% 8% products and assimilated 92% S

S +10.5% Baby food 13.7% Rest Europe Y ogurt ••• w Americans on low-carb diets, a segment to meet the demands of 60 million Control range, launched in January 2004 months to develop its Light’n Fit Carb In the US, it thus took Dannon only a few rapid development of products to match. cation of needs and expectations to allow the key to success is precise identifi- strengthen consumer relationships. Here essential part of its strategy to maintain and faithful to its local brands, which are an Dairy Products business line remains account for half of its total sales, the Fresh While these four champion brands now sales of close to offer in 35 countries and generates annual proven health benefits, Danonino is now on by communications focused on scientifically childhood nutritional deficiencies. Backed sion for each country to target prevalent Brazil and Saudi Arabia, with a different ver- on emerging markets including Argentina, in Western Europe, has won its place an example, Danonino, originally launched nonetheless essential to success. To take but familiarity with local consumers has been are not confined to any particular region, an eye on their weight. Clearly, these benefits is a range of diet products for people keeping Vi Vitali strong. Finally A winning brand recognition, since without weakening the spirit of times in a format attuned to and immediate appeal was to combine warmth The challenge for designers keep pace. and the logo must naturally has evolved with time, Fresh Dairy Products The identity of Danone her tasnella and Ser, depending on the country, e helps children to grow up healthy and t he brand is now the uncontested u nea, also called Taillefine, 750 million. smile within”, the new design signature “Smile from Backed up with the with health that shows. the well-being associated appetite, pleasure and of a smile suggestive the new logo displays Rounded at the edges, quality, trust and health. Danone logo as a sign for consumers see the on health benefits. illustration of DANONE’s strategic emphasis half of the year, providing a perfect UK and Belgium followed in the second Successful launches in Portugal, Italy, the a strong start in France April 2004. of bad cholesterol levels, which got off to Danacol, a yogurt favoring the reduction product deployments. These include central theme, as it has been for recent products is still very low. Health will be a of the world where consumption of dairy China, Russia, Indonesia and other parts pace of expansion on new frontiers in is now confident in itsability to step up the and the Fresh Dairy Products business line are generally considered tough markets, enabled DANONE to take its place on what familiarity with local consumers have Affordable, adaptable products backed by Looking ahead of 650,000 servings a day. mainstay of diet, as reflected in daily sales but where dairy products are a traditional a country where purchasing power is low these are perfectly suited to conditions in a serving—less than one-tenth of euro— another leader. Moufid yogurts in Morocco are example. Sold at only one dirham waters. Ta biscuits in Asia and name, including sold under the Danone used for other products 40 countries. It is also Dairy Products in over by stages for Fresh is being deployed illefine/Vitalinea • vitamins and added quality, with five appeal and nutritional combination of taste 90 days, reflecting a bottles sold in just start with 10 million got off to a vigorous new drinkable yogurt Danone Indonesia’s QUALITY AFFORDABLE > INDONESIA: it within the reach of around the equivalent of for just 1,000 rupiah— The 100 ml bottle sells less than $3 a day. 60% of people live on in a country where crucial consideration affordable price—a content. Plus a very natural milk-protein calcium enriching the u 0.10—putting p. 47). network (see also nationwide distribution water, and its Indonesia for bottled Aqua, number-one in re cost control with the combined rigorous achieve this, DANONE most families. To *1 sources of Danone 0 euro cents. business 34a41_baf2 24/05/05 15:03 Page 40

0 & Development Research R&D DANONE perceptions and descriptions of a product. existing recipe by collecting consumer sensory * > LOCAL NEEDS TA a 10% rise in sales for the year. tastes enriched, contributing to texture was thickened and fruit name Petit Gervais aux Fruits, Danonino is sold under the France, for example, where demand more precisely. In to adjust recipes to match in each country were then able and expectations. Subsidiaries identify their taste preferences where Danonino is on sale to aged 5 to 8 in the 35 countries conducting surveys of children center, played an essential role, r Danone Vitapole, the Group’s appeal for children. In this, further enhance the product’s as an organoleptic review*—to perceived features—referred to optimize taste, texture and other r to local conditions. In 2004, the Dairy Products, Danonino adapts three asset brands for Fresh Ta esearch and development ecipe underwent a review to To

> illefine/Vitalinea, the other Like Actimel, Activia and ILORING DANONINO TO

develop a new recipe or improve an

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r Blédina widens its lead Baby food: 8% of the total. account for approximately Blédina baby foods, which business line include Fresh Dairy Products speaking, sales of the dairy products strictly dairy beverages and other In addition to yogurts,

e Employees % of sales Capital expenditure % of sales Depreciation and amortization Cash flow from operations Operating margin Operating income Organic growth* Sales * € and exchange rates

At constant structure s millions

D u

o from its long-standing market, Blédina benefits a specific focus on this As the only business with consumer awareness. its market lead and raising positions in 2004, widening Blédina bolstered its Number one in France,

u 3692 23

+6.7% c 10.9% 6 4.7% 2000 308 259 667 712 530 4% t

k +6.8% 4129 24 11.4% 6 4.1% 4.2%

2001 e 286 293 742 790 928

fig 0126 20 +9.4% 12.8% 6 3.2% 3.7% 2002 200 233 746 802 276 re consolidate by work in the field to and families, backed up familiarity with mothers export sales in 2004. Blédina also increased of over 45% in France, share market a With serve. unbreakable and ready to plastic bowl—practical, in an innovative transparent favorites, the latter come i on simple recipes drawing aged 8 to 12 months. de Maman” range for i including the new “Les Idées well as other products such as Gallia Calisma powdered milk specialties with examples including been a driver for success, Product innovation has thus to the scientific community.

nspiration from home-made u la

r ti e ons +9.6% 1266 21

13.7% s 6 3.1% 3.1% 2003 hi 195 193 756 845 185 ps consumer and build ties +10.5% 3582 23 13.7% 6 3.8% 2.9% 2004 264 202 825 947 914 Based nfants Probiotics, benefit on the host.” As a amounts, confer a health administered in adequate organisms which, when “Probiotics are live micro- Organization in 2001, adopted by the World Health According to the definition and Spain to the US. from the UK, Netherlands public in countries ranging and magazines for the general from both medical journals surge in interest for probiotics Recent months have seen a > brands in probiotics. are the world’s top Japanese partner— Y Actimel, Activia and PROBIOTICS akult—DANONE’s LEADER IN the benefits of science products sold worldwide. accounts for 62% of probiotic particularly in Asia, which now r have also won growing r several scientific studies. Over out by offering benefits borne France—and Actimel, both include Activia—sold as Bio in groundbreaking ranges that and the development of expertise through its research has built up a unique store of pioneer in the field, DANONE ecognition from consumers, ecent decades, probiotics mark. Partnership with Yakult, range topped the u Actimel sales came to around past four years. In 2004, has averaged 30% over the trends, posting growth that the full benefit of vigorous flagship brands are showing products. DANONE’S two segment in fresh dairy the most promising market progress have made probiotics and continuing scientific for health Increased concern 800 million, while the Activia u 650 million to healthcare specialists. probiotics better known Probiotics Council to make projects and the Global teams to work on specific the establishment of joint two has been reinforced with cooperation between the In recent years, research the company’s equity. holding a 20% interest in momentum, with DANONE whole, makes for added in Japan and Asia as a number one for probiotics

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Beverages moving towards new growth levers The Beverage business line met growth targets for 2004, with sales up 7% despite the high basis for comparison set during the heat wave of summer 2003. It also laid the foundations for future growth, investing in new market segments. Business_42a47_GB_baf 24/05/05 15:17 Page 44

4 DANONE and the US. water deliveries in Europe its interests in home and office n show an exceptional, financial statements for 2004 approximately > > > BUSINESS IN ITALY SALE OF BOTTLED WATER * > AND EUROPE DELIVERIES* IN THE US HOME AND OFFICE for the Chinese market. showcasing the brand spa opened in Shanghai, EVIAN IN CHINA r Badoit came out in bright packaging, while in France available in Tetra Pack A FRESH LOOK IN 2004 P € market, reporting sales of of this fiercely competitive Italaquae has an 8.5% share three in Italy for bottled water. subsidiary Italaquae, number LGR Holding for the sale of its r Highlights 2 1 * > > > > > > > WORLDWIDE* LEADING POSITIONS ed— eached an agreement with Wa based on sales volumes on- ACKAGING: WATER GETS still water. bottled water.

150 million in 2004. > DANONE’s consolidated In March 2004, the Evian In Germany, Evian is now In November 2004, DANONE o 2: No. 1: No. 1: No. 1: No. 1: No. 1: No. 1: No. ter distribution in fountains and jugs. r ecurring charge of a

first for bottled water. B B China Argentina France Germany Mexico Indonesia Spain

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B country to country. Positive trends included the situation varying significantly from Results in Europe were more uneven, with ders on this market (see also p.32). of Arco Iris, one of the leading local conten- home and office deliveries, taking control brand, DANONE reinforced its positions in bottled water in Mexico with its Bonafont up around 30%. Already number one for and, even more, Mexico, where sales were 300% in volumes to over 100 million liters weight control, reported a rise of more than where Ser, a brand focusing on fitness and sources of momentum were Argentina, volumes in Asia. In Latin America, the main in China together account for almost all € alone, sales were up by over 14% to nearly ging as the drivers for fresh growth. In Asia from Latin America and Asia, now emer- mer in Europe. Much of the impetus came against the dollar and yen, a cool sum- for most bottles, as well the euro’s rise raw materials, in particular PET, now used conditions that included higher prices for * Employees % of sales Capital expenditure % of sales Depreciation and amortization Cash flow from operations Operating margin Operating income Organic growth* Sales € 1.3 billion. Aqua in Indonesia and Wahaha and exchange rates At e millions constant structure

g despite unfavorable This was achieved for an organic rise of 7%. € everage sales reached

e 3.4 billion in 2004,

fig 31,042 +8.4% 12.4% 4 9.5% 7.3% 2000 395 302 537 513 141 u

e countries continued efforts to As in 2003, business units other Winning new customers to traditional soft drinks. mers with refreshing, low-sugar alternatives focus to attract health-conscious custo- the pleasures of natural flavors its main its development of flavored waters, making expansion alone, the business line continued market segments rather than geographical Aiming for new sources of growth based on highest volumes, and Bonafont in Mexico. Indonesia’s Aqua, which posts the world’s sales revenues, Volvic, Wahaha in China, including Evian, number one worldwide by and mineral waters, with top brands its world leadership in volumes of natural DANONE’S Beverage business maintained Continued innovation as declines in supermarket prices. the heat wave of previous year, as well from cool summer weather, contrasting with ances in France, where business suffered These nonetheless offset weaker perform- Germany and continued resilience in Spain. double-digit growth in the UK, recovery in 42,556 +7.1% 11.4% s 3,796 8.5% 7.3% 2001 321 276 519 432

40,124 +4.3% 12.6% 3,691 6.4% 7.3% 2002 236 269 556 464 39,126 +9.9% 15.1% 3,557 5.8% 6.6% 2003 208 234 583 537 39,148 14.4% 3,427 4.4% 5.8% 2004 +7% 150 198 532 494 ••• .I. S. and the Pacific last year? beverage business in Asia developments for What were the main in New horizons .I. S. for Beverages in Asia? of growth momentum What are the main sources the consolidated total. and making up 10% of sales topping with growth over the year, fo P Beverages in the Asia- sales. Despite that, va unfavorable exchange-rate prices and the impact of suffered from rises in PET but performance market, on the region’s beverage D the line's sales. of DANONE's beverage operations in the region, which accounts for 42% of SIMON ISRAEL, acific area accounted ANONE took first place r riations on our export 15% of the Group’s > > W Asia and the Pacific Innovation made ith sales up 14%, € 1.4 billion Executive Vice President,Executive Vice Asia-Pacific, reviews the performance countries. in these two different for continued expansion enormous potential we see At DANONE, for volume growth. w Splash of Fruit flavored Indonesia Aqua’s benefits.in And with added nutritional for innovative products city-dwellers looking from sophisticated reflects new demand two high-energy drinks, and Wahaha’sG-Vital, of Robust’s Maidong the success In China, and flavored waters. on functional drinks growth strategy is now The main focus of to business last year. an important contribution ater was a main driver other things. deliveries among from direct store w sales where in Australia, to build up its business Fr fizzy soft drinks. alternative to the usual which offer a healthier fruit-based soft drinks, with carbonated into a new segment the company moved J to the success of its due in particular market, it has 40% of the where fruit juices, as well as in drinks, its lead in functionnal Fr .I. S. and New Zealand? What about Australia ust Juice line. In 2004, r p3,benefiting ere up 3%, ucor is also continuing ucor has held onto > In New Zealand, SALES BY SEGMENT SALES GROWTH* OPERATING MARGIN SALES BY REGION * like-for-like 0220 2004 2003 2002 +4.3% 0220 2004 2003 2002 12%

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A DANONE E G 2.5% 0.5% water 16.5% water 80.5% of World 11% 47% Pacific 42% S E

S S 14.4% +7% Rest Europe Asia- Other HOD Sparkling Still 20 > 04

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6 DANONE Development ) (Research & R&D Dan’Inov d’Or prize. took DANONE management’s also it of the Year by retailers, French consumers and Beverage named Product of the Year by additional recognition, too: 3% of the market. It won 18 million liters representing households and sold over was chosen by two million seven months, Badoit Rouge for optimum storage. In its first combining plastic and nylon r its robust character, with bright packaging underscores as most, while innovative twice as many small bubbles gas, Badoit Rouge contains are the rule. With added natural lightly-carbonated waters on the French market where innovating to set it apart to win a special place for Badoit, Danone Eaux France aims in a bright red bottle. offers customers added fizz June 2004, Badoit Rouge * > A BRIGHTER SPLASH BADOIT ROUGE MAKES ed multi-layer PET* bottles Polyethylene terephtalate.

> On store shelves since

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S an alternative to sweet sodas an alternative Ser in Argentina: ••• the right response, offering ranges appears to be Danone Argentina’s Ser two years ago, Aguas Launched less than still very figure conscious. in France and Italy, but compared with only 13% for 31% of the market drinks, which account are keen on carbonated In Argentina, consumers Functional beverages offering clearly too, innovation was a driver for growth. In the Asia-Pacific area and Latin America, Green Tea in 2004. Vo products that included Volvic Strawberry, new territory with a steady flow of Eaux France also continued its move into of Fruit on the market in Indonesia. Danone in the UK, while Aqua has put Splash Vo segments. To this end, Volvic launched ding the scope of top brands to new strengths in bottled mineral water, expan- Their strategy is thus to build on existing over 60% in flavored waters. France, which holds a market share of ness model developed by Danone Eaux lvic Apfel in Germany and Volvic Splash lvic Lemon, Volvic Orange and Volvic accelerate deployment of the busi- appeal—a combination waters offer taste low-calorie carbonated while the flavored association with health, water has made for an other citrus fruit. The still flavored with lime and carbonated waters and magnesium or gently enriched with calcium the choice of still water traditional soft drinks. continue to win business away from impetus for growth, especially if they that functional beverages will provide new high-energy drinks in 2004 bears out hopes Bubbles. In China, the success of Maidong nated fruit-based drink, Just Juice under the name H2go as well a carbo- Frucor launched a new carbonated water Argentina, while New Zealand subsidiary of low-sugar carbonated waters in include new flavors added to the Ser range dwellers looking for added value. Examples to win new customers among city- identified health benefits were a main lever carbonated beverages. Argentina for low-calorie number-two place in the Ser now holds liters in 2004. 100 million more th doubt, with sales up is in any case beyond city dwellers. Its success especially among young a large following, that has won the brand an 300% to top • > “The road network Manager, explains: Aqua’s General as Pascal de Petrini, distribution problems, Indonesia poses points of sale, and 2 million small With its 4,000 islands NETWORK ITS DISTRIBUTION INDONESIA AND AQUA IN with 70 distributors exclusive agreements The company signed system from scratch. to create a distribution busy.” Aqua decided and are often very because of the climate have deteriorated motorways. The roads there are not many under-developed, in Indonesia is of sale. 1.3 million points in Indonesia, servicing the roads every day the Aqua logo travel 10,000 trucks bearing and 1.5l). In total, sizes (330ml, 660ml and also for traditional fountain bottles for 19-liter water of Aqua deliveries, which carry out 80% Business_48a53_GB_baf2 24/05/05 15:19 Page 48

Biscuits Rebuilding and renewal through local strength Following a phase of consolidation, the Biscuit business line returned to growth in 2004. It is now ready to take the offensive and build new strengths on major markets. Priorities include the right match with local tastes and cultures, renewal of top brands to realize their full potential, and offerings with increased nutritional benefits. Business_48a53_GB_baf2 24/05/05 15:19 Page 50

> 051 BUSINESS BISCUITS > LU FRANCE IN Specialization has sales growth such as Thé, THE SPOTLIGHT paid off—in product accelerate, Vandamme, Brun Biscuit sales in categories such as benefiting from and Napolitain also France are back on crackers, sweet consolidation of posted healthy rises the rise for the first biscuits, or cereal market positions, in 2004, as did time in four years, bars, and in different increased regional brands fter a year of transition number of countries. To meet the challenges Highlights rewarding the types of meal or advertising and like Rem and in 2003, the Biscuits this entails, the Biscuits business line has reorganization that snack. Asset brands promotional seasonal specialties, has brought including Prince, outlays, and quicker including Calèche, business line was back reinforced local teams, particularly in RUSSIA DANONE teams Mikado, Paille d’Or, product innovation. a Christmas favorite. in a winning mood in marketing, decentralizing its structures for > January 2004—DANONE closer to consumers Croustilles and Smaller brands with 2004 when sales grew more independent operation to get the acquires Chupa Chups’ soft and customers. Cracotte have seen strong traditions a3.9%, rewarding a differentiated strategy benefit of constant, direct contact with cake business, with products tailored to individual markets. trends in local consumer preferences. sold in Russia under the Chok For there is no world market in biscuits. Successes on Spanish and Italian markets and Rolls name. The move Instead there are a host of local, national in 2004 show how effective this can be. consolidates DANONE’s leading and regional markets, reflecting wide Rather than challenging more powerful rivals position in the Russian biscuit differences in taste and culture from one on their own ground, subsidiaries in these market and strengthens part of the world to the next. Consumers countries focused on distinctive products its presence in the east of are also very attached to brands, many of like Petit Ecolier and Mini rollos to capture the country. them with traditions going back a century top places in several profitable niches and or more—brands that were part of their own consolidate their number-two rankings in SOUTH AMERICA childhood and that of their parents. In their respective markets. In Russia, > April 2004—Groupe DANONE France, Véritable Petit Beurre goes back Bolshevik restored its lead with a move into and Groupe Arcor, the top 149 years and Paille d’Or a hundred years, cakes through its acquisition of Chok and Argentinean food group, agree while Opavia in the Czech Republic dates Rolls in 2004, and while the new business to merge their South American back to 1846, Bolshevik in Russia to 1855 was consolidated over only a part of the biscuits operations in January and Liga in the Netherlands to 1923. In year, its sales were up by close to 20%. 2005, thus becoming the these conditions, trying to build a world region’s top supplier of biscuits. brand is a daunting and, generally spea- Renewal and changing king, pointless task. Instead, the aim must perceptions UNITED KINGDOM be to realize the full potential of iconic brands > At the end of July 2004, on local and regional markets, which in A priority in 2004 was to steady sales volumes DANONE announces the sale some case may also mean extending their on historical markets, which was achieved of Jacob’s (UK biscuits) to geographical scope. Examples include Petit mainly through the renewal of existing ranges United Biscuits, a move Déjeuner, Taillefine cereal bars, Mini rollos and efforts to improve perceptions of the followed in August by the sale and Ourson biscuits, all now on sale in a nutritional value of biscuits. ••• of W&R Jacob Ltd in Ireland to Fruitfield Foods Ltd. The divestments allow the Group to focus on markets where it figures holds stronger positions. Biscuits key

LEADING POSITIONS

€ millions 2000 2001 2002 2003 2004 WORLDWIDE* > No. 1: Belgium 3 255 3 371 3 232 3 071 3 041 Sales > No. 1: Easten Europe +6.4% +0,4% +2.4% +0,4% +3.9% Organic growth* > No. 1: China1 282 316 317 280 301 Operating income > No. 1: France 8.7% 9,4% 9.8% 9,1% 9.9% Operating margin > No. 1: India 315 308 295 232 256 Cash flow from operations > No. 1: Argentina 172 183 155 145 129 > No. 1: New Zealand Depreciation and amortization 5.3% 5,4% 4.8% 4,7% 4.2% > No. 2: Italy % of sales 83 93 118 110 82 * based on sales volumes. Capital expenditure 2.5% 2,8% 3.7% 3,6% 2.7% 1 Danone is the country’s leading biscuit brand. % os sales 28 835 30 553 27 361 23 996 20 665 Employees

* at constant structure and exchange rates.

DANONE 2004 Business_48a53_GB_baf2 24/05/05 15:19 Page 52

2 DANONE SALES BY REGION SALES BY SEGMENT OPERATING MARGIN * SALES GROWTH*

like-for-like > +2.4% 9.8% 0220 2004 2003 2002 2004 2003 2002

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IT E and other 4% crackers 14% savory snacks 13% sweet snacks 69% of World 5% Pacific 19% 76% S S

S Industrial pastries Rest Biscuits, Biscuits, Crispbreads, 9.9% Asia- Europe of retailer re effective in the Benelux, where LU has nutritional value has been particularly in Heudebert toast bakery products. Added health benefits such as omega-3 fatty acids nutritional value and ingredients with special Déjeuner brand, as well others combining sugar biscuit launched under the LU Petit Ta optimum nutritional profiles. These include success with new products developed for perceptions, as illustrated by DANONE’s important part in developing new Product innovation, too, can play an and health features Optimizing nutritional 72% of ingredients are from wheat. it began drawing attention to the fact that seen sales quicken significantly since a brand more than a century old that has as shown by the example of LU Petit Beurre, an effective way to accelerate sales growth, Emphasizing this simple truth can be in grains and thus packed with energy. it is too often forgotten that biscuits are rich value in addition to taste appeal. Example: is doing all it can to highlight nutritional To indulgence—which can discourage buyers. biscuits, often considered an unnecessary designed to favor new perceptions of Product renewals and innovation are also have reviewed over half of its recipes. completed, LU France, for example, will continued in 2005, and by the time it is undertaken for this purpose in 2004 will be The sweeping overhaul of ranges r and taste to set products well apart from In this, the aim remains to enhance quality etailer brands and deep-discount offerings. nocdits top place despite the onslaught inforced illefine low-fat biscuits and the first low-

counter this idea, the business line brands and deep discounters. in general. new development on emerging markets re for Tiger in India and Biskuat Indonesia, The same strategy has been adopted cannibalizing the company’s existing lines. 1,200 metric tons to volumes without in 2004 sales as 33 million packs added Shanghai Biscuits reporting an 8% rise affordability has paid off, with Danone This combination of convenience and apiece—roughly one-tenth of a euro. and Danone & Milk at just one renminbi thus launched individual 40g packs of Tuc In June 2004, Danone Shanghai Biscuits set at one unit of the national currency. and purchasing power, with prices often with varied offerings suited to local tastes of people, and DANONE has responded at prices affordable for the majority products with high nutritional value challenge on Asian markets is to develop biscuits and TUC crackers. A key Production has begun with Danone & Milk could later rise to 100,000 metric tons. on its first production line, a figure that a capacity of 17,000 metric tons year of a new factory in Suzhou, China, with initiatives that include the construction for biscuits. DANONE has thus taken for over 50% of world growth in demand Asia is a natural priority since it accounts into new territory. historical positions, but also moving out The Biscuit line is not only consolidating its New frontiers flecting the scope it provides for • a strategic focus in Asia Nutritional biscuits: 15% from iron-deficiency from a lack of calcium and of China’s population suffers a simple observation: half This approach results from the Chinese biscuit market. number-one place on ago—in winning the China ten years in eastern of the company—founded driver for the success nutrition has been a main nutritional benefits, and sales with products offering achieved 85% of its 2004 Danone Biscuits China China’s National Disease Sandwich—approved by iron-enriched Prince and vitamin supplements; re combining slow energy Sunshine breakfast biscuits calcium and vitamin D; Milk Biscuits with added Innovations include Danone since 1998. a top development priority made added nutritional value Danone Biscuits China has such deficiencies entail, anemia. To meet the needs lease with calcium, iron Survey 2002. * among nutritionists. concern and diets, leading to rapid changes in lifestyles that have emerged with to problems of obesity crackers. This is in response 30% lower than for standard vitamins with fat content added fiber, calcium and of crackers combining Another is the Wei Zi line soda crackers. Center—and Hi Calcium Source: 4th China Nutritional Development ) (Research and R&D > LOW-SUGAR BISCUITS LU PETIT DÉJEUNER expectations. bearing out management proven a quick success, the two new offerings have launch just a few months ago, minerals similar. Since their and that of vitamins and fiber content is higher, breakfast biscuits, while grain is 25% lower than for other and sweetness. Sugar content r while at the same time enhancing nutritional benefits know-how to good use, at Danone Vitapole put their the product, scientific teams chocolat. In developing Céréales et Pépites de Chocolat et Céréales and low-sugar breakfast biscuits, thus brought out the first with a 75% market share, LU, number one in the field is sugar content, and in 2004 demand in this segment The main obstacle to increased biscuits at least once a year. households buys breakfast educing sugar content One in four French

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