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Tod a yi s s u e s

At , combining business success with social responsibility has been a priority for 40 years. Nutrition, food safety and the enviro n - ment are just some of the a reas in which we have made a formal commit- ment to pro g ress that we are backing up with c o n c rete action*.

Photos: Emmanuel Pierrot

* For more information, see our 2005 Social and Environmental Responsibility Report. Today issues

Health Food or medicine? Groupe DANONE places special emphasis on the development of products with distinctive health benefits. But we make food, not medicine.

Food delivering health benefits above high cholesterol. These benefits have and beyond nutritional value and taste been scientifically proven by the Group’s DANONE now appeal is a defining feature of new pat- researchers in cooperation with research has a collection terns of consumer demand, echoing the teams around the world. advice dispensed by Hippocrates more of more than than 2000 years ago: “Let food be thy NATURAL GOODNESS medicine.” A daily source of the materi- While a wide variety of ingredients are als essential to health and well-being, used to develop functional products, our food can also aid digestion, help improve R&D teams rely first and foremost on the 3,000 cardiovascular functions and reduce cho- natural goodness of our raw materials strains lesterol and other risk factors. Despite —milk, cultures, grains and water. such benefits, food is never the same An important example of this is the lactic that it uses to thing as medicine, which is used to treat ferments referred to as , which specific pathologies over a defined period can benefit health when consumed in study interactions and should never be taken by people in sufficient quantities. DANONE now has between cultures good health. a collection of more than 3,000 different strains that it uses to study interactions and the body. NUTRITIONAL VALUE between cultures and the body. The pro- AND TASTE APPEAL biotics present in and At DANONE, we believe that food should were selected by DANONE researchers contribute to health and well-being. And for their beneficial effects on the intes- while nutritional value and taste appeal tine. The Bifidus essensis culture in have naturally always been priorities for Activia thus stimulates lazy intestinal tran- our products, over the past 20 years we sit while the L. casei defensis in Actimel have gone further, developing products stimulates the defensive capabilities of such as Activia, Actimel, and Danacol the intestinal wall and flore. with specific health benefits—but which we in no way consider medicines, since they are not intended to treat illness and have to meet the same standards for Prevention with Danacol taste, texture and other perceived fea- Danacol, sold in seven countries since 2005, stands out from other DANONE tures as our other products. We refer to products. Fortified with plant sterols to help reduce bad cholesterol, it is them as “functional” products because intended for a distinct group of consumers—only those with high choles- they offer one or more clearly identified terol—as part of a healthy, balanced diet with additional fruit and vegeta- health benefits in addition to their nutri- bles. But it is not medicine. High cholesterol is a risk factor for disease, not a tional value. Actimel helps strengthen disease in itself. And while their effectiveness has been scientifically proven the body’s natural defenses, while Activia and recognized by competent authorities, products containing phytosterols helps regulate intestinal transit and are not a complete solution for high cholesterol. Only a medical professional Danacol helps reduce certain types of can determine the right option for each individual.

18 // DANONE 2005 Today issues Crisis management Prevention or cure? The confidence of consumers, authorities and shareholders increasingly depends on the capacity to anticipate risks and manage crises. DANONE thus makes continuing consolidation of that capacity a top priority.

DANONE identifies and manages around reports directly to the General Secretary, While the frequency of crises has lev- 180 potential crises annually, yet most whose department provides leadership eled off since 2000, their nature has of them go unnoticed—quite simply and professional development for local changed. The number of incidents directly because they are successfully handled crisis managers through kits, training and related to products or quality defects in a matter of hours. This reflects the simulations. thus dropped from two out of three crises first, simple principle of crisis manage- in 2000 to one out of three in 2004, but ment, which is to take everything seri- PREVENTION THROUGH DIALOG new challenges have arisen. These ously, or a minor incident can become Our crisis management network has one include situations relating to social re- a major crisis. That means that even the overriding goal—to identify potential crises sponsibility issues and public opinion most routine issues must be addressed and solve problems before they happen. campaigns led by consumer groups, as soon as they arise, as is illustrated by An important tool for this is Vestalis, a which Groupe DANONE manages a case in October 2005. A British con- risk-mapping method that allows each proactively through regular contact with sumer notified DANONE that her business unit to factor in its specific risk consumer advocates. Another important water tasted like camphor, which is com- environment. The Group also monitors concern is external risks such as SARS, mon when water is stored with household the Internet constantly and actively gath- anthrax and avian flu. The Group is pre- products for too long, but owing to the ers information in the field. Above all, paring for these possible health crises company’s failure to respond immediately, DANONE emphasizes dialog with con- in the knowledge that staying ahead of the situation nearly degenerated into a sumers, paying special attention to the risks is half the battle. real crisis that could have threatened comments and questions directed to the Volvic sales in other countries. customer service units for our various brands and providing tools for effective RESPONDING ON THE SPOT analysis of this invaluable information. Poor handling of an incident can do last- ing damage to a company’s reputation and consumer confidence. Over the past 15 years, Groupe DANONE has thus Quick reactions made a special effort to develop an effec- Christmas 2005: as DANONE distributed water in a limited-edition tive crisis management network. Since Christmas bottle around the world, a customer in Japan reported the the impact of most incidents is local, this presence of foreign objects in one bottle. The information quickly reached began with the appointment of a crisis Group headquarters, and crisis managers swung into action, isolating manager for each business unit, with the warehouse that had shipped the bottle. Using the production date to the result that 75% of all crises are now identify the lots at risk, they recalled all bottles produced on that date handled locally. The local teams are and had other lots checked to ensure that no other bottles had been coordinated by crisis managers for the affected. In all, 180,000 bottles were inspected to eliminate any possible corresponding business lines and by a threat. Although the health of consumers was never in jeopardy, a rapid, central crisis-management team that systematic response was the only option.

DANONE 2005 // 21 Today issues Nutrition Reducing sugar and fat: mission impossible? Concerns over obesity sometimes lead people to see sugar and fat as public enemies. But how can we reduce them without sacrificing flavor? DANONE has been striving to find the best solutions for over 40 years.

Over the past five decades, lifestyles in January 2006 found that healthier is critical to the development of foods that have undergone radical and unprec- products account for 75% of Groupe offer the same pleasure even when a edented change. Physical activity is less DANONE’s portfolio. recipe has been completely reworked. and less a part of daily life, which is in- R&D has enabled DANONE to offer creasingly sedentary. Diet has changed, R&D FOR HEALTH reduced-sugar versions of many products, too, and family groups have splintered. In their continuing drive to enhance the including LU breakfast biscuits and Together, these factors are behind the nutritional value of DANONE products, Actimel, as well as zero-calorie flavored rise in obesity. Although the composition our R&D teams face a challenging task. drinks like Ser and Taillefine Fiz. It also of process foods is just one part of the Sugars and fats not only provide calo- enables us to limit fat content, cutting the problem, businesses, public authorities ries and other nutritional properties. They saturated and trans fats that consumers and scientists work with other stake- also have technical and organoleptic are urged to limit and incorporating holders to reduce ingredients such as properties that are absolutely essential essential fatty acids whenever possible, sugar and fat. to taste appeal—and in many cases to especially in biscuits like our Taillefine / production. If we reduce the fat in a bis- Vitalinea and Ourson lines. The Group’s A LONGSTANDING COMMIT- cuit, for example, the product may not focus on healthy foods also means that MENT TO HEALTHY DIET be as tasty and it will also break and we put special emphasis on products For DANONE, these concerns are noth- crumble more easily. To ensure that our for children. Over the past 15 years, the ing new. The link between diet and health products are both enjoyable and feasible recipes for Danonino—sold in France as inspired the creation of the brand in 1919, to make, the Group’s researchers cut Petit Gervais aux fruits—have thus been and in 1964 DANONE became one of fats and sugars by stages, creating inno- improved at regular intervals on a num- the very first brands to offer low-fat vative new recipes and using sensory ber of our markets, reducing fat by 50% product lines when Taillefine was launched analysis to check quality and acceptabil- in France and Germany. Overall progress in France. And JP Morgan study published ity every step of the way. Their expertise has been measurable over the years. Between 1999 and 2005, added sugars in LU France biscuits fell by 9% and fat content by 7%. More recently, Fresh A real alternative to soft drinks Products has developed a new Taillefine The flavored water beverages sold by DANONE in several countries offer line called “double 0”—0% fat and 0% distinct advantages. Apart from their refreshing flavor, they contain added sugars. as little as two to fifteen times less sugar than soft drinks, and are winning growing favor as a healthier alternative for those who prefer flavored drinks. These products include Volvic Thé in France, Bonafont’s Levite line in Mexico, and Aqua’s Splash of Fruits products in Indonesia. The Group’s Beverages business line is working to develop new labeling that will make it easy for consumers to compare the sugar content of DANONE’s flavored beverages with that of soft drinks.

DANONE 2005 // 23 Today issues Packaging Both convenience and the environment: squaring the circle? A major concern for consumers, packaging reduction is also a priority for DANONE. And we are well on our way to meeting a self-imposed goal—to reduce packaging by 10% between 2000 and 2010.

Consumers are increasingly conscious A COMPREHENSIVE APPROACH DANONE’s pack- of the environmental impact of packag- Clearly, though, packaging cannot be ing. But even though a 2005 Europack reduced indefinitely. As we reach the aging reduction survey found that 97% of respondents technical limits of this approach, DANONE favor biodegradable or recyclable mate- is thus exploring other options. While initiative eliminated rials, everyone still wants products to some of the solutions are less visible to come in attractive, convenient pack- consumers, they are no less fundamental. ages. To tackle this complex problem, DANONE has applied the principles The Group factors in the overall environ- 27,000 of ecodesign since 2000. Which means mental impact of packaging materials, metric tons of factoring the environment into every from the energy required to manufacture stage of the product and packaging and ship them to scope for recycling. waste in four years lifecycle, from design to recycling—all Wherever possible, we avoid using petro- without compromising packaging’s leum-based plastics and other materials —roughly equivalent essential role in food safety, transporta- derived from non-renewable resources to the waste tion and convenience. and choose recycled materials, although these are still in need of technological generated by a city REDUCING VOLUME improvements. Finally, we contribute to We began by reducing the weight and packaging collection and recovery of 400,000 people volume of our packaging. In 2005, thirty- programs and are working to remove in a year. five of our Group’s largest business units obstacles that complicate the recycling adopted this approach for their ten flag- process, particularly during separation ship products, and the results have been of different materials. significant. The weight of Actimel bottles dropped from 11g (about four-tenths of an ounce) to 6.5g (less than a quarter of an ounce), while Evian bottles went Taking the lead on environmental standards from 43g (about an ounce and a half) to “Our commitment to the environment is an integral part of our identity,” 30g (just over an ounce). From 2000 to says Gary Hirshberg, President and CEO of Stonyfield, the leading US producer 2004, all three business lines were well of organic dairy products and a DANONE business unit. The brand has on track to meet their goals, reducing translated this principle into bold environmental initiatives that also make packaging weight by 27,000 metric it more competitive, such as installing solar panels on the roof of its facility tons—roughly equivalent to the waste to save energy. Commitment to high standards in relationships with both generated by a city of 400,000 people consumers and suppliers has also helped Stonyfield to turn in strong business in a year. performances.

24 // DANONE 2005 Today issues Education How can the food industry can help? Nutrition is everyone’s concern today, and education plays a vital role. At DANONE, we are convinced that the food industry can help.

Because Groupe DANONE is in the busi- and education programs of local and ready yielded positive results, since par- ness of designing and making food prod- international institutions. This approach ticipants consume around 12% more ucts, our responsibility for good nutrition provides a sound basis for initiatives that fruits and vegetables after playing the is twofold: to offer products that meet are truly relevant to local needs, which game. The same core purpose drives our customers’ needs in ways that serve is especially important where children DANONE initiatives in other countries public health, and to help educate con- are concerned. such as the Czech Republic, where young sumers by promoting healthy eating Since children acquire eating habits when people are learning good eating habits habits and more active lifestyles. The they are five or six, it is essential to famil- with a video game. food industry can communicate this iarize them with the concept of a bal- important message through a wide range anced diet from the earliest age. DANONE ENCOURAGING EXERCISE of powerful media, starting with the labels Spain is thus working with Sant Joan de As people become increasingly seden- on its own packaging. Deu Children’s Hospital in Barcelona, tary, being active is just as important as forming a multidisciplinary team of experts eating well. Which is why DANONE has BROADLY BASED ACTION dedicated to encouraging youngsters broadened its educational efforts to Since so many different interests are and their families to adopt good eating include practical initiatives dedicated involved, the most effective education habits and be more active. In Belgium, specifically to the promotion of exercise. campaigns bring all stakeholders in DANONE has joined up with the Pediatric While the most widely publicized of these from the beginning. With this in mind, Society to create the “Healthy Appetite” is our Danone Nations Cup, a soccer DANONE places special emphasis on program, which uses an educational card tournament that has drawn the partici- dialog with the scientific community and game to teach children basic rules for pation of more than 10 million children with healthcare and education profes- healthy eating—such as the importance from all parts of the world since 1999, sionals, creating partnerships and sup- of regular meals and eating five fruits and we are taking the same approach through porting the nutrition-oriented research vegetables a day. The program has al- local efforts. These include the Prince Trophy in Belgium, a hip-hop tournament in Canada, and the “Gotta Move” pro- gram in France. Sponsored by soccer Local impact through Danone Institutes star Zinedine Zidane, DANONE’s good- The 16 Danone Institutes around the world bring nutrition specialists into will ambassador, “Gotta Move!” is built partnership with healthcare and education professionals to back nutrition around a variety of fun, educational tools research, keep healthcare professionals informed and raise public aware- for youngsters aged 8 to 14, including ness of the importance of a healthy diet. Each Danone Institute promotes a web site and a traveling fitness circuit. good nutrition in its home country through non-profit initiatives, often with a focus on young people. These include communications drives to help peo- ple develop more discerning tastes and encourage children to enjoy fruit, vegetables and other healthy food, as well as programs that encourage early screening to identify weight problems.

26 // DANONE 2005 Today issues Farmers Why get involved in lasting partnerships? DANONE teams up with farmers in a shared commitment to impeccable quality and steady improvement in environ- mental standards.

Helping farmers to progress, meet tices. In exchange, farmers can rely on SUSTAINABLE AGRICULTURE more demanding quality requirements DANONE’s extensive expertise and In 2005, the Group stepped up efforts and improve environmental practices support in the areas of quality assur- in support of sustainable agriculture, are the goals that drive DANONE’s ance and sustainable development. with the goal of showing farmers that partnerships with these key suppliers. For milk suppliers, the DANONE Quality, commitment to the environment brings Farmers have a special place for us, Safety and Environment program formal- a new kind of value to their products primarily because they produce our izes this relationship. The 15,000 dairy and is not incompatible with profitable most basic raw materials. Every year, farmers who work directly for our Group operation. To take an example, farmers the Group buys 4 billion liters of cow’s have made a commitment to comply can contribute to environmental pro- milk—over 1 billion gallons, or around with the program’s 42 criteria for qual- tection and at the same time improve 0.8% of world output—in 21 countries, ity, food safety and environmental pro- the image and profitability of their in addition to the cereal flours used in tection. They are in regular contact with farms by reducing consumption of fer- biscuits and the fruit added to our dairy a technical adviser monitoring their tilizers, pesticides, water and energy, products. More indirectly, farmers have farms and conducting annual audits or by recycling waste. In France, where an impact on the Group when their of their operations. In return, Groupe DANONE set up working groups on fields are in or near the catchment DANONE provides varied support for integrated farming in 2005, 53 farms areas* for the 78 springs operated by farmers, among other things through have already begun the related certifi- DANONE worldwide. technical meetings and action plans to cation process. improve the profitability of their farms. RISING QUALITY DANONE also offers practical tools, such The equation is simple. Partnership as kits designed to archive veterinary means that the Group can count on prescriptions and store medications regular supplies of top-quality raw safely, and a storage unit that allows materials as it continues to champion farmers to retain samples from each lot environmentally-friendly farming prac- of feed used over the course of a year.

Modernizing dairy farms in Turkey Counting 15,000 small dairy farms with an average of only two to five cows, Turkey is representative of structures in many emerging countries. To compensate for this fragmentation, in 2000 DANONE began financing more than 300 collection centers, each managed by a controller, to ensure a reliable supply of high-quality, traceable milk. Since 2004, the Group has also offered training programs and innovative financing to encourage a trend toward farms with 20 to 50 cows, and is providing these larger * Areas where rainwater gathers after passing through operations with material assistance. several geological layers, before supplying springs.

DANONE 2005 // 29