Biscuits Rebuilding and Renewal Through Local Strength Following a Phase of Consolidation, the Biscuit Business Line Returned to Growth in 2004
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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 Sales 3 255 3 371 3 232 3 071 3 041 > No. 1: Easten Europe Organic growth* +6.4% +0,4% +2.4% +0,4% +3.9% > No. 1: China1 Operating income 282 316 317 280 301 > No. 1: France Operating margin 8.7% 9,4% 9.8% 9,1% 9.9% > No. 1: India Cash flow from operations 315 308 295 232 256 > No. 1: Argentina > No. 1: New Zealand Depreciation and amortization 172 183 155 145 129 > No. 2: Italy % of sales 5.3% 5,4% 4.8% 4,7% 4.2% * based on sales volumes. Capital expenditure 83 93 118 110 82 1 Danone is the country’s leading biscuit brand. % os sales 2.5% 2,8% 3.7% 3,6% 2.7% Employees 28 835 30 553 27 361 23 996 20 665 * at constant structure and exchange rates. DANONE 2004 Business_48a53_GB_baf2 24/05/05 15:19 Page 52 SS > BUSINE > 052 ESS 053 BISCUITS BUSIN BISCUITS SALES GROWTH* In this, the aim remains to enhance quality New frontiers R&D and taste to set products well apart from (Research and +2.4% +0.4% +3.9% retailer brands and deep-discount offerings. The Biscuit line is not only consolidating its Nutritional biscuits: Development ) The sweeping overhaul of ranges historical positions, but also moving out undertaken for this purpose in 2004 will be into new territory. a strategic focus in Asia LU PETIT DÉJEUNER continued in 2005, and by the time it is Asia is a natural priority since it accounts LOW-SUGAR BISCUITS Danone Biscuits China anemia. To meet the needs Center—and Hi Calcium completed, LU France, for example, will for over 50% of world growth in demand > One in four French achieved 85% of its 2004 such deficiencies entail, soda crackers. have reviewed over half of its recipes. for biscuits. DANONE has thus taken sales with products offering Danone Biscuits China has Another is the Wei Zi line households buys breakfast Product renewals and innovation are also initiatives that include the construction nutritional benefits, and made added nutritional value of crackers combining biscuits at least once a year. designed to favor new perceptions of of a new factory in Suzhou, China, with nutrition has been a main a top development priority added fiber, calcium and The main obstacle to increased biscuits, often considered an unnecessary a capacity of 17,000 metric tons a year driver for the success since 1998. vitamins with fat content demand in this segment of the company—founded Innovations include Danone 30% lower than for standard indulgence—which can discourage buyers. on its first production line, a figure that is sugar content, and in 2004 2002 2003 2004 in eastern China ten years Milk Biscuits with added crackers. This is in response To counter this idea, the business line could later rise to 100,000 metric tons. ago—in winning the calcium and vitamin D; to problems of obesity LU, number one in the field is doing all it can to highlight nutritional Production has begun with Danone & Milk number-one place on Sunshine breakfast biscuits that have emerged with with a 75% market share, value in addition to taste appeal. Example: biscuits and TUC crackers. A key the Chinese biscuit market. combining slow energy rapid changes in lifestyles thus brought out the first it is too often forgotten that biscuits are rich challenge on Asian markets is to develop This approach results from release with calcium, iron and diets, leading to low-sugar breakfast biscuits, SALES BY REGION a simple observation: half and vitamin supplements; concern among nutritionists. in grains and thus packed with energy. products with high nutritional value Chocolat et Céréales and of China’s population suffers iron-enriched Prince 76% Europe Emphasizing this simple truth can be at prices affordable for the majority Céréales et Pépites de from a lack of calcium and Sandwich—approved by *Source: 4th China Nutritional an effective way to accelerate sales growth, of people, and DANONE has responded chocolat. In developing 19% Asia- 15% from iron-deficiency China’s National Disease Survey 2002. Pacific as shown by the example of LU Petit Beurre, with varied offerings suited to local tastes the product, scientific teams a brand more than a century old that has and purchasing power, with prices often at Danone Vitapole put their 5% Rest seen sales quicken significantly since set at one unit of the national currency. know-how to good use, of World it began drawing attention to the fact that In June 2004, Danone Shanghai Biscuits enhancing nutritional benefits 72% of ingredients are from wheat. thus launched individual 40g packs of Tuc while at the same time and Danone & Milk at just one renminbi reducing sugar content Optimizing nutritional apiece—roughly one-tenth of a euro. and sweetness. Sugar content SALES BY SEGMENT and health features This combination of convenience and is 25% lower than for other affordability has paid off, with Danone breakfast biscuits, while grain 69% Biscuits, Product innovation, too, can play an Shanghai Biscuits reporting an 8% rise and fiber content is higher, sweet snacks important part in developing new in 2004 sales as 33 million packs added and that of vitamins and 13% Biscuits, perceptions, as illustrated by DANONE’s 1,200 metric tons to volumes without minerals similar.