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Biscuits Apart Business Innovation makes the difference Quality-driven innovation, enhanced nutritional value and affordability set DANONE biscuits apart. n 2005, Groupe DANONE’s Biscuits line row. The rebound was driven primarily by Leading positions worldwide solidified the comeback that began in emerging markets—with Indonesia up 30%, 2004. Higher margins and growth in and Russia and China showing 20% and No. 1: in Belgium, Eastern Iboth volume and sales* rewarded a strat- 9% growth respectively—but several Europe, China, India, France, egy of ongoing innovation, enhancement European markets were also particularly Morocco, Russia and Tunisia of nutritional value, and affordable prices vigorous, among them Spain, where sales for emerging markets. With sales of €2.4 rose 7%. Outside France, biscuit sales were billion, biscuits account for 18% of the Group up more than 3%. total, and in 2005 showed organic growth Although LU France, the line’s number one of 1.5%, reversing a slight downturn to post business unit, saw sales level off slightly in positive numbers for the second year in a a slackening market, it made gains * Like-for-like. DANONE 2005 // 45 Business Business Sales Sales Operating margin by segment by region BISCUITS 7% Industrial 14.5% pastries and 10.9% other 1% Rest Challenging children’s after-school of the world old ideas snack. 14% Savory biscuits On average, biscuits and snacks 24% Asia A recent study by accounted for only 10% Crispbreads, leading lifestyle 4.5% of total sugar crackers researchers in France ingested by youngsters 75% Europe questions conventional each day. Finally, 69% Sweet biscuits 2004 wisdom on eating researchers found and snacks biscuits. The study*, no difference in body 2005 which surveyed mass index between 1,500 adults and participants who 1,000 children, found ate biscuits and those that biscuit consumption who did not, showing in France is moderate, that moderate biscuit averaging 17 g per consumption as day for children practiced in France and 10 g for adults. cannot be viewed Although biscuits as a causal factor are often accused in the rise of obesity. of encouraging * by Credoc (Centre de in both volume and market share, in Europe we’ve taken the same fresh unhealthy snacking recherche pour l’étude et Russia, shoring up its leading position with over approach, rolling out new crackers under and interfering with l’observation des conditions a new frontier 30% of the French market. the TUC brand and broadening the break- regular meals, 89% of de vie) With growth of 20% in 2005, At the same time, Biscuits operations be- fast biscuit range to include whole grains. biscuits are actually Russia is a new frontier for came significantly more profitable. Although eaten during regularly our Biscuits line. Market leader operating margins have lagged behind the ENHANCING scheduled meals, Bolshevik has stepped up the Group average in the past, in 2005 Biscuits NUTRITIONAL VALUE especially as part pace of sales by overhauling posted an above-average margin of 14.5%, Backed by extensive research and devel- of breakfast and its logistics in this enormous an increase of 3.5 points over last year. opment, all of these innovations are directed country, establishing a route Gains are a direct result of improving plant towards the same goals: continually improv- to market to distribute products efficiency and investing in innovation over ing the nutritional value of our products and well beyond the Moscow- the past two years. deriving maximum benefit from the energy St. Petersburg corridor. and fiber naturally found in grains. In mar- At the same time wholesalers STEPPING UP THE PACE kets where consumers are increasingly and local vendors have been OF INNOVATION health-conscious, the ability to improve organized into regional Innovation is the primary driver for growth nutritional value without sacrificing taste Close-up—Mikado networks, with the goal in the world biscuit market, which edged appeal is key to competing and succeed- of expanding our current up in 2005, spurred largely by market growth ing. With this in mind, DANONE researchers On the heels of its successful milk-chocolate Mikado 60% coverage of Russian of around 5% in Asia. For DANONE, inno- are using their expertise to design recipes and chocolate-caramel Mikado, LU Biscuits has territory to 90% by the end vation is grounded in two simple ideas: with the best possible balance—less sugar launched a “revolutionary” new offering—hazelnut of 2006. renewing our commitment to quality, and and fat, and more grain, fiber, fruit and other crunch Mikado. Tasty hazelnut pieces were positioning our products well away from nutrition-packed ingredients. added to a biscuit previously known for its smooth retailer brands and deep-discount offerings. Between 1999 and 2005, grain content of texture—a radical departure in keeping with Over the past two years, some of our busi- LU Biscuits in France rose 14% on aver- DANONE’s broader strategy of innovation. ness units have revisited more than half of age, while added sugar and fat fell by 9% their recipes, and all Group companies have and 7% respectively. We have also devel- played a leadership role in re-energizing the oped whole-grain versions of our biscuits, biscuit market through innovation. On the positioning these as healthier products and French market, for example, around 90% using packaging to underscore the value of all new products came from LU France, and benefit of cereals. where innovation accounted for 11% of sales. New offerings included lemon Paille AFFORDABILITY DRIVES d’Or wafers (see Highlights), flavored Mikado GROWTH cookies and Petit LU with Fruit, all designed Because emerging Asian markets account to pique French consumers’ curiosity and for 21% of DANONE Biscuit sales, grow- satisfy their demand for quality. Elsewhere ing the market means combining 46 // DANONE 2005 DANONE 2005 // 47 Business Business BISCUITS Highlights the United States and tons—some 14.3 million in Algeria. Partners the Middle East. packages—of Paille since 1997, DANONE • In September 2005 d’Or are sold annually. and Sotubi will DANONE begins • 2005 marks the hold 51% and 49%, Asian biscuit boom 7% growth in 2005. topping 14.4% in late to meet the challenge. selling biscuits in 100th birthday of • In October 2005, respectively. Under Indonesia offers an 2005. Volumes have This benchmark Croatia, Slovenia and France’s famous Paille Groupe DANONE and the new agreement, The Asia-Pacific region excellent example of exploded, with annual facility, which will Romania, exporting d’Or biscuits and LU, Tunisia-based Sotubi the Group will represents 25% of total the Group’s strategy growth averaging soon add a fourth line products from plants maker of this delicious announce the creation strengthen its presence Group biscuit sales, for local growth. more than 30% over raising capacity to in neighboring coun- raspberry-filled wafer, of a joint venture in Africa and the and DANONE leads As a result of the the past five years. 50,000 metric tons, tries. More broadly, celebrates by launch- aimed at growing Middle East through the market in India, affordability strategy Between 2000 and is well on its way to exports are on ing a new lemon- the Algerian biscuit holdings in local Malaysia, Indonesia, launched in 2001 with 2005, local output becoming DANONE’s the rise in several flavored version. market and funding companies with lead- and northern and our Biskuat range, increased fivefold, and largest biscuit plant. regions, including Around 2,500 metric construction of a plant ing market positions. eastern China, where DANONE’s market our Karawang plant our brands averaged share has doubled, stepped up production affordability with nutritional value. In €0.05) in nearly a million retail outlets. Low-sugar biscuits Asia, biscuits are viewed as a nutritious sta- Success in Indonesia inspired the launch LU now offers low or reduced- Close-up—Jia Gai ple rather than an indulgence. In countries by DANONE Biscuits China, which offers sugar versions of Petit Déjeuner, where many—and in some cases most— budget-conscious Chinese consumers a Pépito, Prince, Barquette and other The launch of Jia Gai, a financially affordable people live on less than two dollars a day, biscuit fortified with calcium and other European flagship biscuits. Grain, and a nutritionally enriched (particularly consumers demand biscuits that are both nutrients for €0.15. In only a few months, fiber, fruit and other nutrition- in calcium) product for low-income Chinese healthy and affordable. DANONE began DANONE Niu Nai Jia Gai has become a packed ingredients are added to consumers, proved a great success for Danone meeting this demand five years ago in winning product— all the more so in that replace the missing sugar. Biscuits China. Indonesia with our Biskuat range. Fortified the range has encroached only marginally with essential nutrients, Biskuat is sold in on our higher-end offerings. packages priced at 500 rupiah (about of biscuit sales are in emerging markets in Asia, where biscuits are viewed as a nutritious staple 21%rather than an indulgence. 48 // DANONE 2005 DANONE 2005 // 49.
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