Groupe DANONE Health Commitment and Fact Book
First release March 10, 2005 Focus on Probiotics Forward looking statements
This presentation contains forward-looking statements that reflect Danone's current views and estimates. These statements are based on many factors and assumptions. Changes in such factors or assumptions could produce significantly different results. Executive summary
Groupe DANONE has built strong leadership and brand equity in its categories, with Nutrition and Health central to the business foundations of the Group and to its sales growth track record.
Groupe DANONE’s business model and research strategy have yielded business successes and opened new potential worldwide.
Groupe DANONE continues to strengthen its commitment to Health and Nutrition and has identified growth opportunities in this area. Groupe DANONE has the R&D capabilities and the marketing know-how to achieve its strategic goals in the growing Health and Nutrition market. Contents
Health & Nutrition are deemed to be, more than ever, major drivers of top line growth for the food industry
What Health & Nutrition mean for Groupe DANONE
Our commitment in terms of product offer
Danone Vitapole: a catalyst for innovation
Our commitment in terms of product communication
Our commitment in terms of knowledge and education in Health & Nutrition
Focus on Probiotics Introduction
Health & Nutrition are deemed to be, more than ever, major drivers of top line growth for the food industry In 2004, Danone has hit a record top line growth…
+7.0% +6.0% +7.8% +5.1% +7.2%
+2.9% Major 0 European 1 200 2 peers * 200 3 200 200 4 200 4 200 +6.6% Average 1999-2004 +3.6% … confirming its number-one position for top-line growth Major European peers* * Cadbury, Nestlé, Unilever Our focus on three fast-growing food categories: a major driver of growth
Still bottled water +11.8% Functional drinks +9.4% Yog & assimilated +4.6% Frozen food +3.7% Sauces & Cond. +2.9% Savoury biscuits Health & Nutrition +2.7% = Cheese +2.6% a key lever Sweet biscuits of consumption +2.4% Ice Cream +2.4% Confectionery +2.2% Carbonated soft drinks +2.0% Baby food +2.0% Retail volume CAGR Soup 99-04 +1.9% RTE cereals Worldwide +0.8% 0% 2% 4% 6% 8% 10% 12%
Source: Euromonitor Health positioning: a key success factor for sustainable superior top line growth
Like-for-like growth CAGR 03-04 8.0%
7.0% Danone 6.0% PepsiCo Nestlé Kellogg 5.0%
4.0% Campbell Coca-Cola General Mills 3.0% Cadbury Kraft 2.0%
1.0% Heinz Unilever 0.0% 11 9 7 5 3 1 Health ranking Food
* Average ranking JP Morgan/ UBS/ Morgan Stanley analyst* Obesity has become a major public health issue…
Obesity is rising to epidemic levels, affecting 300 million people around the world (1)
Obesity is also an issue for developing countries
Obesity results from both a sedentary lifestyle and changes in nutritional behavior
Obesity is a contributory factor in cardiovascular disease, diabetes, some cancers, joint disorders and other pathologies…
(1) Source: WHO report, March 2004 … but concern for health extends beyond prevention of obesity
Consumers and health professionals also look for :
Optimal growth, i.e supporting physical and mental development, building and preserving sound bone and dental capital… Protection, i.e, preventing deficiencies, supporting immunity, maintaining cardiovascular health, preventing damage from free radicals …
Well-being, i.e facilitating digestion, optimizing hydration, managing satiety and energy levels … What Health & Nutrition mean for Groupe Danone Health & Nutrition are central to Groupe DANONE’s mission statement
Groupe DANONE helps people around the world grow, live better and get more out of life through tastier, more varied and healthier food products - every day Our Health & Nutrition strategy is multi-pronged
Understanding Health and Nutrition science and integrating public health issues Structuring our product offer to better meet consumer needs by: - Optimizing the nutritional profile of our products - Adapting our products to local nutritional needs, eating habits, and consumption occasions - Developing products with additional proven health benefits
Contributing to consumer information and education on Health and Nutrition Health & Nutrition are part of Groupe DANONE’s DNA
Discovery of the health First LU Focus on three product A steady stream of Yogurts sold in First zero-fat benefits of the biscuits, categories with Health products with added pharmacies «fromage frais » natural mineral rich in grain and Nutrition value health benefits water in Evian
1789 1846 1919 1964
Isaac Carasso conducts research into lactic cultures with health benefits, working with the Pasteur Institute and Elie Metchnikoff. 1996 Today Groupe Danone has strong core beliefs regarding Food, Nutrition, and Health
A balanced diet combined with regular physical activity is crucial to individual health.
Only a wide variety of food can satisfy all nutritional needs.
Drinking and eating are basic needs- They should also be a pleasure.
The social and convivial aspect of meals is an essential part of well-being.
Individuals must be free to choose their own food, and to decide when and how they eat. They need clear and relevant information to make their choices. These beliefs are embodied in 9 commitments
To develop new products suited to consumers' nutritional needs and tastes, as well as products offering added health benefits, and to regularly improve existing products
To establish permanent relations with the scientific community
To support and encourage research in nutrition
To share knowledge with scientists, health professionals, and the public
To cooperate effectively with authorities and other public bodies
To provide clear and transparent communication
To claim only scientifically proven benefits
To use responsible advertising
To promote physical activity These commitments are stated in Groupe Danone’s Food, Health, and Nutrition Charter
Shared by all Group companies
Contribute strongly to our corporate culture Our commitment in terms of product offer:
To develop new products suited to consumers' nutritional needs and tastes, as well as products offering added health benefits, and to regularly improve existing products Ensuring a good nutritional profile for our products: a constant priority Using an in-house tool to evaluate and improve the nutritional profile of our products according to several composition criteria Applied to Dairy and Biscuits & Cereal products
PRODUCT ×× CONSUMER POSITIONING (or meal, diet ) == Re-balancing
potential
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Nutritional i Nutritional profile c
requirements n
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according to a
consumer target b Un Improving nutritional profiles: recent initiatives in Biscuits and Cereal products
Cross-brand initiatives: Trans-fatty acids threshold in DANONE products since 1998 : below 5 % of total fats
Brand initiatives:
Nutritional guidelines for Taillefine/ Vitalinea applied since 1998, LU and Prince Petit Déjeuner/ Breakfast brands since 1999
2001: optimization of the fatty-acid profile by using rapeseed oil for the Taillefine/ Vitalinea brand in Europe
2004 : total sugar content of LU Petit Déjeuner in France cut by 25%, replaced mainly with flour and fibers Developing innovative nutritional proposals: Long Lasting Energy
A concept developed by Danone Vitapole for Biscuits and Cereal products, launched in 1999, after 10 years of research
Favoring a better use of energy by the body Based on a high content of slowly digestible carbohydrates
Contributing to good nutrition A family-oriented product A cereal base for a balanced breakfast
Launched in 1999 and now available in 9 countries LU Petit Déjeuner (France), Prince Start (Belgium), BeBe Dobre Rano (Czech Republic), Jubilee Good Morning (Russia), Sunshine (China)… Adapting products to meet local nutritional needs (I)
Danonino has been adapted to nutritional needs of local children in 12 countries with specific vitamin or mineral fortifications:
Brazil: enriched with calcium, zinc, iron, vitamins A and D Mexico: fortified with zinc, vitamins A, C and D Poland and the US: enriched with calcium and vitamin D France: fortified with vitamin D
In Europe, launch of Bio/ Activia line extensions with added fibers
In Asia, launch of biscuits with added calcium or iron Adapting products to meet local nutritional needs (II)
Bringing a quick response to a local trend: low-carb diets in the US
60 million people in the US are on low-carb diets and have thus reduced their consumption of dairy products Dannon launched its low-carb range in January 2004: Light’n Fit Carb Control, now available in both cups (5 flavors) and bottles (4 flavors)
Dannon offer: balanced low-carb dairy products to meet the essential daily calcium requirements of people on low-carb diets. Danone has gained a clear lead in this segment (over 50% market share), which represented approx. 5% of the total value of the fresh dairy product market in 2004 Marketing affordable nutrition: Biscuits in Asia
Affordability is key in developing countries
Two billion people live on less than 2 Our answer : affordable nutrition euros a day in Asia
Affordable
Nutrition Indonesia : Biskuat Susu with added calcium
China : Danone Milk Biscuits with added calcium for children
India : Britannia Tiger with extra milk and calcium Expanding water and beverage offerings for consumers
Increasing consumption of packaged water: Promoting the benefits of good hydration Enhancing product availability and convenience Offering safe packaged water in developing countries
Conquering new territories: Offering flavored, water-based beverages- a healthier alternative to soft drinks Developing functional drinks Developing new products with specific health benefits
Probiotics with additional health benefits:
Actimel Activia
(see last section of the presentation)
New opportunities: Danacol Danacol with phytosterols that help reduce cholesterol
Cardio-vascular problems - a worldwide issue In France, at least 20% of adults suffer from excessive levels of cholesterol (above 2.2 g/liter of blood)
CVDs(1) are the first cause of mortality in the world with around 10 million deaths/year (Lancet, 1997)
Danacol is a fermented dairy product enriched with phytosterols(2) that help reduce ”bad” cholesterol 60 scientific studies show the positive impact of vegetal sterols on ”bad” cholesterol
A strong start in France launched in April 2004 in France, and now category leader (3)
Danacol is now being rolled out across Europe In the UK, Ireland, Belgium, Portugal and Spain as a drinkable or spoonable product
(1) CVD: Cardio-Vascular desease (2) Active plant extract (3) Nielsen 2004, volume, last period Danone Vitapole: a catalyst for innovation Danone Vitapole, an innovation catalyst, for all the Groupe DANONE brands
Uniting 3 Businesses Creating Synergies Speeding up Innovation Our Health and Nutrition Strategy is built on integrated expertises and resources
Global & Local Nutritionists & Health Marketing DANONE Institutes promoting nutrition worldwide DanoneDanone VitapoleVitapole Research Research & & DevelopmentDevelopment Global & Local International Marketing & scientific Consumer Relationships with the scientific cooperation research Preventive community and Food Safety with authorities center and other public bodies Our Research and Development capabilities to achieve excellence Danone Vitapole: A community of 800 people worldwide: - over 500 people in Daniel Carasso Research center -a worldwide network of developers to ensure proximity with local needs and accelerate project deployment - more than 110 Nutrition and Health professionals
R&D Budget: 1% of Group sales or € 130 million a year Daniel Carasso Research center: Approx. 70% of the Group’s R&D resources … - of which 250 scientists (i.e 100% of Group’s resources in Research) dedicated to advanced applied research - the rest being engineers dealing with Product Development, Food Safety, Quality and Support Services A broad range of expertise in Science and Technology* to deliver scientifically proven health benefits, combined with superior taste preference
* Nutritionists; physicians; gastro-enterology; cardiovascular and immunity specialists, microbiologists; molecular biologists; biochemists; food engineers; food safety experts; consumer behavior and sensory evaluation specialists…etc Danone Vitapole focuses on 4 strategic domains …
ACTIVE HEALTH Reinforcing the leadership and image of Danone products with health benefits
Winning recognition as a benchmark for NUTRITION good nutritional practice among consumers, the scientific community and authorities
Danone aims to win a lead on competitors PREFERENCE in product preference and packaging convenience
Regularly upgrading technology to - Ensure the safety, quality and compliance Technological of Danone products EFFICIENCY - Facilitate and accelerate industrial launches and worldwide roll-outs … which correspond to a diversity of specific expertises
Nutrition and Health benefits associated with: ACTIVE HEALTH • Probiotics • Milk based products • Cereals • Hydration & Beverages • Active ingredients NUTRITION Sensory preference through: • Understanding of consumer behavior • Advanced sensory evaluation & product optimization methods • Product profile and packaging design reflecting health claim PREFERENCE expectations Formulation & processing to maintain quality with:
• Low fat/ Low sugar product formulation Technological • Texture and flavor tailoring • Controlled baking to protect nutrients EFFICIENCY • Mild processing of beverages • Functionally designed plastic containers Danone Vitapole develops strong links with the scientific community
Close partnership with independent research institutes to complement our expertise in nutrition and health
Organization of scientific committees, bringing together international experts to reach scientific consensus
For examples: Probiotics committees Carbohydrates and lipids health symposia Evian Water Scientific Council International Life Sciences Institute
A network of 15 Danone Institutes promoting research, information and education in nutrition Our commitment in terms of product communication:
To provide clear and transparent communication To claim only scientifically proven benefits To use responsible advertising Providing consumers with clear and relevant information
Groupe Danone undertakes to provide consumers with full information in a readily understandable form, in particularly by phasing in nutritional labels on all products and expanding consumer information services.
For example, hotlines staffed by dieticians, informational magazines, websites, meetings with consumers Claims on Health and Nutrition must be evidence-based, ethical, and duly validated
Groupe DANONE undertakes to make no claims on nutrition or health benefits without sound scientific evidence
No nutrition or health claims, other than nutritional content information, will be made for ‘purely indulgent’ products.
Nutrition and health claims are backed up by relevant scientific data based on appropriate studies.
To ensure compliance with this commitment, the Groupe has instituted a validation procedure for all nutrition and health information communicated to the public. Self-regulation in advertising to protect consumers
Groupe DANONE is committed to responsible advertising where health and nutrition issues are concerned.
In particular, all advertising of Group brands must respect local cultural sensitivities as well as the following principles:
No misleading information on benefits No message encouraging overeating No message encouraging a sedentary or unhealthy lifestyle Our commitment in terms of Health & Nutrition knowledge and education:
To establish permanent relations with the scientific community To support and encourage research in nutrition To share knowledge with scientists, health professionals, and the public To cooperate effectively with authorities and other public bodies To promote physical activity Fostering open communication with health professionals
At the front line of Health and Nutrition, health professionals help Groupe Danone understand the concerns of consumers and respond effectively.
Example: consultation with Example: consultation Example: Consultation with 40 leading practitioners in 5 with pediatricians in 9 180 family doctors, countries on fat and fiber countries on the diet of pediatricians, and dieticians parameters for cereal young children in France on consumption of biscuits sugar and sweeteners France Finland Belgium
Czech Netherlands Republic
Our products are part of the daily life of families around the world. We strive to make full information readily accessible for health professionals.
Example: product monographies for Actimel, Danacol, ... Example: documentation on Taillefine for patients consulting doctors in France Helping consumers achieve a balanced diet is part of our responsibility (I)
Some Groupe DANONE’s companies have a website to inform local consumers on nutrition general nutritional advice information on probiotics
www.dannon.com www.danoneconseils.com www.actimel.com
weight management water and hydration information on biscuits
www.taille-fine-et-moi.com www.evian.fr www.liga.nl Helping consumers achieve a balanced diet is part of our responsibility (II)
Danone call centers manned by dieticians to answer consumer queries
initiated in France in 1995 and then extended to other countries including Spain, Italy, the US and the Netherlands.
for the purpose of: listening to consumers’ needs and providing nutritional advice
The call number appears on every pack
Consumer informational magazines such as Danoé in France, a free magazine with practical nutritional advice, sent to nearly 4 million households each quarter Consumer brochures on nutritional content of product Promoting physical activity for children and teenagers
Danone Nations Cup An international football tournament for children, held each year since 2000 8 million children from over 32 countries have already taken part Represented by Zinedine Zidane Funds raised are donated to the European Leucodystrophy Association
Brand programs
Prince Trophy in Belgium, a sports event providing useful tips for daily exercise
‘On the move with Prince’ in France (information and tips in leaflets and on labels) Distribution of leaflets in China Danone Institutes - embodying our commitment and social responsibility in the field of Health and Nutrition
Danone Institutes are independent bodies bringing together recognized nutrition experts at local level Their mission is to: promote nutrition research inform and educate health and education professionals on all subjects related to nutrition adapt scientific documentation on food and nutrition for the general public
Danone Institutes are funded by local Danone companies Danone Institutes - promoting research, information and education on nutrition 1991: the first Danone Institute set up in France Today, a network of 15 Danone Institutes around the world Bringing together some 200 experts France 1991 Belgium International 1991 Germany 2004 1992 Czech Rep. 1991 Poland Canada 1992 1998 Russia 1998
USA Japan 1996 1998 Mexico China 1998 1998 Israel 1998 Italy 1991 Spain 1993 Research and knowledge sharing
Some 60 local research projects are funded each year
Danone International Prize for Nutrition Created in 2000 € 120,000 a year to reward the achievements of leading researchers
Participation in public-sector projects Example: European Union Childhood Obesity Program launched at the initiative of Danone in spring 2002
Participation in international scientific events: Example: Pre-congress symposium of the 18th ICN (Durban, RSA) “Nutrition solutions to major public-health problems to optimize growth and development of pre-school children” (2005) Information and education for health professionals
Local newsletters, books and CD-ROMs Newsletters: free distribution to 400,000 professionals; 240 issues published Several million copies distributed
7 continuing education programs for health professionals For students, doctors, journalists, and others 70 training sessions with 5,000 participants
137 specialized workshops For students, doctors, journalists and others More than 20,000 participants Education for the general public
72 education programs For children, teenagers, expectant mothers, elderly people and others Featuring learners’ kits, games, contests, booklets, radio and TV programs and other material
For more information: www.danoneinstitute.org Probiotics What are probiotics?
Probiotics are live microorganisms which, when ingested in adequate amounts, bring a health benefit to the host*. Probiotics may: • have a positive effect on the intestinal tract resulting from an increase in bacteria considered as beneficial and a reduction of bacteria considered as harmful • and/or accelerate intestinal transit in subjects with slow transit • and/or strengthen natural defences particularly at the intestinal level • and/or act on different parameters of the immune system • and/or increase the nutritional value • and/or reduce the risk factors for some cancers
The effects of each probiotic are specific and differ according to conditions of use from one product to another Health claims have to be validated product by product
*FAO definition (2002) officially adopted by the World Health Organization (WHO) Isaac Carasso and Dr Shirota - pioneers in probiotics
Isaac Carasso … and his son founds the Daniel founds the Danone company French business Alliance in Barcelona … 10 years later between Danone and Yakult in Probiotics
1907 1919 1929 2004
Elie 1935 Metchnikoff proves the benefits of probiotics scientifically Dr Shirota introduces Yakult drinks Probiotics* - among the fastest growing segments of the Fresh Dairy Product market approx. 13% of total market volume approx. 18% of total market value
+12.1%
+7.6% +4.6%
CAGR 98-04
Total of which: of which: Fresh Dairy Fermented Probiotic Dairy Product yoghurts Category Drinks source: Euromonitor, retail volume, 2004
* with specific health benefits Danone has built 2 major brands in Probiotics *
Lactobacillus Casei Defensis Bifidus Essensis
Actimel: approx. € 800 m in 2004 Activia: approx. € 650 m in 2004
Helps to strengthen your natural defenses Helps to regulate your intestinal transit
approx. 20% of Fresh Dairy Product (1) sales in 2004
(1) Yogurts and assimilated products only * with specific health benefits What is Actimel ?
Actimel is a fermented dairy probiotic drink helping to strengthen your natural defenses
Fermented milk drink that comes in 100g bottles
Contains unique Danone L.Casei defensis strain selected for its probiotic properties
Plain, orange, multifruit, vanilla, strawberry flavors, plus 0.1% fat version (plain, pineapple and raspberry) Actimel- € 1 billion sales within reach
CAGR 2000-2004 >+30% 800
620
Net Turnover € mn 475
350
250 165 85 45 1 2 18
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Actimel - present in some 30 countries
Norway Sweden Holland (1995) Denmark Finland (2003) Belgium . . (2004) (1994) UK Russia (1998) (2001) Ireland USA (1997) Poland Ukraine (2004) (2001) (2002) Spain (1996) Slovakia Portugal (2001) (1998) . Slovenia Canary Is Greece (2002) (1995) France (1998) (1997) Hungary Saudi Germany (2001) Arabia (1996) (2004) Uruguay Italy Austria (1998) (1996) Israel Cz Rep (1998) Argentina (1999) (2001) Serbia Actimel - a dominant position in Western Europe …
Market size ≈ $ 1,700 Million
Others 18%
#3 player 6%
Yakult 11% Actimel 65%
Top 5 Actimel markets: Spain, Germany, France, the UK and Italy
Source: Euromonitor 2004- Share of market value in probiotic dairy drinks … where it has been top contributor to market growth
Volume CAGR 98-04
% of total 49% 7% 39% growth +23.9%
Segment average +7.6% +5% +4.4%
Western Latin Asia Breakdown of Europe America 2004 volumes 24% 9% 62%
Source: Euromonitor Yakult - the historical leader in Latin America
Market size ≈ $ 361 Million Others Actimel 11% 13%
#3 player 32% Yakult 44%
•Yakult dominates in Mexico and holds strong positions in Brazil •Actimel #1 in Argentina
Source: Euromonitor 2004- Share of market value in probiotic dairy drinks Pioneer Yakult still dominant in Asia
Market size≈ $ 3,245 million
Others Yakult 47% 52%
Yakult’s main markets are Japan, South Korea, #3 player Taiwan, Thailand and 1% Indonesia.
Source: Euromonitor 2004- Share of market value in probiotic dairy drinks Actimel - growth potential still outstanding
PCC(1)/year
40
30 Average consumption in countries where Danone is 20 present : 3.2 bottles/ capita / year 10
0
a
Kore Japan Taiwan
Source Nielsen 2003 (1) PCC: Per Capita Consumption in bottles of 100 g; What is Activia?
Activia is a fermented dairy probiotic product helping to regulate your transit
ACTIV: Active benefits VIA: Path in the digestive tract Contains unique Danone Bifidus Essensis strain selected for its probiotic properties Choice of plain, multifruit, fiber, vanilla, mango and soy , plus 0% fat version (plain and fruit) Activia – present in over 20 countries
Belgium Canada Cz. Rep. UK Holland Ireland
Russia Ukraine Spain Slovakia Mexico Portugal Romania Canary .Is •W Bulgaria SaudiSaudia Arabia Japan France
Hungary Italy Brazil Austria Sales growth has accelerated since 2000…
Net sales 650 € millions
Worldwide Activia sales +24% (CAGR 2000-2004)
‘99 ‘00 ‘01 ‘02 ‘03 ‘04 … as a result of extension to new markets…
Belgium Canada Cz. Rep. UK Holland Ireland
Russia Ukraine Spain Slovakia Mexico Portugal Rumania Canary .Is •W Bulgaria SaudiSaudia Arabia Japan France
Hungary Italy Brazil Austria
In red, countries where Activia has been launched since 2000 …and momentum from innovation
Mature markets
New ingredients New segments/ New occasions
Growth markets Fibers
Plain Fruits Entry-level markets Yakult & Danone- combining strengths to accelerate expansion on the probiotics segment
April 2004: strategic alliance between Yakult and Danone Yakult is the leader in the probiotics segment* with 35% of the world market, followed by Danone with 20%
Exchange of Board Members
A liaison office has been set up: to identify opportunities for cooperation (e.g., for R&D or new markets)
creating value for both parties
making dairy probiotics outside Japan the priority
Global Probiotics Council set up To promote the cause of probiotics worldwide
* Total market value: fermented dairy drinks + probiotics yogurt