Business All three business lines contributed to firm growth in 2005, each with its own strategy, but all with the same will to win.

Photos: Galith Sultan/Rapho Fresh Dairy Products 33 Beverages 39 Biscuits 45

30 // 2005 DANONE 2005 // 31 Business

Vigorous health DANONE’s Fresh Dairy Products continued worldwide expansion backed by a focus on health.

resh Dairy Product (FDP) sales margin up from 12.2% in 2000 to 13.9% Ranking by country showed an organic rise of 7% to or 14.2% including baby food in 2005. stand at €7.2 billion, accounting for No. 1 in North Africa F55% of the consolidated total. Over NEW REACH and the Middle East, the past five years, the business line’s sales Rapid growth on a number of key mar- Argentina, , , excluding baby food have grown by an kets drove gains in 2005. In Latin America, Canada, Spain, Eastern annual of 9.3% on average, setting the rise sales were up 40% in Argentina and 15% Europe, , , from the beginning to the end of the period in Mexico, while in Eastern Europe over- the US, Portugal and Turkey. at €2.6 billion. At the same time, profitabil- all performance benefited from rises reach- ity has improved steadily, with operating ing 20% in Turkey and a robust 30%

DANONE 2005 // 33 Business Business

Sales Sales Operating margin Activia en route 2006, making it the Guangdong metro- by segment by region to becoming the top Danone brand politan areas, and in top-selling brand in the near future. early 2006 it made FDP An extensive range its debut in the US, + 14.2% + 14.1% are today with variations where it will be 29% Rest the fastest-moving including fermented aiming for a lasting 6% Baby food of the world segment in Fresh milk specialties such place on the still 71% Europe Dairy Products, as laban and embryonic market benefiting from the means that Activia for probiotics. progress of science products match a 94% Yogurt and assimilated and consumers’ own wide variety of local 2005 products 2004 health concerns. For tastes and they are Activia, a fermented now on sale in 30 milk product with countries, up from bifidus, this was only ten in 2000. The reflected in a 36% brand is expanding surge in 2005 sales its presence in to €845 million, a China, with sales figure expected to accelerating in the rise to €1 billion in Shanghai and

in . Sales on the strategic past the €840 million mark. Promise for FDPs around Russian market have thus risen by an growth is backed by both expansion into the world annual average of 50% over the past five new markets,—with Activia, for exam- • In April 2005, Danone and years, lifting market share* from 6% in 2000 ple, now on sale in China,—and innova- Yakult create a joint venture to 25% in 2005. Growth was also robust tion to extend ranges. Examples include in India to develop the local in developed markets, at 11% in Germany, the successful launch of “double 0” probiotics market. 25% in the UK and 12,4% in North Ameri- yogurts—zero fat and zero added sugar— • Groupe DANONE increases its ca. DANONE’s share of the US market in France under the Taillefine name and, holding in Bright Dairy to 9.7% topped 36% with sales up by an annual in Spain, that of Vitalinea Saciactiv, a (China). average of no less than 13% over the past zero-fat product with a newly developed • The Danone brand enters five years. France was the only exception recipe inhibiting hunger. Egypt by acquiring Olait to these trends, but market share held in October. high despite softer sales. PROXIMITY • The first Danone products Another lever for growth in Fresh Dairy appear in Guatemala, Uruguay FOUR BRANDS WITH Products is proximity through the exten- and Slovenia where they are €1 BILLION POTENTIAL sion of sales beyond the big retail stores exported from neighboring The business line’s strategic focus is on where our Group has traditionally been countries. the continued development of four top well represented to outlets serving local brands, each representing a distinct con- neighborhoods. These may include, for cept based on a specific health benefit, example, traditional grocery shops, snack in turn backed by dedicated research. bars and even stands in the street. To In the case of Activia, the benefit is achieve this, the business line is invest- improved intestinal transit, for it ing heavily in the development of spe- is consolidation of natural defenses, and cialized sales teams, delivery systems for Taillefine-Vitalinea it is weight con- able to call on a large number of small trol, while Danino favors healthy growth. outlets each day, and the supply of refrig- In 2005 each of the brands continued to erated displays for dairy products. gain ground on world markets, with the Returns make the effort well worthwhile two biggest sellers, Activia and Actimel, since the business line has found that doing particularly well to post sales regular visits from sales reps can raise growth of 36% and 19%, respectively. business at grocery shops by around This confirmed the potential for each of 50%, while the installation of refrigera- the four to generate annual sales of tors pays for itself in just a few months. €1 billion in the near future. Activia and In 2005, Danone thus established a Actimel are already well on the way to presence at over 100,000 additional * in value achieving that goal, with sales already points of sale.

34 // DANONE 2005 DANONE 2005 // 35 Business Business

Research powering €120,000, to Professor probiotics and in Asia. It comes Highlights Growth remains directly in the • Noteworthy also success David Baker for his the way they work. in addition to existing at Blédina driven by the trust microwave—was was a step rise in decisive contribution • On October 31, research facilities it has established the main source exports, with double FDP • At the 18th Inter- to research into Danone inaugurated in Asia including • 2005 results: with mothers. of growth for Blédina digit, growth in national Nutrition the fetal origins its first research one for biscuits and Blédina continues • 2005 success in 2005 the majority most Conference in of diseases in adults. center for Fresh Dairy two for beverages. to expend in 2005, stories: – for the first time, markets. Durban, South • In November, Products in Asia. and with a market – “Idées de maman” Gallia is leader in the Africa, the Danone Danone’s research Based in Shanghai, share of 46.3% bowls—simple powdered milk market International Institute center and the this is dedicated strengthenes its lead recipes in practical – Blédilait Croissance awarded the fifth Pasteur Institute to the development in the baby food plastic bowls that takes the lead in Danone International formed a partnership of products matching market in France. can be heated up milk for toddlers. Nutrition Prize, worth for research into consumer expansion

BREAKING FRESH GROUND business line in 2005 and 25% of total Focus on Asia The Fresh Dairy Products business line sales, including 65% in Latin America. Markets for fresh dairy products is also branching out in new directions Potential remains enormous, since only are still in their infancy in many with innovative distribution services to around a quarter of the 4.4 million out- parts of Asia and consumption reach consumers in emerging markets. lets that could sell dairy products around of milk is not traditional part of For Danimal, a highly affordable yogurt the world are at present regular Danone diets in countries such as China enriched with iron, zinc and vitamin A to customers. and Indonesia. Interest in the meet the needs of underprivileged chil- health benefits of dairy products dren in poor townships in , is nonetheless on the rise and this means a unique sales force made up we are moving to make the most of previously unemployed women selling of the potential with a broad door-to-door under the name Daniladies. presence and new investments. This approach has enabled Danone This has involved in particular Clover to overcome the problems that the creation in China of a new result from the lack of organized distri- management division for Fresh bution systems and refrigerators. Dairy Products in Asia and All told, sales through smaller outlets, a new research center in referred to as proximity business, ac- Shanghai, as well as a new counted for nearly 60% of growth for the recipe for Milkuat, the vitamin- enriched dairy drink sold in Indonesia, the acquisition of an additional interest in Shanghai Bright Dairy in China and new joint venture with Yakult in Close up—a breakthrough innovation of the Division’s India. Asia is thus emerging growth in 2005 as the new frontier for expansion In 2005, Danone France innovated on Fresh Dairy Product. in the low-fat segment by launching came from of Taillefine “double zero”, the first yogurt with 0% fat and 0% added sugar. proximity business through 59traditional grocery% stores, stalls, kiosks, etc.: DANONE has steadily built up its presence at all these sales points.

36 // DANONE 2005 DANONE 2005 // 37