Danone and Danone and emerging countriesemerging countries

Around 3 billion of people live Around 3 billion of people live with less than 2 € per daywith less than 2 € per day

Stakes, challenges, methods and learning

Danone and emerging countriesDanone and emerging countries

How can we bring health through How can we bring health through food and beverages to the largest number of food and beverages to the largest number of

peoplepeople ? ?

A strengthened presence in emerging A strengthened presence in emerging countriescountries

19961996 20062006Mature countries

89%

Emerging countries

11%

Mature countries

69%

Emerging countries

31%

A

B

C

D 25,2%

Addressing the whole populationAddressing the whole population

Worldwide PopulationWorldwide Population

Class B 1,500–1,750

Class C

Class D

>$ 20,000Class A 55 - 100

< $1,500

Purchasing power in US$

$1,500 - $ 20,000

$1,500

Breakdown of population per level of income

1.6%1.6%

30.0%30.0%

68.4%68.4% Class C&D : 4,000

Population in millions / Class

Class A and B: Class A and B: situations close to mature marketssituations close to mature markets

Population breakdown

B, C et D…B, C et D…

A

B

C+D

E

MexicoMexico

3.8%3.8%

19.1%19.1%

45.0%45.0%

32.1%32.1%

IndonesiIndonesiaa4%4%

69%69%

21%21%

6%6%A

B

C+D

E

RussiaRussia

25.8%25.8%

34.8%34.8%

28.4%28.4%

11%11%

AB

C+D

E

A

B

C

D

19.0

19.0

16.6

16.6

12.7

12.7

9.79.7

19.1

19.1

12.7

12.7

7.87.8

0.70.7

Mexico: B and C’s consumption increases to the Argentinian level = +300,000 tons

per Capita 12.8 Kg

per Capita 6.9 Kg

7.6%7.6%

15.3%15.3%

44.2%44.2%

33.2%33.2%

A A large potential for growth large potential for growth

ArgentinArgentinaa

A

B

C+D

E

MexicoMexico

3.8%3.8%

19.1%19.1%

45.0%45.0%

32.1%32.1%

8

Poverty and malnutritionPoverty and malnutrition

60

50

40

30

20

10

05 10 20 50 100 200 500 1 000 1 500

Annual average income (K$)

% of children, under 5 years old with a too weak

weight

INDIA

BANGLADESH

NIGERIA

ETHIOPIA

PAKISTAN

INDONESIAVIETNAM

EGYPT

MEXICO

GHANA

PHILIPPINESTANZANIA

THAILANDKENYA

CHINA

A major stake: malnutritionA major stake: malnutrition

Energy-giving Energy-giving contribution deficiencycontribution deficiency

Proteins contribution Proteins contribution deficiencydeficiency

Growth retardationGrowth retardation

DiarrheaDiarrhea

Various infections Various infections linked to a lack of linked to a lack of hygienehygiene

Macro Macro NutritionNutrition

Micro Micro NutritionNutrition

Health ProblemsHealth Problems

IronIron

Vitamin AVitamin A

Iodine and zincIodine and zinc

CalciumCalcium

Questions we ask to ourselves Questions we ask to ourselves

Is there a real need of a more accessible

nutrition in the country ?

A

B

C+D

E

3.8%3.8%

19.1%19.1%

45.0%45.0%

32.1%32.1%

Can the category be developed toward the bottom of the

pyramid ?

Can Danone gain market shares toward

the bottom of the pyramid ?

Is a profitable business model possible for Danone

?

4 criterias 4 criterias

1 ct1 ct

The pricing challenge The pricing challenge

EuroEuro 1 ct1 ct 2 ct2 ct 3 ct3 ct 6 ct6 ct

Unit of measure = 0.01 €Unit of measure = 0.01 €

% of sales realised in proximity sales Total points of sales

62%

80%

85%

90%

95%

98%

South Africa

Saudi Arabia

Turkey

Tunisia

Morocco

Algeria

Bangladesh

2,000,02,000,00000

9898,0,00000

3535,,000000

2525,000,000

5050,000,000

770,0000,000

200200,000,000

800,000800,000

Indonesia 68%

99%

The distribution challenge The distribution challenge A multitude of points of sales A multitude of points of sales

Indonesia

Morocco

The distribution challenge The distribution challenge

The challenge of consumption’s habits The challenge of consumption’s habits

1 to 3 times per month

Once per week

2 to 3 times per week

4 to 6 times per week

Every day81

5645

TotalTotal

80% of consumers 80% of consumers shop every dayshop every day

The geographical challengeThe geographical challenge

Vladivostok

Moscou

9 days of delivery

Irkourtsk

Tchekhov

Often gigantic dimensions and Often gigantic dimensions and low level of infrastructures’ low level of infrastructures’

development development

Step 4Step 3 Step 5Step 2Step 1

Definition Definition of the of the

objectivesobjectives

Immersion Immersion and gathering and gathering

of of informationinformation

Definition Definition of the of the

concept & concept & business business

planplan

Development Development

FirstFirstimplantatioimplantatio

nnthen setting then setting

upup

Objective: 1 to 2 years to reach step 5Objective: 1 to 2 years to reach step 5

The Danone method: a structured approach The Danone method: a structured approach

Understanding the specificity of our Understanding the specificity of our consumersconsumers

Go outside our world…Go outside our world…

Understanding the specificity of our Understanding the specificity of our consumersconsumers

Sticking to local habits Sticking to local habits

Yoghourt in Bangladesh:Yoghourt in Bangladesh:creamy, very sweet creamy, very sweet

Yoghourt in China:Yoghourt in China:drunk with a strawdrunk with a straw

Bringing a real and useful innovationBringing a real and useful innovation

Milkkuat: the first nutritional and affordable dairy product launched in Indonesia

Main Main deficienciesdeficiencies

in the in the countrycountry

Main Main deficienciesdeficiencies

in the in the countrycountry

15.0%Vitamin D

10.0%Selenium

30.0%Vitamin B330.0%Folique Acid (B9)

25.0%25.0%Iodine and zincIodine and zinc

24.0%24.0%IronIron

35.0%35.0%20%

12.0%5.4%7.6%

% of AJR 7-9 years oldKids provided by 6 Milkkuat

biscuits

Vitamin AVitamin AVitamins B1, B2, B6

CalciumProteinsEnergy

The business model brings resultsThe business model brings results

Yogurissimo pack ArgentinaYogurissimo pack Argentina

Price: 13 cts €Price: 13 cts €95,000 tons95,000 tons

Activia FranceActivia France120,000 t120,000 tTaillefine FranceTaillefine France75,000 t75,000 t

20062006

Another challenge:Another challenge:Populations who live with less than 1 € per day Populations who live with less than 1 € per day

A very particular context: A very particular context: the Bangladeshthe Bangladesh

41% of the population under 14 years old

56% do not read and write

5% has access to tap water

80% de rural populations

Extreme density (>1000 people per km²)

60% of the population live with less than 2$ per day

The challenge of distribution: The challenge of distribution: no organized tradeno organized trade

The challenge of communicationThe challenge of communication Posters and brochures for nutritional educationPosters and brochures for nutritional education

Non-negotiable processes/criteria

• It is accepted that our products/processes do

not comply 100% with our standards.• Normal procedure is to have an action plan in

place how to reach the standards • Some requirements however are so crucial for

food safety reasons that we do not accept a non-compliance.

Definitions

• Non-negotiable Criteria:– Based on risk/Benefit-assessment

– Acute effect on health for the consumer– Possible long term effect on health for the

consumer / accumulation effect– Based on present/future legal requirements

Affordability Project - QFS

Before producing any new affordability ranges• a risk assessment must be conducted to

determine– Risk to consumers

– Risk to plant and other products we produce in the plant

– Risk to name and reputation

Risk / Benefit Assessment

Food Safety Criteria – Non Negotiable

Food Safety Criteria

ProductBrand

Microbiology ContaminantsNutritionalTolerableDeviation

Foreign Material

Premium Corporate Standards Apply

Value Corp StdCodex or

Local Regs or Corp Std

Codex orLocal Regs or

Corp Std.Corp Std

Affordable Corp StdCodex or

Local Regs orCorp Std

Codex orLocal Regs or

Corp StdCorp Std

Food Quality Criteria – Negotiable.

Food Quality Criteria

Brand SupplyChain

Control

RawMaterialQuality

PackagingMaterialsQuality

Distribution

Premium Full SCC Corporate Specification

CorporateSpecification

Global

Value Full SCC -Category 1

Corporate + Local

Specifications

Corporate + Local

Specifications

Local Mainly + Global (with

QFS Approval)

Affordable To Local Standards and

Legislation

To Local Standards and

Legislation

To Local Standards and

Legislation

Local OnlyQFS Approval Required for

Global.

Compliance for all products/productions worldwide

• Products + Production must comply with.. CODEX +

NATIONAL LEGISLATION +NON-NEGOTIABLE CRITERIA

• Action plans must be in place to reach the Danone-requirements.

• Action plans must be approved by central quality.