Danone and emerging countries

1. Danone and emerging countries

2. Danone and emerging countries How can we bring health through food and beverages to the largest number of people ? Stakes, challenges, methods and learning Around 3 billion of people live with less than 2 € per day

3. A strengthened presence in emerging countries 1996 2006 Emerging countries Mature countries Emerging countries 11% 89% 31% Mature countries 69%

4. Addressing the whole population Worldwide Population Breakdown of population per level of income Population in millions / Class Purchasing power in US$ A B C D 1.6% Class A 55 - 100 >$ 20,000 30.0% Class B 1,500–1,750 $1,500 - $ 20,000 Class C $1,500 68.4% Class C&D : 4,000 Class D 25,2% < $1,500

5. Class A and B: situations close to mature markets

6. B, C et D… Population breakdown Russia Mexico Indonesia A B C+D E 4% 6% 3.8% A B C+D E A B C+D E 11% 19.1% 25.8% 69% 45.0% 34.8% 32.1% 28.4% 21%

7. A large potential for growth Mexico: B and C’s consumption increases to the Argentinian level = +300,000 tons Mexico Argentina per Capita 6.9 Kg per Capita 12.8 Kg 3.8% 19.1 A B C+D E A B C D 19.0 7.6% 19.1% 12.7 16.6 15.3% 45.0% 7.8 44.2% 12.7 32.1% 33.2% 9.7 0.7

8. Poverty and malnutrition % of children, under 5 years old with a too weak weight 60 50 40 30 20 10 0 BANGLADESH ETHIOPIA INDIA PAKISTAN INDONESIA VIETNAM NIGERIA PHILIPPINES GHANA TANZANIA THAILAND KENYA EGYPT CHINA MEXICO 5 10 20 50 100 200 500 1 000 1 500 Annual average income (K$)

9. A major stake: malnutrition Macro Nutrition Health Problems • Energy-giving contribution deficiency • Proteins contribution deficiency • Growth retardation • Diarrhea • Various infections linked to a lack of hygiene Micro Nutrition • Iron • Vitamin A • Iodine and zinc • Calcium

10. Questions we ask to ourselves 4 criterias Can the category be developed toward the bottom of the pyramid ? Is there a real need of a more accessible nutrition in the country ? A B C+D E 3.8% 19.1% 45.0% Can Danone gain market shares toward the bottom of the pyramid ? Is a profitable business model possible for Danone ? 32.1%

11. The pricing challenge Unit of measure = 0.01 € 1 ct 1 ct 2 ct 3 ct 6 ct Euro

12. The distribution challenge A multitude of points of sales % of sales realised in proximity sales Total points of sales 99% 800,000 Bangladesh 98% 70,000 Algeria 95% 50,000 Morocco 25,000 90% Tunisia 200,000 85% Turkey 35,000 80% Saudi Arabia 98,000 62% South Africa 2,000,000 Indonesia 68%

13. The distribution challenge Morocco Indonesia

14. The challenge of consumption’s habits 80% of consumers shop every day 5 4 1 to 3 times per month 6 5 Once per week 2 to 3 times per week 4 to 6 times per week 81 Every day Total

15. 9 days of delivery The geographical challenge Often gigantic dimensions and low level of infrastructures’ development Tchekhov Moscou Irkourtsk Vladivostok

16. The Danone method: a structured approach Step 5 Step 4 Step 2 Step 3 Step 1 Definition of the objectives Immersion and gathering of information Firstimplantationthen setting up Definition of the concept & business plan Development Objective: 1 to 2 years to reach step 5

17. Understanding the specificity of our consumers Go outside our world…

18. Understanding the specificity of our consumers

19. Sticking to local habits Yoghourt in Bangladesh:creamy, very sweet Yoghourt in China:drunk with a straw

20. Bringing a real and useful innovation • Milkkuat: the first nutritional and affordable dairy product launched in Indonesia % of AJR 7-9 years old Kids provided by 6 Milkkuat biscuits Energy 7.6% Proteins 5.4% Calcium 12.0% Vitamins B1, B2, B6 20% Main deficiencies in the country Vitamin A 35.0% Vitamin D 15.0% Iron 24.0% Vitamin B3 30.0% Folique Acid (B9) 30.0% Selenium 10.0% Iodine and zinc 25.0%

21. The business model brings results Yogurissimo pack Argentina Price: 13 cts € 95,000 tons 2006 Activia France 120,000 t Taillefine France 75,000 t

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

23. A very particular context: the 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

24. The challenge of distribution: no organized trade

25. The challenge of communication Posters and brochures for nutritional education

26. 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.

27. 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

28. 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

29. Food Safety Criteria – Non Negotiable

30. Food Quality Criteria – Negotiable.

31. 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.