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First release March 10, 2005Focus on Probiotics
Groupe DANONEHealth Commitment and Fact Book
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.
Forward looking statements
Executive summary
Groupe DANONE’s business model and research strategy have yielded business successes and opened new potential worldwide.
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 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 andNutrition market.
What Health & Nutrition mean for Groupe DANONE
Health & Nutrition are deemed to be, more than ever, major drivers of top line growth for the food industry
Our commitment in terms of product offer
Danone Vitapole: a catalyst for innovation
Focus on Probiotics
Our commitment in terms of product communication
Our commitment in terms of knowledge and education in Health& Nutrition
Contents
Health & Nutrition are deemed to be, more than ever, major drivers of top line growth for
the food industry
Introduction
+7.0%+5.1%+6.0% +7.8%
+3.6%
Major European peers*
+7.2%
Average 1999-2004
* Cadbury, Nestlé, Unilever
20002001
20022003
2004
2004
+2.9% Major European peers *
+6.6%
In 2004, Danone has hit a record top line growth…
… confirming its number-one position for top-line growth
Source: Euromonitor
Retail volume CAGR99-04
Worldwide
Health & Nutrition =
a key leverof consumption
+0.8%+1.9%
+2.0%+2.0%+2.2%
+2.4%+2.4%
+2.6%+2.7%
+2.9%+3.7%
+4.6%+9.4%
+11.8%
0% 2% 4% 6% 8% 10% 12%
RTE cereals
Soup
Baby food
Carbonated soft drinks
Confectionery
Ice Cream
Sweet biscuits
Cheese
Savoury biscuits
Sauces & Cond.
Frozen food
Yog & assimilated
Functional drinks
Still bottled water
Our focus on three fast-growing food categories: a major driver of growth
* Average ranking JP Morgan/ UBS/ Morgan Stanley
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
1357911
Like-for-like growthCAGR 03-04
Cadbury
Danone
Nestlé
Unilever
Campbell
Kellogg
Heinz
Kraft
PepsiCo
Coca-Cola General Mills
Health ranking Food analyst*
Health positioning: a key success factor for sustainable superior top line growth
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
(1) Source: WHO report, March 2004
Obesity is a contributory factor in cardiovascular disease, diabetes, some cancers, joint disorders and other pathologies…
Obesity has become a major public health issue…
Consumers and health professionals also look for :
Well-being, i.e facilitating digestion, optimizing hydration, managing satiety and energy levels …
Protection, i.e, preventing deficiencies, supporting immunity, maintaining cardiovascular health, preventing damage from free radicals …
Optimal growth, i.e supporting physical and mental development, building and preserving sound bone and dental capital…
… but concern for health extends beyond prevention of obesity
What Health & Nutrition mean for Groupe Danone
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
Health & Nutrition are central to Groupe DANONE’smission statement
- 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
Understanding Health and Nutrition science and integratingpublic health issues
Contributing to consumer information and education on Healthand Nutrition
Structuring our product offer to better meet consumer needs by:
Our Health & Nutrition strategy is multi-pronged
19191964
1996Today
First zero-fat «fromage frais »
Yogurts sold in pharmacies
Isaac Carasso conducts research into lactic cultures with health benefits, working with the Pasteur Institute and ElieMetchnikoff.
1789
Discovery of the health
benefits of the natural mineral water in Evian
1846
First LU biscuits,
rich in grain
Focus on three productcategories with Health
and Nutrition value
Health & Nutrition are part of Groupe DANONE’s DNA
A steady stream of products with added
health benefits
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.
Groupe Danone has strong core beliefs regarding Food, Nutrition, and Health
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 beliefs are embodied in 9 commitments
Shared by all Group companies
Contribute strongly to our corporate culture
These commitments are stated in Groupe Danone’s Food, Health, and Nutrition Charter
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
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
Nutritional profile Nutritionalrequirementsaccording to
consumer target
PRODUCT(or meal, diet )
CONSUMER POSITIONING ×× ==Re-balancing
potential
Unb
alan
cing
pote
ntia
l
Ensuring a good nutritional profile for our products: a constant priority
Cross-brand initiatives:
Trans-fatty acids threshold in DANONE products since 1998 : below 5 % of total fats
Improving nutritional profiles: recent initiatives in Biscuits and Cereal products
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
A concept developed by Danone Vitapole for Biscuits andCereal products, launched in 1999, after 10 years of research
Based on a high content of slowly digestible carbohydratesFavoring a better use of energy by the body
Contributing to good nutrition A family-oriented product A cereal base for a balanced breakfast
LU Petit Déjeuner (France), Prince Start (Belgium), BeBe Dobre Rano(Czech Republic), Jubilee Good Morning (Russia), Sunshine (China)…
Launched in 1999 and now available in 9 countries
Developing innovative nutritional proposals: Long Lasting Energy
Adapting products to meet local nutritional needs (I)
In Asia, launch of biscuits with added calcium or iron
In Europe, launch of Bio/ Activia line extensions with added fibers
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 DPoland and the US: enriched with calcium and vitamin DFrance: fortified with vitamin D
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 CarbControl, 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
Adapting products to meet local nutritional needs (II)
China : Danone Milk Biscuits with added calcium for children
Affordability is key in developing countries
Indonesia : Biskuat Susu with added calcium
India : Britannia Tiger with extra milk and calcium
Two billion people live on less than 2 euros a day in AsiaOur answer : affordable nutrition
Affordable
Nutrition
Marketing affordable nutrition: Biscuits in Asia
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
Expanding water and beverage offerings for consumers
Probiotics with additional health benefits:
New opportunities:
Actimel Activia
(see last section of the presentation)
Danacol
Developing new products with specific health benefits
Danacol with phytosterols that help reduce cholesterol
Cardio-vascular problems - a worldwide issue
Danacol is a fermented dairy product enriched withphytosterols(2) that help reduce ”bad” cholesterol
A strong start in France
60 scientific studies show the positive impact of vegetal sterols on ”bad” cholesterol
(3) Nielsen 2004, volume, last period
launched in April 2004 in France, and now category leader (3)
In the UK, Ireland, Belgium, Portugal and Spain as a drinkable or spoonable product
Danacol is now being rolled out across Europe
(2) Active plant extract
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)
(1) CVD: Cardio-Vascular desease
Danone Vitapole: a catalyst for innovation
Uniting 3 Businesses Creating Synergies Speeding up Innovation
Danone Vitapole, an innovation catalyst, for all the Groupe DANONE brands
DANONE Institutes promoting nutrition
worldwide
Global & Local Marketing & Consumer research
Relationships with the scientific community and with authoritiesand other public
bodies
PreventiveFood Safety
center
International scientific
cooperation
Global & Local Nutritionists &
Health Marketing
Our Health and Nutrition Strategy is built on integratedexpertises and resources
Danone Vitapole Research & Development
Danone Vitapole Research & Development
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
* Nutritionists; physicians; gastro-enterology; cardiovascular and immunity specialists, microbiologists; molecular biologists; biochemists; foodengineers; food safety experts; consumer behavior and sensory evaluation specialists…etc
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
Our Research and Development capabilities to achieveexcellence
Reinforcing the leadership and image ofDanone products with health benefits
ACTIVE HEALTH
NUTRITION
PREFERENCE
TechnologicalEFFICIENCY
Winning recognition as a benchmark for good nutritional practice among
consumers, the scientific community and authorities
Danone aims to win a lead on competitorsin product preference and packaging
convenience
Regularly upgrading technology to- Ensure the safety, quality and compliance
of Danone products - Facilitate and accelerate industrial launches and worldwide roll-outs
Danone Vitapole focuses on 4 strategic domains …
ACTIVE HEALTH
NUTRITION
PREFERENCE
TechnologicalEFFICIENCY
Nutrition and Health benefits associated with:• Probiotics • Milk based products• Cereals• Hydration & Beverages • Active ingredients
Sensory preference through: • Understanding of consumer behavior• Advanced sensory evaluation & product optimization methods• Product profile and packaging design reflecting health claim
expectations
Formulation & processing tomaintain quality with:
• Low fat/ Low sugar product formulation• Texture and flavor tailoring• Controlled baking to protect nutrients• Mild processing of beverages• Functionally designed plastic containers
… which correspond to a diversity of specific expertises
Organization of scientific committees, bringing together international experts to reach scientific consensus
A network of 15 Danone Institutes promoting research, information and education in nutrition
Close partnership with independent research institutes to complement our expertise in nutrition and health
For examples: Probiotics committeesCarbohydrates and lipids health symposia Evian Water Scientific CouncilInternational Life Sciences Institute
Danone Vitapole develops strong links with the scientific community
Our commitment in terms of product communication:
To provide clear and transparent communication
To claim only scientifically proven benefits
To use responsible advertising
Groupe Danone undertakes to provide consumers with full information in a readily understandable form, in particularly byphasing in nutritional labels on all products and expanding consumer information services.
For example, hotlines staffed by dieticians, informational magazines, websites,meetings with consumers
Providing consumers with clear and relevant information
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.
Claims on Health and Nutrition must be evidence-based, ethical, and duly validated
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 benefitsNo message encouraging overeatingNo message encouraging a sedentary or unhealthy lifestyle
Self-regulation in advertising to protect consumers
Our commitment in terms of Health & Nutrition knowledge and education:
To establish permanent relations with the scientific communityTo support and encourage research in nutrition
To share knowledge with scientists, health professionals, and the publicTo cooperate effectively with authorities and other public bodies
To promote physical activity
At the front line of Health and Nutrition, health professionals help Groupe Danone understand the concerns of consumers and respond effectively.
Example: consultation with40 leading practitioners in 5
countries on fat and fiberparameters for cereal
biscuitsFrance
Finland
CzechRepublicNetherlands
Belgium
Example: Consultation with180 family doctors,
pediatricians, and dieticiansin France on consumption of
sugar and sweeteners
Example: consultation with pediatricians in 9
countries on the diet of young children
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
Fostering open communication with health professionals
Some Groupe DANONE’s companies have a website to inform local consumers on nutrition
water and hydration information on biscuits
Helping consumers achieve a balanced diet is part of our responsibility (I)
www.dannon.com www.danoneconseils.com www.actimel.com
www.taille-fine-et-moi.com www.evian.fr www.liga.nl
general nutritional advice information on probiotics
weight management
initiated in France in 1995 and then extended to other countries including Spain, Italy, the US and the Netherlands.
Danone call centers manned by dieticians to answer consumer queries
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
for the purpose of: listening to consumers’ needs
and providing nutritional advice
The call number appears on every pack
Helping consumers achieve a balanced diet is part of our responsibility (II)
Danone Nations Cup
8 million children from over 32 countries have already taken part
Represented by Zinedine ZidaneFunds raised are donated to the European LeucodystrophyAssociation
An international football tournament for children, held each year since 2000
Brand programsPrince 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
Promoting physical activity for children and teenagers
Danone Institutes are independent bodies bringing together recognized nutrition experts at local levelTheir mission is to:
promote nutrition researchinform 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 - embodying our commitment and social responsibility in the field of Health and Nutrition
Japan1998China
1998
Spain1993
Mexico1998
USA1996
Canada1998
France1991
Italy1991
Belgium1991 Germany
1992 Czech Rep.1991 Poland
1992
Israel1998
Russia1998
International2004
1991: the first Danone Institute set up in France Today, a network of 15 Danone Institutes around the world Bringing together some 200 experts
Danone Institutes - promoting research, information andeducation on nutrition
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)
Research and knowledge sharing
Local newsletters, books and CD-ROMsNewsletters: free distribution to 400,000 professionals; 240 issues publishedSeveral 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 workshopsFor students, doctors, journalists and othersMore than 20,000 participants
Information and education for health professionals
72 education programsFor children, teenagers, expectant mothers, elderly people and others
Featuring learners’ kits, games, contests, booklets, radio and TVprograms and other material
For more information: www.danoneinstitute.org
Education for the general public
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 consideredas 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
*FAO definition (2002) officially adopted by the World Health Organization (WHO)
What are probiotics?
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
ElieMetchnikoffproves the benefits of probioticsscientifically Dr Shirota
introduces Yakult drinks
2004
Alliance betweenDanone andYakult in Probiotics
Isaac Carassofounds theDanone companyin Barcelona …
1919 1929
… and his son Daniel founds theFrench business 10 years later
1935
1907
Isaac Carasso and Dr Shirota - pioneers in probiotics
source: Euromonitor, retail volume, 2004
+4.6%
Total Fresh DairyProduct Category
+12.1%
+7.6%
of which:Probioticyoghurts
of which: Fermented
DairyDrinks
approx. 13% of total market volume
CAGR 98-04
* with specific health benefits
approx. 18% of total market value
Probiotics* - among the fastest growing segments of the FreshDairy Product market
Actimel: approx. € 800 m in 2004
Lactobacillus Casei Defensis Bifidus Essensis
Activia: approx. € 650 m in 2004
Helps to strengthen your natural defenses Helps to regulate your intestinal transit
(1) Yogurts and assimilated products only * with specific health benefits
approx. 20% of Fresh Dairy Product (1) sales in 2004
Danone has built 2 major brands in Probiotics *
Fermented milk drink that comes in 100g bottles
Actimel is a fermented dairy probiotic drinkhelping to strengthen your natural defenses
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)
What is Actimel ?
Actimel- € 1 billion sales within reach
CAGR 2000-2004 >+30%
Net Turnover € mn
1 2 18 4585
165
250
350
475
620
800
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Actimel - present in some 30 countries
France(1997)
UK(1998)
Canary Is(1995)
.
Portugal(1998)
Italy(1998)
Ireland(1997)
Spain(1996)
. .
Hungary(2001)
Belgium (1994)
Slovakia(2001)
Ukraine(2002)
Austria(1996)
Holland (1995)
Saudi Arabia(2004)
USA(2004)
Germany(1996)
Greece(1998)
Russia(2001)
Israel(1998)Cz Rep
(1999)Argentina(2001)
Poland(2001)
Slovenia(2002)
(2004)FinlandDenmark
(2003)
Uruguay
Sweden Norway
Serbia
Actimel 65%
Yakult 11%
#3 player 6%
Others18%
Source: Euromonitor 2004- Share of market value in probiotic dairy drinks
Top 5 Actimel markets: Spain, Germany, France, the UK and Italy
Market size ≈ $ 1,700 Million
Actimel - a dominant position in Western Europe …
Breakdown of 2004 volumes
Source: Euromonitor
… where it has been top contributor to market growth
% of totalgrowth
49% 7% 39%
+23.9%
Volume CAGR 98-04
Western Europe
Latin America Asia
+5%+4.4%
24% 9% 62%
Segment average+7.6%
Market size ≈ $ 361 Million
•Yakult dominates in Mexico and holds strong positions in Brazil
•Actimel #1 in Argentina
Actimel13%
Yakult 44%
#3 player32%
Others11%
Yakult - the historical leader in Latin America
Source: Euromonitor 2004- Share of market value in probiotic dairy drinks
Yakult’s main markets are Japan, South Korea, Taiwan, Thailand andIndonesia.
Market size≈ $ 3,245 million
Yakult 52%
#3 player1%
Others47%
Pioneer Yakult still dominant in Asia
Source: Euromonitor 2004- Share of market value in probiotic dairy drinks
Source Nielsen 2003
0
10
20
30
40
Korea
Japan
Taiwan
Average consumption in countries where Danone ispresent :
3.2 bottles/ capita / year
PCC(1)/year
(1) PCC: Per Capita Consumption in bottles of 100 g;
Actimel - growth potential still outstanding
ACTIV: Active benefitsVIA: Path in the digestive tract
Contains unique Danone Bifidus Essensisstrain selected for its probiotic properties
Choice of plain, multifruit, fiber, vanilla, mango and soy , plus 0% fat version (plain and fruit)
What is Activia?
Activia is a fermented dairy probiotic producthelping to regulate your transit
UK
Canary Is.
Portugal
Italy
Spain
. .
BelgiumCanada
Mexico
Brazil Austria
Saudi
Hungary
France
Ireland
•W
Japan
SaudiaArabia
Russia
Bulgaria
Slovakia
Romania
Ukraine
Cz Rep
Holland
Activia – present in over 20 countries
Worldwide Activia sales +24% (CAGR 2000-2004)
‘99 ‘00 ‘01 ‘02
Net sales€ millions
‘03 ‘04
650
Sales growth has accelerated since 2000…
In red, countries where Activia has been launched since 2000
UK
Canary Is.
Portugal
Italy
Spain
. .
BelgiumCanada
Mexico
Brazil Austria
Saudi
Hungary
France
Ireland
•W
Japan
SaudiaArabia
Russia
Bulgaria
Slovakia
Rumania
Ukraine
Cz Rep
Holland
… as a result of extension to new markets…
Mature markets
Entry-level markets
Growth markets Fibers
Fruits
New segments/ New occasions
New ingredients
Plain
…and momentum from innovation
Yakult & Danone- combining strengths to accelerateexpansion on the probiotics segment
April 2004: strategic alliance between Yakult and Danone
Exchange of Board Members
A liaison office has been set up:
Global Probiotics Council set up
To promote the cause of probiotics worldwide
Yakult is the leader in the probiotics segment* with 35% of the world market, followed by Danone with 20%
* Total market value: fermented dairy drinks + probiotics yogurt
making dairy probiotics outside Japan the priority
creating value for both parties
to identify opportunities for cooperation (e.g., for R&D or new markets)
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