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DANONE UNIQUENESS DANONE UNIQUENESS A STRONG RECORD OF PROFITABLE GROWTH A STRONG RECORD OF PROFITABLE GROWTH Antoine GISCARD D’ESTAING

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Page 1: DANONE UNIQUENESS - danone-danonecom …danone-danonecom-prod.s3.amazonaws.com/user_upload/... · No central marketing organization, but light ... AQUA Indonesia 2001 Zywiec Zdroj

DANONE UNIQUENESSDANONE UNIQUENESS

A STRONG RECORD OF PROFITABLE GROWTHA STRONG RECORD OF PROFITABLE GROWTH

Antoine GISCARD D’ESTAING

Page 2: DANONE UNIQUENESS - danone-danonecom …danone-danonecom-prod.s3.amazonaws.com/user_upload/... · No central marketing organization, but light ... AQUA Indonesia 2001 Zywiec Zdroj

Steady high organic growth recordSteady high organic growth record

6.4%6.4%

3.1%3.1%

7.5%7.5%

6.6%6.6%

8.1%8.1%

6.3%6.3%

5.4%5.4%

6.6%6.6%

5.7%5.7%

3.7%3.7%

4.6%4.6%4.1%4.1%

4.2%4.2%

7.8%7.8%8.1%8.1%

7.9%7.9%

5.5%5.5%

8.5%8.5%

7,6%7,6%7.1%7.1%

6.8%6.8%

9.0%9.0%9.5%9.5%

8.9%8.9%

5.3%5.3%

9.8%9.8%

4.7%4.7%

6.6%6.6%

7.8%7.8%8.2%8.2%

9.4%9.4%

0%

2%

4%

6%

8%

10%

12%

T199

T299

T399

T499

T100

T200

T300

T400

T101

T201

T301

T401

T102

T202

T302

T402

T103

T203

T303

T403

T104

T204

T304

T404

T105

T205

T305

T405

T106

T206

T306

5 %

7 %

Since 1999 Groupe Danone has achieved 10 quarters itsLT guidance and 15 quarters above its guidance

Page 3: DANONE UNIQUENESS - danone-danonecom …danone-danonecom-prod.s3.amazonaws.com/user_upload/... · No central marketing organization, but light ... AQUA Indonesia 2001 Zywiec Zdroj

The Group’s organic sales growth for the last five yearshas been situated near the high end of our target rangeThe Group’s organic sales growth for the last five yearshas been situated near the high end of our target range

20032001 2002 2004

+5.0%+5.0%

+7.0%+7.0%

+5.1%+6.0%

+7.2% +7.8% +6.7%+6.7%

2005

Average annual growth ’00-’05: +6.6%Average annual growth ’00-’05: +6.6%

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Danone has shown constant operating margin improvement in spite of sustained input costs pressureDanone has shown constant operating margin improvement in spite of sustained input costs pressure

20012001

11.1%

20022002

11.7%

20032003

12.2% 12.4%

200520052004IFRS2004IFRS

13.10%

20042004

13.35%

The gap with the « best in class » has narrowed

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DANONE has achieved a sustained EPS growth from continuing activitiesDANONE has achieved a sustained EPS growth from continuing activities

20012001 20022002 20032003

Excluding exceptional items

3.22€3.22€

3.06€3.06€

2.76€2.76€

+11.2%+11.2%

+5.6%+5.6%

+10.9%+10.9%

2004IFRS

2004IFRS

20042004

3.58€3.58€

+15.9%+15.9%

4.14€

20052005

3.57€

CAGR 01-05 ≈ +11%CAGR 01-05 ≈ +11%

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In 2005 FCF amounted to 10% of net sales, a strong progression from 2001…In 2005 FCF amounted to 10% of net sales, a strong progression from 2001…

20012001 20022002 20032003

818

1,0171,149

2004IFRS2004IFRS

20042004

1,224

+8.2%

1,204

20052005In % of sales

5.7%5.7% 7.5%7.5% 8.7%8.7% 8.9%8.9% 9.8%9.8% 10.0%10.0%

1,303

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14.3%14.3%

…and Return on Invested Capital has increased continuously over the last 5 years…and Return on Invested Capital has increased continuously over the last 5 years

9.3%9.3%

11.8%11.8%12.7%12.7%

14.4%14.4%

12.3%

20012001 20022002 20032003 2004IFRS2004IFRS

20042004 20052005

ROIC : (NOPAT + net income of affiliates) / average I nvested Capital over the year).

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DANONE has posted a significant growth of its annual dividendDANONE has posted a significant growth of its annual dividend

20012001

1.03€*1.03€*

Dividend per shareDividend per share

20022002 20032003

1.15€*1.15€* 1.225€*1.225€*

20052005

1.70€

20042004

1.35€1.35€

*After adjustment for the two-for-one share split on J une 15, 2004

CAGR 01-05 ≈ +13%

Page 9: DANONE UNIQUENESS - danone-danonecom …danone-danonecom-prod.s3.amazonaws.com/user_upload/... · No central marketing organization, but light ... AQUA Indonesia 2001 Zywiec Zdroj

From 2002 to 2005, Danone has outperformedits peer group*From 2002 to 2005, Danone has outperformedits peer group*

PEER GROUP*

Average organic sales growth +6.9% +3.8%

Margin progression (bp) +39 -17

EPS progression (bp) +10.9% +4.8%

DANONE

* Peer group: Cadbury, Kellogg’s, Kraft, Nestlé, Un ilever.* Peer group: Cadbury, Kellogg’s, Kraft, Nestlé, Un ilever.

ROIC 2005 14.5% 14.0%

Source: analyst’s reportsSource: analyst’s reports

ROIC : (NOPAT + net income of affiliates) / average I nvested Capital over the year).

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How was this growth achieved?

Focusing on the right categoriesFocusing on the right categories

Focusing on the right geographiesFocusing on the right geographies

Developing innovations which meet consumers’ needsDeveloping innovations which meet consumers’ needs

Leveraging on an efficient organizationLeveraging on an efficient organization

Making the right acquisitionsMaking the right acquisitions

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Focusing only on the fastest growing food categoriesFocusing only on the fastest growing food categories

Source: EuromonitorSource: Euromonitor

World Market CAGR 00-05 (volume) World Market CAGR 00-05 (volume)

1.1%

1.7%

2.1%

2.5%

2.6%

2.7%

2.9%

2.9%

2.9%

3.1%

3.6%

5.4%

10.1%

10.4%

2% 4% 6% 8% 10% 12%

RTE cerealsRTE cerealsSoupSoup

CarbonatesCarbonatesFrozenFrozen

ConfectioneryConfectionerySauces,Sauces,CheeseCheese

Sweet biscuitsSweet biscuitsIce creamIce cream

Savoury biscuitsSavoury biscuitsBaby foodBaby food

YogurtYogurtFunctional drinksFunctional drinks

Still bottledStill bottled

0%

Page 12: DANONE UNIQUENESS - danone-danonecom …danone-danonecom-prod.s3.amazonaws.com/user_upload/... · No central marketing organization, but light ... AQUA Indonesia 2001 Zywiec Zdroj

Investing strongly to achieve critical size in “New Frontiers”Investing strongly to achieve critical size in “New Frontiers”

RussiaMexico

� over +18% organic growth versus +9.1% at Group level*� over +18% organic growth versus +9.1% at Group level*

� from 11% in 1999 to 29% in 2006*� from 11% in 1999 to 29% in 2006*

Fresh Dairy

Bottled water

#1

#1

#1

#2

#1

#1 ex-aequo

#1 ex-aequo

China USA

Doubling their weight in the total Group salesDoubling their weight in the total Group sales

And catching up with the rest of the group on profitabilityAnd catching up with the rest of the group on profitability

Danone market positionsDanone market positions

* YTD September 2006* YTD September 2006

#1

#1

Indonesia

Biscuits

New Frontiers grow much faster than the Group averageNew Frontiers grow much faster than the Group average

Page 13: DANONE UNIQUENESS - danone-danonecom …danone-danonecom-prod.s3.amazonaws.com/user_upload/... · No central marketing organization, but light ... AQUA Indonesia 2001 Zywiec Zdroj

The contribution to sales growth is well balanced across geographiesThe contribution to sales growth is well balanced across geographies

9 months 2006 SALES9 months 2006 SALES

49.5%

10.8%8.9%

10.2%

18.2%2.3%

9 months Growth contribution9 months Growth contribution

11.3% 17.3%

14.8%

9.4%23.3%

23.9%

Western Europe

Eastern Europe

North America

LATAM

Asia

ROW

Page 14: DANONE UNIQUENESS - danone-danonecom …danone-danonecom-prod.s3.amazonaws.com/user_upload/... · No central marketing organization, but light ... AQUA Indonesia 2001 Zywiec Zdroj

Innovations drive high value and high margin organic growth with limited cannibalizationInnovations drive high value and high margin organic growth with limited cannibalization

>+15%

>+25%

0%0%

5%5%

10%10%

15%15%

20%20%

25%25%

30%30%

DAIRYDAIRYBLOCKBUSTERSBLOCKBUSTERS

AQUADRINKS +AQUADRINKS +FUNCTIONAL DRINKSFUNCTIONAL DRINKS

BISCUITS' JEWELSBISCUITS' JEWELS

>+10%

≈ 50% of dairy business

≈ 40% of beverages business

≈ 10% of biscuits business

Page 15: DANONE UNIQUENESS - danone-danonecom …danone-danonecom-prod.s3.amazonaws.com/user_upload/... · No central marketing organization, but light ... AQUA Indonesia 2001 Zywiec Zdroj

Light, agile organization encouraging decision-making and exchanges at CBU levelLight, agile organization encouraging decision-making and exchanges at CBU level

CBUs are responsible for new products development (eg: SER functional drink)

Launching decisions are taken at country level, corporate acting only as a coordinator

No central marketing organization, but light “acceleration units”

Market-place events: best practices sharing amongst attendees

CBUs are responsible for new products development (eg: SER functional drink)

Launching decisions are taken at country level, corporate acting only as a coordinator

No central marketing organization, but light “acceleration units”

Market-place events: best practices sharing amongst attendees

Roll-out initiatives built on past successesRoll-out initiatives built on past successes

Page 16: DANONE UNIQUENESS - danone-danonecom …danone-danonecom-prod.s3.amazonaws.com/user_upload/... · No central marketing organization, but light ... AQUA Indonesia 2001 Zywiec Zdroj

The companies we have acquired in our core business in the last ten years represented 22% of our sales in 2005, while growing at+19%

The companies we have acquired in our core business in the last ten years represented 22% of our sales in 2005, while growing at+19%

DairyDairy BeveragesBeverages BiscuitsBiscuits

Danone ArgentinaDanone Argentina ArgentinaArgentina 19961996 Aguas MineralesAguas Minerales ArgentinaArgentina 19961996 PapadopoulosPapadopoulos GreeceGreece 19961996Danone Clover PLFDanone Clover PLF South AfricaSouth Africa 19981998 WahahaWahaha ChinaChina 19961996 Danone IndonesieDanone Indonesie IndonesiaIndonesia 19971997StonyfieldStonyfield USUS 20032003 BonafontBonafont MexicoMexico 19971997 BolshevikBolshevik RussiaRussia 19991999Al Safi DanoneAl Safi Danone Saudi ArabiaSaudi Arabia 20052005 Health DrinksHealth Drinks ChinaChina 19981998 Lu GyoriLu Gyori HungaryHungary 20002000

Termas de VillavicencioTermas de Villavicencio ArgentinaArgentina 19991999 Danone MashreqDanone Mashreq EgyptEgypt 20032003RobustRobust ChinaChina 20002000 Chock and RollsChock and Rolls RussiaRussia 20042004NayaNaya CanadaCanada 20002000AQUAAQUA IndonesiaIndonesia 20012001Zywiec ZdrojZywiec Zdroj PolandPoland 20012001SMDASMDA FranceFrance 20012001SALUSSALUS UruguayUruguay 20012001Frucor NZFrucor NZ New ZealandNew Zealand 20022002Robust drinking waterRobust drinking water ChinaChina 20042004AquariusAquarius ChinaChina 20042004

2005 GROWTH2005 GROWTH

2005 SALES - Bn €2005 SALES - Bn €

23% 18% 12%

0.7 1.9 0.3

2005 GROWTH 19%2005 SALES - Bn € 2.9

TOTAL

Page 17: DANONE UNIQUENESS - danone-danonecom …danone-danonecom-prod.s3.amazonaws.com/user_upload/... · No central marketing organization, but light ... AQUA Indonesia 2001 Zywiec Zdroj

Our acquisition criteria are quite simpleOur acquisition criteria are quite simple

Only specific targets which match our long-term strategy

Small to medium acquisitions rather than big, expensive ones

We trust our capacities to develop our business in a new geography through « brown fields »

Only specific targets which match our long-term strategy

Small to medium acquisitions rather than big, expensive ones

We trust our capacities to develop our business in a new geography through « brown fields »

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AND NOW?AND NOW?

WE ARE READY TO STAY AHEAD

OF COMPETITORS!

WE ARE READY TO STAY AHEAD

OF COMPETITORS!

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Our markets will remain very attractive on a world wide basisOur markets will remain very attractive on a world wide basis

Source: EuromonitorSource: Euromonitor

World Market CAGR 06-11 (volume) World Market CAGR 06-11 (volume)

0% 1% 2% 3% 4% 6%

0.9%1.9%

2.4%2.8%2.8%

3.0%3.2%

3.7%4.0%

4.4%4.6%

5.3%6.4%

6.6%

SoupSoupCarbonatesCarbonatesRTE cerealsRTE cereals

ConfectioneryConfectioneryCheeseCheese

Frozen processed foodFrozen processed foodSauces, dressings & condtsSauces, dressings & condts

Ice creamIce creamSweet biscuitsSweet biscuits

YogurtYogurtSavoury biscuits & crackersSavoury biscuits & crackers

Baby foodBaby foodFunctional drinksFunctional drinksStill bottled waterStill bottled water

5%

Page 20: DANONE UNIQUENESS - danone-danonecom …danone-danonecom-prod.s3.amazonaws.com/user_upload/... · No central marketing organization, but light ... AQUA Indonesia 2001 Zywiec Zdroj

Launching breakthrough innovationsLaunching breakthrough innovations

Bone health, ageing, joints protection, etc.Bone health, ageing, joints protection, etc.

Danone has a distinctive know-how to leverage its R&D capabilities to launch tasteful and attractive products…

…which meet health consumer needs

Danone has a distinctive know-how to leverage its R&D capabilities to launch tasteful and attractive products…

…which meet health consumer needs

Page 21: DANONE UNIQUENESS - danone-danonecom …danone-danonecom-prod.s3.amazonaws.com/user_upload/... · No central marketing organization, but light ... AQUA Indonesia 2001 Zywiec Zdroj

Entering new “adjacent” categoriesEntering new “adjacent” categories

Fruits & plants: our focus ison scientific cooperationand specific associations with « experts » in new ingredients.

Fruits & plants: our focus ison scientific cooperationand specific associations with « experts » in new ingredients.

…with the objective to launch functionalproducts with new benefits

…with the objective to launch functionalproducts with new benefits

Page 22: DANONE UNIQUENESS - danone-danonecom …danone-danonecom-prod.s3.amazonaws.com/user_upload/... · No central marketing organization, but light ... AQUA Indonesia 2001 Zywiec Zdroj

Ready to stay ahead of competitorsReady to stay ahead of competitors

So many new countries to conquer!So many new countries to conquer!

EgyptEgypt

AlgeriaAlgeria

UkraineUkraine

ScandinaviaScandinavia

BangladeshBangladesh

Recent acquisitionsRecent acquisitions

Beverages24 M inhabitantsBeverages24 M inhabitants

Dairy142 M inhabitantsDairy142 M inhabitants

Dairy47 M inhabitantsDairy47 M inhabitants

Dairy + Beverages + Biscuits35 M inhabitantsDairy + Beverages + Biscuits35 M inhabitants

Dairy74 M inhabitantsDairy74 M inhabitants

Page 23: DANONE UNIQUENESS - danone-danonecom …danone-danonecom-prod.s3.amazonaws.com/user_upload/... · No central marketing organization, but light ... AQUA Indonesia 2001 Zywiec Zdroj

DANONE is well positioned to sustain its competitive edgeDANONE is well positioned to sustain its competitive edge

PORTFOLIOPORTFOLIOHealth & wellnessFocus on a limited number of categoriesEmerging market exposure

Health & wellnessFocus on a limited number of categoriesEmerging market exposure

TOP LINETOP LINEConstantly ahead of « the pack »BlockbustersInnovation

Constantly ahead of « the pack »BlockbustersInnovation

FINANCIALSFINANCIALS Capital discipline on CAPEXBalance sheet optimization: buy back + improved dividend

Capital discipline on CAPEXBalance sheet optimization: buy back + improved dividend

PROFITABILITYPROFITABILITY

Market shares & gap with local #2Product mixGeographic mixOperational leverage

Market shares & gap with local #2Product mixGeographic mixOperational leverage

++-+

++-+

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DANONE’s 2007 prioritiesDANONE’s 2007 priorities

PORTFOLIOPORTFOLIO Consolidate our US successKeep the right balance between the fast growing countries and the mature ones

Consolidate our US successKeep the right balance between the fast growing countries and the mature ones

PROFITABILITYPROFITABILITY Focus on operating & logistic efficiencies to offset input costs pressureHead office & IS costs under strict control

Focus on operating & logistic efficiencies to offset input costs pressureHead office & IS costs under strict control

FINANCIALSFINANCIALSContinuous acquisition of minority interestsMore emphasis on ROIC for acquisitions and CBU’s

Continuous acquisition of minority interestsMore emphasis on ROIC for acquisitions and CBU’s

TOP LINETOP LINE Build on France recoveryAddress few geographic situationsBuild on France recoveryAddress few geographic situations

Page 25: DANONE UNIQUENESS - danone-danonecom …danone-danonecom-prod.s3.amazonaws.com/user_upload/... · No central marketing organization, but light ... AQUA Indonesia 2001 Zywiec Zdroj

DANONE’s ObjectivesDANONE’s Objectives

SALES GROWTHSALES GROWTH +6% to +8% like-for-likeSelective acquisitions to reinforce our geographic expansion

+6% to +8% like-for-likeSelective acquisitions to reinforce our geographic expansion

PROFITABILITYPROFITABILITY EBIT to growth faster than sales, between 7 % and 10 %, like for likeEBIT to growth faster than sales, between 7 % and 10 %, like for like

Like for like operating margin improvement in 2007 >20 bpFull guidance for 2007 (FCF, EPS) to be given next FebruaryLike for like operating margin improvement in 2007 >20 bpFull guidance for 2007 (FCF, EPS) to be given next February