International

competitiveness thru Innovation

Yves ReyCorporate Quality General Manager

Danone

From Breakdown to Breakthrough

International Competitiveness Thru Innovation

Focusing on “Research and Development”Focusing on Stakeholders’ satisfaction

High quality products. Free Trade ad Domestic Liberalization are the best way to encourage higher quality standards Create a Quality Culture

Social Pyramid

Poor

Middle Class

Upper Class

3

COFCO Corporate Mission- Offer nutritious and healthy foods and superior quality life services;- Establish industry leadership; and- Maximize the interests of customers, shareholders and employees

International Companies

National Companies

Danone Corporate Mission- Bring health thru food to as many people as possible

DANONE 2010 – Key Facts

About Danone:Danone is present in over 120 countries on 5 continentsMore than 160 production plantsAround 100,000 employeesSales of € 17 billions, of which half were in emerging markets

A world leader in healthy food industry

N°1 worldwide in Fresh Dairy Products

N°2 worldwide in Bottled Water

N°2 worldwide in Baby Nutrition

N°1 in Europe in Medical Nutrition

6

Growth/ Building Capital

Maintenance/ prevention

Ageing process/ Problem solving

Spec

ific

nutr

ition

/ Fo

od n

eeds

Infants/Children Teenagers Adults SeniorsLow

High

A coherent products portfolio covering needs and demands at every age

Bringing health through food to as many people as possible

7

A unique mission based on 4 axes

For All

Nature

Health

People

Half of business in emerging markets

1. France2. Russia 3. Spain4. USA5. Mexico6. Germany7. Indonesia8. UK9. China10. Argentina

49%Emerging markets

10%North America

2%Japan + ANZ

Sales breakdown in 2010*

39%Western Europe

Top 10 countries FY 2010*

8

Account for 64%

of the company growth

Innovation account for 40% of the Total sales over the past 3 years

Social Pyramid

Poor4,75 Billion

people

Medium0,95 Billion

people

Rich1 Billion people

$25K

$10 - 25

< $10

GDP/hab Usually companies only target this part of the social pyramid

9

Gross Domestic Products

Business Evolution

Danone is increasingly:Tailoring its products for emerging-market consumers

Making the products in the markets in which they are sold

Adapting thee products to local nutritional requirements, tastes and … budgetConsumers are Ready to pay if there is a value

Covering the full pyramid with portfolio management

Dairy Romania Baby Nutrition IndonesiaPrice Points

280

70

180

100

11

Business Risk & Opportunity

Danone’s challenge

Work with local raw materials, source and produce locallyGuarantee product safety to these low-income consumers in countries where Quality & Food Safety processes are in their infancy While supplying affordable products meeting Danone Quality standards to consumers…

Consumer’s hierarchy of needs

PRODUCT SAFETY

PRODUCT CONFORMITY

PRODUCT SUPERIORITY

Commit to Food safety

Deliver Quality

GuaranteeBrand Superiority

Food Security program in Emerging Countries

Non-Negotiable requirementsIn Emerging countries, it is accepted that our products/processes do not comply 100% with our corporate 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

Bringing Health thru food to as many people as possible

Codex / National Regulation / Danone Non-

negotiable criteria

Codex / National Regulation / Danone

Corporate Standards & Systems

Codex / National Regulation / Danone Corporate/Local*

Standards & Systems

* Consumer Driven requirements

International competitiveness

International competitiveness is built up on:Product quality

Ability to innovateCapacity to adjust rapidly to customers' needs

Absence of restrictive practices in the labor market and local regulations

WarningInternational norms, standards, rules, and practices may drive businesses toward harmonization…

What can create competitive edge

Innovation product quality and international competitiveness

Higher product quality helps differentiate and gain market share in “reference-priced” and “homogenous” products

Breakthrough innovation is especially relevant in creating new consumers’ experiences and ensuring consumers’ loyalty

Chinese Industry

Chinese industries have made tremendous progress since China opened its door to the world. China’s national economic competitiveness has been improved significantly over the past 25 years. Competition only based on lower labor cost will not put Chinese industry in a competitive position in long run.What are the things that should be done to make Chinese industry stay competitive in the future world market?

Innovation and Product Quality

Social Pyramid

Poor

Middle Class

Upper Class

19

International Companies

National Companies

From commodities to added value products

Speed to innovateProduct Quality

Provocative QuestionsIs « Made in France » an international guarantee of high quality standards?Has France still the capacity to innovate?Do we have the educational infrastructure for supporting it

Is France a quality trend setter?... Just like Japan wasDo The Authorities help promote this image “Due to the bad image of French politicians”…State-run companies don’t help promote “made in France” as label of qualityAs French-based international companies, what do we do in this field?Can IRIS play a role in this field?

Consumer Good Forum: The Consumer Goods Forum (CGF) is a global, parity-based industry network. It brings together the CEOs and senior management of over

650 retailers, manufacturers, service providers across 70 countries and reflects the diversity of the industry in geography, size and product

category . Forum member companies have combined sales of EUR 2.1 trillion.

Global Food Safety InitiativeThe Global Food Safety Initiative (GFSI) is a international multi-

stakeholders platform collaboration bringing together the world's leading quality experts from retailer, manufacturer and food companies

associated with the food supply chain. It is coordinated by The Consumer Goods Forum

GFSI: A unique multi-stakeholder platform across the world

GFSI Board Members

GFSI Technical Committee

GFSI Advisory Council