Information about Groupe Danone

Groupe Danone S.A.
	public Euronext: BN, NYSE: DA
Founded	1919
Headquarters	7, Rue de Téhéran, Paris, France
Key people	Franck Riboud, Chairman & CEO Jacques Vincent, Vice-Chairman & COO
Industry	Food
Products	Dairy products (55%), Water, Biscuits (18%),
Revenue	EUR 13,024 million (2005)
Operating income	EUR 1,739 million (2005)
Employees	88,184
Parent	n/a
Website	[1]
Associates Huiyuan Juice, Yakult .

Groupe Danone (Euronext: BN, NYSE: DA) (known as Dannon in the United States) is a food-product company with its central headquarters in Paris, France. It claims world leadership in dairy products,^[1] which are marketed under the corporate name umbrella, and also in bottled water. It swapped its world number 2 position as producer of cereals and biscuits^[1] for the same position in baby foods, having sold the biscuits division to Kraft Foods^[2] and acquired Numico.

Besides the Danone/Dannon brand of yoghurts, the company owns several internationally known brands, namely Volvic, Evian, and Badoit. About 55% of its 2005 net sales derived from dairy, 27% from beverages, and 18% from biscuits and cereals^[3]

Danone owns many water brands worldwide. In Asia, it has acquired Yili, Aqua (Indonesia), and Robust (92%), and has a 51% holding in China's Wahaha Group, giving it a total market share of 20%, making it the leading vendor of packaged water in Asia.

History

Name

The original company bearing the corporate name was founded in 1919 by Isaac Carasso in Barcelona (Spain) as a small factory producing yoghurt. The factory was named "Danone", a Catalan diminutive of the name of his first son, Daniel.

Ten years later, the first French factory was built, but during WWII, Daniel Carasso moved the company to New York, where Dannon Milk Products Inc. was founded. In the United States, Daniel partnered with the Swiss-born Spaniard Joe Metzger and changed the brand name to Dannon to sound more American.

In 1951, Daniel Carasso returned to Paris to manage the family's businesses in France and Spain, and the American business was sold off in 1959. In Europe, Danone merged with Gervais, the leading fresh cheese producer in France in 1967, becoming Gervais Danone.

Glassmaking tradition

The corporation today is descended from industrial glassmakers Boussois-Souchon-Neuvesel (BSN), which was founded by the family of Antoine Riboud. After a failed attempted takeover battle for its larger rival Saint Gobain, Riboud transformed it into one of Europe's leading food groups in the 1970s by a series of acquisitions.

Strategic reorientation

The acquisitions initially took the shape of vertical integration, acquiring Alsacian brewer Kronenbourg and Evian mineral water, the glassmaker's largest customers content with which to fill the factory's bottles.^[4] In 1973, the company merged with Gervais Danone, and began to internationalise. In 1979, the company abandoned glassmaking by disposing of Verreries Boussois. In 1987, Gervais Danone acquired European biscuit manufacturer Général Biscuit, owners of the LU brand, and in 1989, it bought out the European biscuit operations of Nabisco.^[5]

In 1994, BSN changed its name to Groupe Danone, adopting the name of the Group’s best known international brand. Franck Riboud succeeded his father, Antoine, as the company's Chairman and Chief Executive Officer in 1996 when Riboud senior retired. Under Riboud junior, the company continued to pursue its focus on the 3 product groups, namely Dairy, Beverages, Cereals, and divesting several activities which had become non-core.

In 1999 and 2003, the Group sold 56% and 44%, respectively, of its glass containers business, and, in 2000, the Group sold most of its European beer activities: The brands Kronenbourg and 1664 were sold to Scottish & Newcastle for UK£ 1.7 billion;^[6] its Italian cheese and meat activities (Egidio Galbani Spa) in March 2002;^[7] as well as its beer producing activities in China. Its British (Jacob's) and Irish biscuit operations were sold to United Biscuits in September 2004.^[8] In August 2005, the Group sold its sauces activities in the United Kingdom and in the United States (HP Foods),^[7] in January 2006, its sauces activities in Asia (Amoy Food) was sold to Ajinomoto^[5] and pushing its international expansion in its 3 business units, emphasising health and well-being.^[11]

In July 2007, it was announced that Danone had reached agreement with Kraft to sell its biscuits division, including the LU and Prince brands, for around €5.3 billion.<ref name="Kraft" /> Also in July 2007, a €12.3 billion cash offer by Danone for the Dutch baby food and clinical nutrition company Numico was agreed by both boards,^[12] creating the world's second largest manufacturer of baby food.

Protecting Danone

Due to its narrow focus and relatively small size, it is potentially an attractive takeover target for its competitors, namely Nestlé, PepsiCo, Kraft Foods. In mid-July 2005, the share price of Danone rose by 20% in two weeks on rumours of a bid approach by PepsiCo, although this intention was denied.^[13] On realising that a takeover of a national champion such as Danone by a foreign company was indeed possible in the more open capital markets, the "economically patriotic"^[14] French government stepped in by drafting a law to protect companies in "strategic industries" such as Danone^[15] from takeover. This has been dubbed the "Danone Law"^[16].

Speculation was renewed once again in the summer of 2006, when PepsiCo declared its intention to grow significantly in France, through a sizeable non-hostile acquisition,^[17] and Kraft was also reported in The Figaro not to have ruled out an acquisition on French soil.^[18] The stock market apparently marked down the possibility of a bid by Pepsico following the Numico acquisition.^[19]

Corporate governance

Current members of the board of directors of Groupe Danone are: Bruno Bonnell, Richard Goblet d'Alviella, Michel David-Weill, Emmanuel Faber, Jean Laurent, Hirokatsu Hirano, Bernard Hours, Christian Lauble, Hakan Mogren, Jacques Nahmlas, Benoît Potier, Franck Riboud, and Jacques Vincent.

In 2004, the annual compensation of these individuals were: Franck Riboud, €2,426,860 (euros), Jacques Vincent, €1,511,140, Emmanuel Faber, €746,430 ^[2].

Main Brands

Mineral Water

Evian, Volvic, Badoit, Aqua, Naya.^[1]

Food products

Actimel, Activia, Blédina baby food, Danone, Royal Numico baby food brands including Cow & Gate

Joint ventures

Danone has adopted a strategy of growth through use of joint ventures, particularly in fast-growing emerging markets, because it lacked the management depth and size to grow quickly. In its markets, Danone has built an attractive portfolio in emerging markets over 10 years which represent 30% of its sales.^[20]

Danone has continued to pursue this strategy, and has more recently signed joint ventures include Yakult in India (2005) and Vietnam (2006), Alquería in Colombia (2007), Mengniu in China (2006)^[20]

Danone has been having problems with some other of its joint ventures, notably its joint venture with Wahaha (1996), and Britannia Biscuits in India (1995), which have been in high-profile dispute since early 2007 and 2006 respectively. Danone filed for arbitration in the Bombay High Court on June 29; arbitration with Wahaha was accepted in Hangzhou on June 17, 2007.

India

Under the 1995 joint venture agreement to acquire Britannia Industries, Danone would not launching food brands within India without the consent of the Wadia family.^[21] The partners also agreed on a right of first refusal to the other partner in the event of the other wishing to exit.^[22]

In light of frustrations with the growth and marketing strategy, Danone initiated plans to independently invest in an Indian dairy subsidiary. In May 2007, Nusli Wadia told the Ministry of Commerce and Industry that Danone invested in a Bangalore-based bio nutrition company, Avesthagen, in October 2006 in violation of the government's Press Note 1, 2005, which requires a foreign company to obtain the consent of its Indian joint venture partner before pursuing an independent business in a similar area, including joint ventures based purely on technical collaboration. Danone argued that Press Note 1 did not apply to it as it did not have a formal technology transfer or trademark agreement with Avesthagen, and that its 25 pct holding in Britannia was indirect.^[23] Wadia also filed a case in the Bombay High Court for a breach of a non-compete clause in that connection. The court ordered Danone not to alienate, encumber or sell shares of Avestagen.^[24]

In September 2007, the Foreign Investment Promotion Board of India rejected Danone's claims that it does not need a non-compete waiver from the Wadias to enter into business in India alone.^[25]

China

Bright Dairy

In 2001, Danone acquired a 5% stake in Bright Dairy, and boosted its shareholding above 20% in April 2006, becoming the third largest shareholder after Shanghai Milk Group and S.I. Food, each holding 25.17%.^[26] Danone and Bright set up a 50-50 yogurt joint venture in 1992. Danone licensed Bright Dairy to produce and market products inside China using Danone brands. The joint venture underwent a stake diversification reshuffle and went public in 2000.^[27]

Shortly after increasing its stake, Danone's plans were upset when the Shanghai government announced it was to consolidate the city's food and beverages market by merging Shanghai Bright Dairy Group, the holding company for Bright Dairy, with Shanghai Sugar Tobacco Wine Co., Shanghai Agriculture Industry and Commerce Group and Jinjiang Food. The new conglomerate, named Bright Foods would be managed by the Shanghai local administration and the State-owned Assets Supervision and Administration Commission.^[26]

The parties announced in October 2007 that Danone would divest its stake to the other tow main shareholders, at a small profit.^[27]

Wahaha

Main article: Wahaha Danone joint venture

The Hangzhou Wahaha Group, the largest beverage producer in China,^[28] and Danone entered into a dairy products joint venture in 1996, in which Danone held 51%. It was hailed by Forbes magazine as a "showcase" joint venture.^[29]

As the businesses expanded and became more complex, Danone had made several attempts to buy out Wahaha, but was rebuffed.^[30] Danone and Wahaha's General Manager Zong Qinghou signed a deal in December 2006, allowing Danone to buy a majority stake in the non-JV operations. However, Zong had second thoughts about the deal and reneged,^[30] claiming the offer was underpriced and held out for a higher price out of Danone.^[30]

The dispute took on the shape of a trademark dispute, and Danone filed for arbitration in Stockholm on May 9.^[27] On June 4,^[33] Danone filed suit in Los Angeles Superior Court against Ever Maple Trading and Hangzhou Hongsheng Beverage Co Ltd, companies controlled by Zong, hiss wife and daughter.^[34]

Marketing

• Danone Institute International is a non-profit organisation originally established with funding from the company in 1997. The Danone International Prize for Nutrition, worth €120,000 is presented biennially to honour individuals or teams that have advanced the science of human nutrition.
• In the 1970s, the company started airing in the United States, and continued to show for many years, a television advertisement entitled "In Soviet Georgia".
• Following advertising campaigns for fat-free yoghurt in Spain using the slogan "cuerpo Danone" ("Danone body"), it has become a slang term for a model-like, slender, muscular body.

Other

• The company operates the world’s largest yoghurt plant in Minster, Ohio USA which employs more than 400 people^[35]
• In the 2007, the pesticide Dioxin was discovered in the company's products in Romania, and large quantities were withdrawn from the market.

See also

• List of French companies
• Wahaha dispute with Danone
• Yoplait, another popular yogurt brand.

References

• Neil R. Gazel, Beatrice: From Buildup Through Breakup. University of Illinois Press, 1990. ISBN 0-252-01729-3. Discusses the early history of Dannon in the US on pages 30ff.

On-line references

External links

• Danone international home page
• Official American website

•  • [ e]  Groupe Danone Co.

Corporate Directors: Bruno Bonnell | Richard Goblet d'Alviella | Michel David-Weill | Emmanuel Faber | Jean Laurent | Hirokatsu Hirano | Bernard Hours | Christian Lauble | Hakan Mogren | Jacques Nahmlas | Benot Potier | Franck Riboud | Jacques Vincent

Products: Actimel (DanActive in US) | Activia | Evian | Lattella | Volvic

Annual Revenue: $18.6 billion USD (12% FY 2004) | Employees: 89,449 | Stock Symbol: Euronext: BN NYSE: DA | Website: www.danonegroup.com

•  • [ e] CAC 40 companies of France

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