Groupe Danone S.A. - 2010

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Paris-based Groupe Danone continued to pursue a growth agenda despite a challenging economic climate. During the first half of 2010, company leadership announced several business deals that aligned with the company’s strategy to grow product volumes and expand into large emerging markets.

In March, Chiquita Brands International, Inc. and Groupe Danone formed a joint venture to market fruit beverages. The agreement, which is based on Chiquita’s Just Fruit in a Bottle product line, made the two companies financial and operational partners. Danone will provide management under the agreement. Chiquita will handle marketing, sales and supply chain services.

“The combination of Danone’s healthy European footprint together with Chiquita’s operational expertise in fruit-based drinks will create exciting growth opportunities,” said Bernard Hours, co-chief operating officer of Danone.

Groupe Danone also made acquisitions and alliances designed to broaden the company’s reach in medical nutrition and dairy products and to strengthen the company’s market position in those categories.

In June, Danone North America Inc. announced it would acquire Medical Nutrition U.S.A., Inc., a developer and distributor of nutrition-medicine products. The acquisition is expected to reinforce the company’s position as a leader in Europe in the advanced medical nutrition category while expanding market opportunities in the United States, according to Danone. The merger closed July 22.

“The benefit of this transaction relies in the strong complementarities both in terms of product ranges and channels of distribution,” Danone said. “Medical Nutrition Inc. has developed a solid access to the very promising long-term care channel while Nutricia’s products in the U.S. are mainly aimed at infants and distributed in pharmacies.”

Further advancing Groupe Danone’s position in the dairy category was the merger of the company’s fresh dairy business with Unimilk, the second-largest manufacturer of dairy products and baby food in Russia. The deal makes Danone-Unimilk the largest provider of dairy products in the Commonwealth of Independent States (C.I.S.).

The greatest benefits of the merger will be realized in Russia where the entity will have 21% market share with an east-towest geographical presence. Danone’s operations are mainly in western Russia where it offers products in the value-added health segment. Unimilk, which has production plants in Belarus, Ukraine and Russia, operates mainly in eastern Russia.

Combined annual sales of the new entity are forecast at approximately €1.5 billion ($1.9 billion). The two companies plan to invest at least €500 million ($618.7 million) in Danone-Unimilk over the next five to seven years.

“The new entity will become the leader for dairy products in the C.I.S. area as a whole, and particularly in Russia,” the company said. “Danone-Unimilk will draw strength from the tie-up between two fast-growing businesses offering strong complementarities in terms of geographies, product ranges and distribution networks, giving the new entity the benefit of significant sales and cost synergies.”

The first-half deal making became apparent in positive financial results. Underlying net income rose 10% in the first half of 2010. Underlying net income during the half was €848 million ($1,105 million), compared with €722 million during the same period in 2009. Sales were €8,364 million ($10,901 million), up 7% from €7,520 million. The company projects like-for-like sales growth of 6% for full year 2010.

In its first-half results report, the company said it “… assumes that the financial, economic and social crises will continue to weigh on consumption trends in Europe, while emerging markets are expected to keep developing well overall.” CP


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