danone para leer annual-report-2010_en

8/3/2019 DANONE PARA LEER Annual-report-2010_en

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DANONE

10

Growthfirst

byFranckRibo

ud

2010RESULTS

INNOVATING

ANDEXPANDINGINEMER

GING

ECONOMIES

STRATEGICPRI

ORITIES

Nature,afforda

bility

&availability,he

alth,

people:perform

ance

andchallenges

Danoneessentialsin2

010

FORMOREIN

FORMATION

&PHOTOS

www.danone

10.danone.co

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BRINGINGHE

ALTHTHROU

GHFOODTO

ASMANYPE

OPLEASPO

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2 This years essentials 2010 edition

2010 at a glanceDanones sales rose 6.9%*, with growth in all four businesslines and in all parts of the world demonstrating the strengthof our model.

North AmericaNo. 1 in fresh dairy products

Latin AmericaNo. 1 in fresh dairy productsNo. 1 in bottled waters

Western EuropeNo. 1 in fresh dairy productsNo. 1 in baby nutritionNo. 1 in medical nutritionNo. 2 in bottled waters

Central EuropeNo. 1 in fresh dairy productsNo. 1 in medical nutritionNo. 1 in baby nutrition

Asia-PacificNo. 1 in bottled watersNo. 2 in baby nutrition

EMPLO

YEE

S&

PLANT

SEUROPE*46,072 employees

80 plants*includes Unimilk

ASIA-PACIFIC24,638 employees

49 plants

REST OF THE WORLD30,285 employees

55 plants

DANON

No.1WORLDWIDEinfreshdairyproductsNo.2WORLDWIDEinbabynutritionNo.2WORLDWIDEinbottledwaters

No.1INEUROPEinmedicalnutrition

Africa and Middle EastNo. 1 in fresh dairy productsNo. 2 in baby nutrition

*like-for-like


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This years essentials 2010 edition

Photographer:Ben Bloom for Getty

DANONE10

Landmark events in the year started withthe launch of the Danone-Unimilk joint venture in Russia,a symbol of Danones move into the economy of the future:emerging markets now account for 49% of our total salesand are home to two-thirds of our employees.

This new balance changes the shape of our group andbrings new challenges, in particular in the field of human

resources starting with recruitment, training, and thedeployment of Danones fundamental principles amongmore than 100,000 staff members.Danone in 2010 is also about far-reaching environmentaland societal commitments, illustrated by the 20 projectsbacked by our Danone Ecosystem Fund and the fiveprograms supported by the danone.communities fund.We were proud to announce a 22% reduction in our carbonfootprint compared with 2008.

Access to information is changing and, in recognition of thisDanone is this year presenting a summary annual report inprint, backed up an online version that goes into more detail with more text, more pictures, more video and sound.Updates, comments, analysis and personal reports areaccessible on the web and available in smartphone and iPadversions. To learn more, visit www.danone10.danone.com.

Visit us atdanone10.danone.comfor a comprehensivereview of business andsocial data for 2010.

4 InterviewDanones strategy of growth first wasconfirmed once again by strong 2010results. CEO Franck Riboud analyzesdevelopments and looks to the future.

8 Divisions: the yearin review

Growth in all four divisions and acrossall regions where we operates: a reviewof 2010 developments in Fresh DairyProducts, Waters, Baby Nutrition andMedical Nutrition.

20 NatureTo reduce our carbon footprint, westepped up deployment of the Danoneeco-program.

22 Accessibility for allIn a diverse world market, shapedby different expectations and economicrealities, we are working to makeDanone products accessible tothe largest possible number of people.

24 HealthHealth is a priority for Danone and asource of fruitful partnerships in thescientific community as we fine-tuneproducts nutritional features and helpadvance food science.

26 PeopleDanone people their commitmentand expertise drive our performanceand international growth.

28 Key figuresClose-up of key financial, social andenvironmental results for 2010.


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How do you account for Danoneshealthy results in the troubled

context of the past year?Franck Riboud: I dont want tosound presumptuous, but I amconvinced that Danone has the rightbusiness model. We have fourbusiness lines perfectly attuned toneeds and long-term trends inconsumer demand, we have robustbrands backed by quality R&D andeffective advertising, and ourproducts are made with extremecare to ensure better taste andnutritional content. And then there

is our geographical reach: with ourworldwide presence, we can makethe most of growth momentumanywhere. Not to mention ourculture, which emphasizespragmatism, adaptability and localdecisions what I have called beingquick on your feet. In testing times,when you need to take a fresh lookat things, that is a huge advantage.

Have all your business linescontributed to this growth?FR: We have held to our strategiccourse for all our business lines,although we have not hesitatedto change our ways in responseto much tougher conditions.And that is what I think has enabledDanone to return to the sort ofgrowth we had been used to putting us consistently aheadof others in the food industry.

Figures show that all our businessesare growing. Without exception.

Fresh Dairy Products scoreda very sound 6.5% rise, which isparticularly important becausethe division accounts for nearly60% of our sales. Medical Nutritionand Baby Nutrition again postedgains of close to 10%, thanks inpart to our geographical expansion.And our Waters division, which washit hard by the economic downturnon mature markets, showedrenewed pace with rises of 5.2%in value and 7.3% in volume.

Its growth was always impressivein new economies, but sales in thedeveloped world, particularlyin Europe, had flagged. Our brandteams made really remarkableefforts to inject new life into theFrench and German markets andrestore the appeal of natural waters beverages that offer consistentlyhigh quality, that are storednaturally and are naturally good forhealth, and that are environmentallysound. In 2010 their work began

to pay off.

As regards geography, 2010appears to have been somethingof a watershed.FR: I think thats right. In a way, youcould say that Danone moved intothe economy of the future, at leastsymbolically. It was the last yearthat the developed world accounted

for a higher proportionof our sales than new economies.

In 2000, these economiescontributed under 30%, but thatwas up to 49% in 2010, and it wilautomatically pass the 50% markin 2011. In the near term, Russianwill move ahead of France andSpain where we have our rootsand launched our bid for worldleadership and an emergingeconomy will thus become ourlargest market.

Because of your acquisition

of Unimilk at the end of 2010?FR: Unimilk is a young companythat already held third place onits market and is posting robustgrowth with a brand portfolio anda geographical presence in salesand production that are perfectcomplements for Danone Russia,the subsidiary we set up some20 years ago. The reasoning behinthe tie-up between these tworegional champions is very simple:it will give us the base we need to

reach the whole of the Russianmarket, which counts more than140 million people and is growingfast. Combining Unimilks broadranges and strong momentum withDanones advanced expertise andoperational know-how opensvery promising prospects. Now itsup to us to realize that potentialby getting the integration process

With sales up 6.9% like-for-like one of the best performancesin the food industry Danone got back on course for stronggrowth in 2010, harnessing new strategic markets with hugegrowth potential.

2010:

GROWTH FIRST

INTERVIEW WITH FRANCK RIBOUD



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264 MILLP

CIS *REPREHIGH POT

GR

* COMMONWEALTH OF INDEPE

+

49%

GROWTH

IN SALES:6.9%*CONFIRMSTHE RELEVANCEOF OUR STRATEGY* LIKE-FOR-LIKE

+

+OF DANONES TOTALBUSINESS IS INEMERGINGECONOMIES


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INTERVIEW

right. That is a top priority, and weare giving it all the energy and careit needs.

What are your priorities from theglobal perspective?FR: We will be sticking to ourstrategy of focused efforts,investing first and foremost inmarkets with high growth potentialand rapid returns. At Danone,

and this may seem an unlikelycombination, we call them theMICRUB countries for Mexico,Indonesia, China, Russia, the USand Brazil. We have been in all thesecountries for a number of years now,patiently laying a solid foundationthat is now rewarding us for ourefforts. Our businesses there areposting double-digit growth andthey are now big enough to drivethe whole group ahead.

You call the US an emergingmarket. Isnt that a bit strange forthe worlds largest economy?FR: It certainly is if you are talkingabout GDP per capita. But we areperfectly serious about this. Whenyou look at our markets, particularlyfor fresh dairy products, you cansee that the US really is an emergingmarket: it is a country with a bigpopulation, where per capitaconsumption of our products is low only a sixth or a seventh of what it

is in France and Spain but growingfast, making for enormous potential.There is real demand for healthierfoods among US consumers, andwe are responding to that.

Isnt exposure to emergingeconomies a source of risk?FR: It might be if we didnt have thebalanced presence we do. If, for

example, one country accountedfor 30% of our sales. But our modelis the opposite of that. No singlecountry accounts for more than12%. And on top of that, our main

markets are now in countries withvery different profiles as you cansee when you compare Russia,France, the US, Spain, Indonesiaand Mexico. As I said, our presenceis soundly balanced. And thebiggest risk for any business isgetting stuck in its comfort zone there is no such thing asindustrial innovation or growthwithout risk. Of course you alsohave to keep control of it, measureit and manage it. And our strategy

for managing our geographicalexpansion does precisely that.

Are you turning your back onyour historic bases like Franceand Spain?FR: It is true that they show lessoverall pace. But given their size andthe strength of the brands wedeploy there, it would be a serious

mistake to neglect them. It is vitalto keep growth in Europe on apositive track. That is just whatenables us to make the most ofgrowth in emerging markets. If tha

growth was only there to make upfor slackening in Europe, we wouldbe playing a zero-sum game.The challenge for our Europeanbusinesses is to regain momentumwith new business models to boosgrowth rates, basis point by basispoint. An interesting aspect of thais the way our emerging marketoperations are becoming a majorsource of inspiration, especiallyas regards innovation.

Does that mean that emergingmarkets are now the drivers forinnovation?FR: To a large extent, yes.And that is one of my objectives.Until recently we assumed that therichest countries would be the masource of innovation. As I see it, itsthe countries with strong growththat should inspire us. Especially

>



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Key figures

Danone

divisionrankingsNo. 1 worldwidein fresh dairy productsNo. 2 worldwidein baby nutritionNo. 2 worldwidein bottled watersNo. 1 in Europein medical nutrition

2010 growthDanone sales increased6.9%*, fueled by all fourdivisions

*like-for-like

- 22%Danone cut its carbon

footprint by 22% from2008 to 2010, based onemissions under Danonesdirect responsibility(packaging, industrialactivities, logistics andend of life). The group ismaintaining its 30%reduction target for 2012,i.e., over a five-year period.

as we are having to deal with aneconomic downturn, resourceshortages and a squeeze onconsumer purchasing power.The strength of emerging-economy

businesses is that they have facedthat sort of thing for a long time andhave come up with simple,economical and very inventivesolutions. Building a micro dairy-product plant in Bangladesh with thesort of budget youd have for a housein France forced us to adoptradically new solutions, some ofwhich can be applied perfectly wellin our big traditional plants withoutcompromising quality. You can findsimilar examples for product design,

marketing and distribution.

You sound fairly optimistic aboutDanone this year.FR: I dont know whether optimisticis really the right word. But I amconfident. Business conditions arestill tough, but that is true foreveryone, and Danone stands fullyprepared, fully armed and ready to


Watch a video interviewwith Franck Riboud atwww.danone10.danone.com.

meet our growth targets and achieveour priority objectives. That is whatmakes me feel confident theknowledge that our group is fullymobilized behind a clearly definedstrategy, and our mission of bringinghealth through food to as manypeople as possible.And there is another reason:our people, their energy andengagement. I travel a lot in tough

times, I think it is my duty to showdirect support for our teamseverywhere. Their engagement isunmistakable, and the results of ourin-house surveys are objective proofof it. I want to do everything I can topreserve that, because it is the realsource of Danones strength.To sustain that engagement,our work has to have meaning.In that, we are lucky to be in the foodbusiness, since our work and ourmission are meaningful in

themselves. The same applies tothe approach we have adopted tosocietal issues, as illustrated by ourdecision to reduce our carbonfootprint by 30% between 2008and 2012, and by our unstintingcommitment to support oureconomic and social environmentthrough our 100 million Ecosystemfund. In all these ways, we lendmeaning to our action. And that isenormously powerful, renewingour capacity to build and grow, now

and in the future.

+ 6.5%*

+ 5.3%*

+ 8.9%*

FreshDairy

Products

Waters

Baby

Nutrition

Medical

Nutrition

+ 9%*

Our people engagement isunmistakable. It is the real sourceof Danones strength.


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FRESH DAIRY PRODUCTSAT A GLANCE

9.7bnOur Fresh DairyProducts divisionposted like-for-like sales growthof 6.5%. Volumesrose 7.5%.

ENERGY FROM

INNOVATIONSales of Fresh Dairy Products grew 6.5%in 2010, like-for-like, driven by three factorsinroads into new markets, effective innovation antransformation of our relationship with consumers

Fresh Dairy Products grew steadilyin 2010, posting strong results thatreflect the divisions new geographicrange. Like our Waters division, Fresh

Dairy Products is now almost equally dividedbetween mature and emerging markets, wherepace was accelerated by the renewed focus onvolume sales that began with our Reset programin 2009.

REDRAWING THE MAPIN 2010

Danone has its roots in Europe, and yogurtremains a favorite in France, Belgium, Germanyand Spain, where per capita consumption tops20 kilograms a year (rising to 30 kilograms inFrance). In these mature markets, Danoneexpects moderate growth. We have alsomade markets with strong economic and/ordemographic growth major targets forinvestment, laying the foundation for long-termdevelopment. Business in these countries which are emerging markets for Danone grew solidly in 2010, with sales rising 20% inRussia, the United States and Brazil. In Russia,

Danones dairy product business merged withUnimilk on December 1, 2010, uniting themarkets largest and third-largest players, givingus new access to the 142 million consumers

For more news from our Fresh DairyProduct division, visit www.danone10.danone.comclick on News and listen tothe interview with Dr. Olivier Gouleton probiotics and intestinal microbiota.


throughout the country, and opening up negrowth potential. To strengthen supplines across Brazil, with its 8.5 million squakilometers (3.3 million square miles), we opena second plant in the northeastern town Maracana. And in the United States, wheyogurt consumption is one-sixth that of Francthree of Danones five plants increased producticapacity to keep pace with rising sales.

Other countries that have contributed to the negeographical shape of Danone include Mexic

Argentina, South Africa, Saudi Arabia and alChina, where sales more than doubled in 201

Danone is now the worlds top producer of fredairy products: in 2011 we expect Russia athe United States to become our top twmarkets, edging ahead of France and Spawhere our business began.

LOCAL INNOVATION FUELSGLOBAL GROWTH

Product innovation generated 50% of tdivisions growth in 2010, and Danone reli

increasingly on the creativity of local teamscountries as different as Algeria, Japan, ChiScandinavia, Russia and the United StateBecause we are highly decentralized, obusiness units are free to offer innovatiproducts that fit into local cultures anpreferences for taste and texture. This loccreativity can then be harnessed to feed tglobally structured innovation strategy for oflagship brands. At Danone, good ideas ha

FantasiaSince September,refrigerated casesat points of sale inFrance havefeatured Fantasia,a two-part yogurtproduct thatcombines a dairytreat with achocolate or fruittoppings.Consumers cancreate their own

desserts, choosingfrom a range of fruitpures or differenttypes of chocolate and the twocompartments canbe mixed or enjoyedseparately. By late2010, Fantasiasales had exceededprojections by 30%.


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FRESH DAIRY PRODUCTS

We need to learnnew ways to talk toconsumers. They wantto talk to us, and we canlearn a lot from listeningIn many countries,we have launchedprograms that allowus to interact withconsumers via theInternet and other digitamedia. Our web-basedDanacol program inItaly was as effective

as a traditional TVcommercial. Jordi Constans,Executive Vice President, Danone Fresh Dairy Product


legs. Illustrating this, we now sell a Brazilianversion of an Activia drink from Russia, whileActivia Pouring Yogurt, sold in cartons forbreakfast and originally launched in Scandi-navia, is currently available in Ireland, the UnitedKingdom and France. In another example,Portuguese consumers can enjoy a versionof Activia Breakfast yogurt with a cerealtopping in a separate compartment developed in Bulgaria. And the small-sizebottle of Actimel inspired a single-servingActivia Flora drink in Mexico, where

consumption of takeaway and breakfastyogurts is on the rise.

Momentum from innovation is critical in settingDanone apart from retailer brands and localcompetitors, and is also benefiting other dairybrands including Actimel itself, our traditionalDanone ranges, Danette, and Danonino, ourfromage frais line for children. Frozen Danoninois now sold in Spain; a yogurt version of theproduct is available in Bulgaria, Russia, Ukraineand Romania; and a spoonless treat created inthe United States has become a favorite with

Mexican children.

New product launches are naturally part of theinnovation process. Consumers in the UnitedStates, Poland, Hungary, Portugal and Spaincan now enjoy thick, creamy Greek-style yogurts,while our new Fantasia range, sold with portionsof grains, fruit, and bits of chocolate and biscuitto add to the yogurt itself, is on the market inFrance and five other countries.

DensiaDesigned forwomen aged 45and older, Densiayogurts are rich inthe calcium andvitamin D neededfor healthy bones.Vitamin D helpsthe body absorbcalcium andphosphorus, andmaintains bloodcalcium levels.Densia is presentin four countries.

50%

Product innovationgenerated50% growth forthe Fresh DairyProducts divisionin 2010.


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FRESH DAIRY PRODUCTSAT A GLANCE

EXPLORINGNEW OPPORTUNITIES

Danone developed a number of new vegetable-and fruit-based offerings in 2010. Savia, anew range of soy-based milk and yogurts, madeits debut in southern Europe last year, and inFrance Taillefine, the brand that invented lightdairy products, launched a new line of fruitdesserts in partnership with Andros, a leadingfruit processor.

The group also teamed up with Chiquita, taking

a 51% interest in a joint venture selling fruit-based beverages in Europe: C-optima, a drinkwith 200 mg of natural vitamin C from threevarieties of acerola, is now on sale in Belgium.Finally, Danone acquired a controlling stake inProViva, a Swedish business that specializesin fruit juices and fruit yogurts containing thebeneficial bacterium Lactobacillus plantarum,expanding the health-promoting productsthat have been Danones trademark since ourfounding.

CLOSE TIES

TO CONSUMERSFresh Dairy Products is exploring two strategiesto enhance its dialog with consumers: inventingnew times and places to enjoy our products,and creating imaginative new channels ofcommunication. Following the success of CasaDanone in Barcelona in 2009, last year weopened the first Danone Yogurterias in Spanishairports, and we will soon export the conceptto other countries at points of sale and in kiosks

in supermarkets as well as institutional acorporate catering facilities. This new concegives consumers a wide choice of yogurts with optional fruit, grains or chocolate ththey can take away or enjoy on the spot. France, the Danette brand celebrated its 40anniversary with the launch of Maison DanetAnd in late 2010 Danone acquired YoCreathe frozen yogurt leader in the United Stategiving us a presence in a fast-growing segmethat draws consumers to specialized poinof sale.

In 2010 the division adjusted its strategy enhance communication and forge closer tiwith consumers. In Japan, Italy, Argentina, tUnited States and France, Fresh Dairy Producdeveloped brand-reinforcing digital applicatiothat provide nutritional coaching and othservices, show the inner workings of a daplant, and even invite consumers to participain product development by voting on Danettnext new flavor, for example. In addition encouraging dialog with consumers, thecommunication channels publicize the divisio

efforts to reduce its environmental impact aenhance milk quality delivering a messaattuned to growing awareness of such issue(Learn more on page 20, Nature.)

This years essentials 2010 edition10

28%In 2010 Danonesshare of its 43leading marketsreached 28%.

72countriesActivia, thedivisions leadingbrand, is sold in72 countries in anever-increasingrange of sizes andproduct variationsdesigned to reachas manyconsumers aspossible.


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UNIMILK, A POWERFUL

LEVER FOR GROWTHUnimilk gives Danone a base to developa comprehensive portfolio of products to meetthe full range of Russian consumer demand.

SPECIAL REPORT:DANONE IN RUSSIA

For more information on the Danone-Unimilkjoint venture, visitwww.danone10.danone.comand click Webdocumentary.

Two leadersJudging from a 3.8%rise in GDP, Russia hasput the economic down-turn behind it. Last yearDanone Fresh Dairy

Products returned to thedouble-digit growth thatdrove its twentyfoldincrease in regional salesover the last decadefor Russia, Belarus andKazakhstan combined.Buoyed by the successof Activia, Actimel,Danissimo, Danacorand Rastishka, Danone CIS*commanded 26% marketshare, the highest sales

in the fresh dairy productssegment, even beforeits merger with Unimilkin late November.Unimilk posted 24%

growth in 2010 and ownsseven powerful brands,including Prostokvashino,the volume leader in thefresh dairy productsmarket, putting the new

venture in a strongleadership position.With combined regionalsales of nearly 2 billiona year, Danone is nowideally positioned to growin the markets two mainsegments: traditional dairyproducts such as kefirandcrme frache, and moreinnovative, high-growthdairy products. Althoughthe CIS counts 264 million

people 142 million inRussia alone per capitaconsumption of fresh dairyproducts is only 12 kilosa year compared with20 in Europe.

Number 1Multiple synergiesThe new Danone-Unimilkwill benefit from numeroussynergies between the twocompanies in many areas.

While Danone is presentprimarily in western Russia,Unimilk has been a powerful

force in the east and south.And whereas Danone iswell established insupermarkets, Unimilksstrength is in small localoutlets. In addition, Unimilk

has 26 modern plants andan efficient distributionnetwork. Danone whichpreviously had two plantsnear Moscow (Togliatti andChekhov) will be ableto use this infrastructureto make Activia and otherproducts, opening newmarkets and cuttingdistribution costs at thesame time. And as Danoneknow-how boosts Unimilks

margins, there will besignificant potentialfor increased profitability.By streamlining productranges, improvingproductivity, pooling salesand purchasing, andintegrating in other areas,the Danone-Unimilkpartnership holds promiseof new pace for growthand innovation.

*CIS: Commonwealthof Independant States60%Othercompanies.

Russias dairyproducts market


40%Danone

+ Unimilk

Russprod


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For more news from our Waters division,visitwww.danone10.danone.comclick on News, and listen to the interviewwith Dr. Franois Pronnet on theimportance of hydration..

2.8bnThe Watersdivision reportedlike-for-like salesgrowth of 5.3%.Volumes rose7.8%.

After several challenging years forbottled water, the turnaround thatbegan in 2009 continued in 2010,with robust results in all markets

bearing out Danones strategy of promotingwater as the ultimate beverage and the onlyone essential to life.

INDONESIA AND MEXICOTAKE THE LEAD

Buoyed by double-digit growth, Indonesia andMexico are now the Waters Divisions top two

markets as measured by sales.

In Indonesia, Aqua Lestari posted annual growthof nearly 15% to capture 60% of the marketwith Aqua and Mizone, its two flagship brands.In this nation of over 240 million, Aquas expan-sion depends primarily on its ability to find newwater resources quickly. To succeed, it mustwin the trust and involvement of communitiesnear these resources not just by improvingwater delivery infrastructure, but also by raisingawareness of responsible water use andpreserving water resources in the long term.

Thanks to this highly participatory approach,Danone was able to begin building three newplants in Indonesia during the year.

In Mexico, Bonafont boosted its market shaby two points, consolidating its position market leader. Rising 12.9% in a sector thgrew only 3-4%, the brand now holds 40% the market for all water products combined.In 2008, Bonafont expanded into the Brazilistate of So Paulo: in barely two years, tbrand conquered 30% of the market andnow number one in bottled water. In late 201Danone acquired a home and office delivecompany in So Paulo to meet strong dema

for affordable six-liter family and economy sizin this emerging market, as in many others.

Launched in Turkey under the Hayat brand ain Poland as Dobrowianka, the Bonafont conceowes its success to the three factors: combinimultiple product sizes, a presence at all poinof sale, and marketing that benefits both tbrand and the market.

MATURE MARKETSREBOUND

In mature countries, the turnaround that beg

in the second half of 2009 continued in 201The upturn was particularly dramatic Germany, where double-digit sales growth amomentum from market leader Volvic pDanone in the lead.The Waters division also ha very good year in France, where we regainmarket share. In both countries, our succewas due in large measure to consumer awarness campaigns that emphasized the uniqqualities of mineral water.

With a 5.3% like-for-like increase in sales, the WaterDivision had a very strong year: double-digit growt

continued in emerging countries and it increased markeshare in mature economies in Europe

REBOUND ON ALL

MARKETS

WATERS AT A GLANCE



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INNOVATION WINSNEW CONSUMERS

For the Waters Division, the challenge is toattract new consumers who perceive naturalwater as bland and prefer sodas and other sweet-ened beverages. Fruit-flavored waters are seenas a healthy, natural alternative, and are drivingmuch of the segments growth in Mexico. In2010 Bonafont scored a hit with consumers byintroducing new beverages made with stevia,a natural sweetener that reduced the sugar inthe popular Levit and Bonafont con Jugo

ranges by 33-39%.

In China, Mizone reported 40% growth for thethird year in a row. Now present throughout thecountry, the brand leads the Chinese market forflavored and vitamin-fortified waters. Mizonessuccess in China was repeated in Indonesia,building on the countrys very dense network ofsmall neighborhood shops the main distribu-tion vector in both national markets. Overall,flavored waters and aquadrinks generated20% of division sales in 2010.

GREEN AND AFFORDABLEPACKAGING

Using non-fossil materials is a priority for thegroups packaging innovation strategy, whichseeks to reduce Danones carbon footprint. Aftercreating the first 100%-recycled/100%-recy-clable PET bottle in 2009, Mexico-basedBonafont launched a new four-liter container,also made entirely of recycled PET, in 2010.Meanwhile, Volvic introduced the first bottle

WATERS

Our growth ispowered by progressin five strategic areashealth, sustainabledevelopment,the consumer-brandrelationship,productivity gains, anda distributionsystemthat respondsspecifically to localwater challengesworldwide.Thomas Kunz,Executive Vice President, Waters


2 L / dayTo maintain healthand well-being, thehuman body needsa minimum of twoliters of water aday. Even milddehydration canreduceconcentration,impair mood andcause headaches.Learn more at:

www.h4hinitiative.com

Beauty meets innovationin limited edition designerbottles developed by Evian withIssey Miyake (photo), Paul Smithand Jean-Paul Gaultier.


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incorporating plant-based PET in France, theUnited Kingdom and Germany. Made fromsugar-cane waste, this innovative material wasinitially used in half-liter bottles and is nowbeing used in a 1.5-liter size in France. Our nextgoal is to manufacture a bottle made exclu-sively from bioplastics. We plan to do this in thenear future.

Waters is also investing to develop ultra-lightbottles, as well as large containers that requireless plastic, cutting packaging costs and making

natural waters more affordable.

A HEALTH STRATEGYBASED ON THE BENEFITS

OF HYDRATIONOver the past few years, Danone Research hasfocused on the universal health benefits ofoptimal hydration. Working with recognizedexperts, our teams have spent the past fouryears laying the foundations of hydration science,with the ultimate goal of enabling each consum-er to assess and manage his or her own hydra-tion level. Research is producing new insights

into waters role in eating habits.

As part of this strategy, our ywiec Zdrj brandin Poland has launched a campaign gearedaround the slogan Mamo, Tato, wole wode(Mom, Dad, I prefer water) to encourage childrenand teens to choose water as their primarybeverage. A companion website for mothersnow ranks as the second most visited by itstarget group.

WATERS AT A GLANCE

This years essentials 2010 edition14

TOPBRANDSDanones maininternationalbrands includeEvian and Volvic(in France,Germany, the UKand Japan),Bonafont(in Mexico andBrazil) and Mizone(in China and

Indonesia).Our main localbrands includeFontvella andLanjarn (in Spain),Villavicencio andVilla del Sur(in Argentine),Aqua (in Indonesia),and ywiec Zdrj(in Poland).

150 MILLIONEvians Roller Babies video has become an Internephenomenon, scoring more than 150 million viewsand winning several prizes. Among them wasthe 2010 EFFIE, a french award that recognizesadvertising campaigns for measurable, proveneffectiveness. Evian sales surged 7% after thevideo was released on the Internet. A catalyst foEvians new positioning and the brands worldwid

Live Young campaign, the Roller Babies video alsreflects a new marketing model that hinges on

intensive interaction with consumers.


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BABY NUTRITION AT A GLANCE

Growth reached 24% in China and30% in Indonesia, making thesemarkets the top two contributors todivision business, while in Europe the

United Kingdom, the Netherlands and Polandalso performed extremely well. The divisionopened up new markets too, launching operationsin Colombia, Mexico, Pakistan and Nigeria.

At just over 3.35 billion, the Baby Nutritiondivision accounts for 20% of group sales andis built on two main product families: specialized

formula for infants and very young children asa complement to breast milk, and weaning orsolid food, which represents one-quarter ofsales. The latter has grown fastest in Europe,home of the companys historic brands, includingtraditional favorites such as Bldina in France,Cow & Gate in the United Kingdom and Mellinin Italy.

All brands combined, Danone ranks secondworldwide in the baby nutrition market. In 2010the division had an average 27% share of its33 main country markets.

For more news from our Baby Nutritiondivision, visit www.danone10.danone.comclick on News and listen to the interviewwith Dr. Dennis Bier on the critical role ofnutrition for infants.

STRONG GAINSFOR GROWING-UP MILKS

Infant formula accounts for three-quarters Baby Nutrition sales, with a particular focus growing-up milks for ages one to three aolder, where sales rose nearly 20% in 201The division is continuing to expand in tharea, in full compliance with the WHO code alocal legislation Danone naturally recognizthat breastfeeding is the best solution fbabies.Out in the field, our Baby Nutrition teams co

tinue to build close relationships with healthcaauthorities and medical professionals, emphsizing the importance of understanding ththe special nutritional requirements of babiare different from those of adults. For exampbefore age 3, toddlers should not switdirectly from breastfeeding to cows milk, whiis both too high in proteins and too low in vitamiand minerals to meet their needs.

ENHANCINGNUTRITIONAL QUALITY

Another priority for our baby nutrition teams

improving the range of diversified food producavailable. In this, we draw on nutritional surveyof which 16 conducted in Europe, Africa, tMideast and Asia have generated data eating habits, nutritional levels and deficienciin each country.

At the same time, Danone continues to enhanthe nutritional value of its products to provithe best possible diet for toddlers. Divisi

The Baby Nutrition division made a robust showing in 2010.Powered by double-digit growth in the Asia-Pacific region,sales rose 8,9% like-for-like, to top the 1 billion mark.

ASIA DRIVESGROWTH

3,355MIn 2010, BabyNutrition saleswere up 8.9%like for like, whilethe volume risewas 7.6%. Infantformula salesand businessin Asia were themain sourcesof momentum.

CO2The Baby Nutritionplant in Wexford,Ireland, isinvesting50 million toreduce its carbonfootprint to near nil.



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1STChina becameBaby Nutritionslargest market in2010, with salesrising 24% fromthe previous year.Our Dumex brandleads the Chinesemarket forrevenues andvolumes in infantformula.


BABY NUTRITION AT A GLANCE

priorities include reducing sugar and salt contentand fortifying products with iron, calcium,vitamin D and other micronutrients essentialto healthy child development.

Research also covers the nutritional needs ofmothers during pregnancy and breastfeeding.

MOVINGSCIENCE FORWARD

Prenatal nutrition and diet in the first threeyears of life have a decisive influence on adult

health. This is when the body builds up itshealth resources programming metabolism,building the immune system and bone density,developing cognitive capacities and more.

Our Baby Nutrition division thus devotes muchof its research to the effects of diet and nutritionat the earliest age, focusing on key issues:

For mothers who cannot or do not want tobreastfeed, or whose living conditions or healthmake it impossible, Danone is developing infantformula structured after breast milk by defini-

tion the ideal food for newborns and babies.

To understand the infant immune system, weare studying intestinal microbiota and theinfluence of prebiotics and certain bacteria.

Finally, there is epigenetics, which examinesthe impact of diet and other environmentalfactors on gene expression from the very firstdays of life.

This, along with maternal health during prenancy and breastfeeding, is the prime focof Singapores new research center at tBiopolis Research Park. Areas covered incluearly nutrition, microbiology, immunology aclinical research, conducted within easy reaof what is now a strategic aera for DanonToday the Asia-Pacific region accounts fone-third of sales and is home to more thhalf the worlds population over 4 billipeople in all.

Alongside these initiatives, Danone hlaunched a major groundbreaking program better understand how in utero conditiocan have a lifelong impact on human beingdetermining health from the immediate posnatal period on.

WAKING UP TO A NEW WORLDOF TASTE AND FLAVOR

Helping children to grow up healthy is a natupart of Danones mission. To achieve that, wwork in close cooperation with scientists a

Age0 to3The first three years of life are a period of rapid change and growth,which means that babies and toddlers need nearly six times the normadult requirement for micronutrients per kilo of body weight.This makes nutrition critically important for infants, with good or badeffects that can last a lifetime: a poor diet in early life can increasethe risks of obesity and allergies in adulthood.


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BABY NUTRITION

The mission of the BabyNutrition division isto get babies off to thebest possible start in life.We have enormousresponsibilities to motherand to society at large.And we are obsessed withproduct safety and quality:both are absolutelyfundamental to our workand exchanges withhealthcare professionals,and to understanding theneeds and expectationsof local and internationalauthorities.Felix Martin Garcia,Executive Vice President, Baby Nutrition

experts to design products that match youngstersneeds, combining taste pleasure with an initiationto a healthy diet. Recognizing that taste appealprovides the essential motivation for embracing avaried diet, Bldina has brought master chefs ontoits R&D teams, enabling them to take into accountall regulatory requirements and nutritional needsfrom the start, while factoring in a taste experiencethat preserves natural flavors.

The challenge is to start with traditional recipesand adapt these to infants requirements as regards,

for example, salt content and texture. Bldina alsoaim to help toddlers discover the world of taste byincorporating flavors often considered difficult bitterness with broccoli, artichokes and peppers;and acidity with apricots, raspberries and oranges.These tastes play a significant part in the differentcultures that define Danones environment.

Innovation ingrowing-up milkA new growing-up milk developed by the divisions R&Dteam and containing scGOS/IcFOS prebiotics associatedwith Bifidobacterium breve, a probiotic, that waslaunched in Thailand under the Dumex Hi-Q1 brand.


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MEDICAL NUTRITION AT A GLANCE

1,055MDanone MedicalNutrition salesmoved past the1 billion markin 2010, showingrises of 9% invalue and 8.7%in volume on a like-for-like basisat constantexchange rates .

The Medical Nutrition division recordeda 9% like-for-like rise in sales for 2010with volumes up 8.7%, demonstratingits continuing pace and potential. This

reflects two broad trends: aging populations inmany countries and greater recognition of theimpact of diet on health. A major priority is raisingawareness of the role of nutrition in dealing withpathologies, whether as a means of preventionor as a complement to treatment, the aim in bothcases being to improve quality of life.

After building solid positions in Europe, wherethe division leads the market, it has extendedits reach to new economies, which accountedfor half of its overall growth in 2010. Pace wasparticularly brisk in China, Brazil and othernewer markets, as well as in countries wherethe division has been present for only a shorttime the case of Mexico, where it began doingbusiness in 2009.

HELPING CHILDRENGROW UP HEALTHY

The division provides nutritional solutions at both

extremes in the life cycle: for seniors as well asyoung children suffering from serious metabolicdisorders or genetic diseases preventing themfrom growing as they should.

Pediatric lines, accounting for nearly 40% ofdivision sales, include products for infants andfor children suffering from allergies, as illus-trated by Neocate, made up of amino-acidsthat make it an effective substitute for food and

beverages based on cows milk. Others habeen developed in response to genetic disordesuch as those preventing children from assiilating certain proteins, and still others afortified to favor growth. The Nutrini range, fexample, helps children with specific enerneeds, as with the Nutrini Low Energy MuFiber formulation for children suffering froneurological disabilities.

In 2010, Danone launched a range of frsmoothies under the Nutrini and Fortini brand

in packaging decorated with fruit-shapcartoon characters to make children forget ththey are a form of medical nutrition. Combinitasty eating and fun with nutritional valuean important priority in developing producthat play a vital role in the life and healtgrowth of young children.

QUALITY OF LIFEFOR VULNERABLE GROUPS

Old age and hospital care entail significant risof undernutrition that worsens pathologies aimpairs quality of life. To counter this, the Medic

Nutrition division offers complex nutritional sotions to offset vitamin and mineral deficiencieFor greater effectiveness and easier intakthese are available in various forms soor liquid, or in high concentrations for oral catheter-based administration while maintaing the same organoleptic properties. Illustratithis, in 2009 the divisions leading brand Nutricbrought years of research and development a fruitful conclusion with the launch of Fortim

NUTRICIANutricia,historicallyassociated withspecializednutrition and theneeds of infants,the elderly andother vulnerable

groups, is the corebrand of DanonesMedical Nutritionbusiness. Thebrands reputationis built on its broadpatient portfolio,and the scienceand proven healthbenefits of itsinnovations.

Medical Nutrition business gained ground in all produccategories and on all markets in 2010, with western Europ

and new economies making equal contributions to growth

STRONG, BALANCED

MOMENTUM


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Compact, which packs the same quantity ofenergy and nutrients into a 125 ml bottle as ina 200 ml bottle and is thus easier to take forpeople in weak condition or with little appetite.Extensions of this kind enabled the Fortimelrange to turn in one of the divisions strongestperformances in 2010.

In Brazil, Nutricia now offers its top-performingNutridrink product in powder form. This is lessexpensive than the liquid version and can bestored for up to 24 months. Each portion of

Nutridrink contains at least 20% of recom-mended daily intake (RDI) of vitamins, mineralsand trace elements. This product is designedto meet the needs of a country where thenumber of people over 60 is expected to risefrom 16 million in 2010 to 30 million in 2025 1and where public health insurance coverage islimited. Distances are also an importantconsideration given Brazils vast area over8.5 million square kilometers (3.3 million squaremiles), with some 45,000 pharmacies requiringeither regular deliveries or products with a longshelf life. Results in Brazil show that powdered

dietary supplements are an effective solutionfor developing countries with similar demo-graphics and comparable constraints on pricesand storage. Our Nutricia research teams arecontinuing development work on solutions forother pathologies creating public health con-cerns, working in close cooperation with themedical profession and leading scientists toaddress future needs more effectively.

PREVENTINGMEMORYLOSSResearchers arecontinuing workon Souvenaid,a product that isbelieved to helpslow memoryloss and protectcognitive functionin people withAlzheimers dis-ease. Two clinicalstudies are underway in partnership

with independentscientists, aimingto corroborateresults to date,and the conclu-sions will be knownin the course of2011. The productshould be on themarket soon.

MEDICAL NUTRITION

Doctors do not fullyrecognize the importancof nutrition in thetreatment of illness,partly because theydevote surprisingly littletime to the subject asmedical students.The work we are carryinout with specialists in anumber of pathologiesshows that nutrition caplay a complementaryand even fundamentalrole in treatment.Flemming Morgan,Executive Vice President, Medical Nutrition

1.According to WHOprojections, by 2020the number of peopleaged 60 and overaround the world willexceed one billion, with700 million of them indeveloping countries.

For more news from our Medical Nutritiondivision, visit www.danone10.danone.com, click on News and listen to theinterview with Dr. Mike Hodin on seniorsand independent living


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OFFSETS

MANGROVES ANDMANGO TREES IN INDIAThe mangrove replanting program conductedalongside NGO Ocanium in Senegals Casamanceregion scored renewed success in 2010, with350 villages helping to plant 100 million saplings.In India, the Danone Fund for Nature is backing twosimilar projects: one in the Ganges Delta, to restorea 6,000-hectare area of mangroves over three yearthe other to plant mango trees in a 6,000-hectarearea in the Araku valley. All of these initiativeshave three goals: protecting soils, offsetting CO

2

emissions and boosting local economies.

Since carbon dioxide levels are linked to a broadrange of environmental targets, we have madethem a key indicator and main focus for our driveto achieve rapid and lasting change in businesspractices. We have set our sights high, aiming toreduce our carbon footprint by 30% between 2008and 2012. Following a record 8.7% decline in 201the reduction reached 22% at the end of the year,

and we now expect to meet our target by 2012.To this end, our teams have developed Danprint, asophisticated tool that measures carbon footprintsby analyzing product life cycles. In 2010, Danprintwas integrated into the IT systems of threesubsidiaries in two countries, Spain and Belgium,on a pilot basis, in preparation for group-widedeployment by 2012. Danprint is an effectivedecision-making tool for operational managers,enabling them to assess carbon impacts.

REDUCING CARBON FOOTPRINT

CO2, A KEYBUSINESS INDICATOR

IN TUNEWITHNATURE


NATURE

With the energy and raw materialsconsumed, and the negative sideeffects of operations, [...] businessis bit by bit changing the faceand equilibrium of our planet,

noted Antoine Riboud backin 1972, in a speech definingDanones dual commitment tobusiness success and socialprogress. Today, nearly 40 yearson, the same thinking is reflectedin the five strategic prioritiesshaping our proactive responsesto environmental issues: reducingour carbon footprint, protectingwater resources, stepping uppackaging research to transformwaste into a resource, promotingsustainable farming and supportingbiodiversity.

Learn more at:http://downtoearth.danone.com


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Emmanuel Faber,Co-Chief Operating Officer, Danone

For Danone, healththrough food

means healthyproducts, and that in turnmeans healthy animalsand farming methods.Which makes respect fornature as a whole the realconcern. Everything isinterrelated. Food safetyand health through foodare goals that can only

be achieved by rebuildinga chain linking up farmers

to consumers throughDanone. And that is justwhat is happening withinitiatives like our FreshDairy Product divisionsActeurs pour un laitdurable program inFrance in support of dairyfarmers.

Visit www.danone10.danone.comanddiscover two special reports on packagingand sustainable dairy farming.

In 2009 our Bonafont subsidiary in Mexicobrought out the first bottles made entirelyof recycled PET (R-PET), and bioplastics continuto be a focus for all of our Waters brands.Similar concerns are behind two major initiativesto replace traditional plastic materials withbioplastics. Volvic has launched new 50-cl inFrance, Germany and the UK (and 1.5-liter PETbottles in France), with bioplastic PET made fromsugar-cane waste accounting for 20% of thematerial used. A full 95% of the polyethylenein Actimel bottles is from sugar cane, cutting the

carbon footprint of packaging by at least 70%.

PACKAGING

BIOPLASTICS

SUPPLIERS

SUSTAINABLE DAIRY FARMINGIn 2010, Danone adopted a tool thatcorrelates the fatty acid contentof milk and the impact of dairy herdson greenhouse gas emissions.This is in line with our commitmentto helping farmers prepared to adapttheir herds feed to reduce both thefatty acid content of milk and methane

pollution. In France, 80% of the dairy farmers workingwith Danone support Acteurs pour un lait durable,a sustainability program targeting environmentalprotection, milk quality and nutritional balance, thecontinuing viability and development of farms, andrecognition for the profession.

We also teamed up with French agricultural researchinstitute INRA to publish the first studies showing apositive relationship between pasture profiles andthe composition of milk a research area that Danonehas opted to study more closely.

MEASUREMENT

WATER FOOTPRINTSWhile fresh water is arenewable resource,available quantities arefinite. And per capitavolumes have declinedin some countries, withmore and more peoplefeeling the effectsof water shortages.Protecting this preciousresource and measuringour water footprintis thus a key priorityfor Danone. Havingalready measured waterconsumption throughoutthe product life cycle, in2010 we began testinga comprehensive toolthat appraises water

footprints. Developedby Evian in associationwith Quantis and theWater FootprintNetwork, it measuresnot only consumptionbut also positive andnegative impacts onthe water cycle, inparticular as regardsground water, andinitiatives to restorea healthy equilibrium.The new tool will bedeployed group-widein 2011, allowing usto control our waterfootprint as effectivelyas we do our carbonfootprint.

Eliminating the cardboard sleeves usedin Activia and Taillefine packaging in

France, Volvics launch of its bioplasticbottle and Danoninos reforestation

program in Brazil consumers responded

positively to all these initiatives.


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ACCESSIBILITY FOR ALL

Bring health through foodto as many people as possible with a mission this challenging,making our products affordableand widely available is critical

to Danones strategy. To succeed,we must develop recipes tailoredto each populations nutritionalneeds, and also adapt ourproducts to the socioeconomicrealities of each community.

AFFORDABLEAND

AVAILABLE

A

chieving affordability and availabilityfor as many people as possible means

designing, making and distributingproducts that match nutritional needs,purchasing power, tastes and eating habitsof groups that have never had access to Danonproducts before. Inspired by our mission andcorporate DNA, this strategy targets the mostdisadvantaged people in emerging countries,as well as low-income groups in maturecountries. To reach them, Danone is developinga new approach to nutrition based on localingredients, which often prove to haveunexpected nutritional value.

Thus, affordability and availability also driveinnovation, inspiring us to create newdevelopment models for each country. For thepast 18 months, we have structured thisstrategy around three key drivers of Danonesgeographic expansion and business growth.

Broad ranges enabling everyone to buyDanone products, both in industrializedcountries and in the emerging countriesthat account for nearly 50% of our businessWe have achieved this goal in Russia, whereDanone has joined forces with Unimilk to cove

the entire spectrum of consumer purchasingpower, from traditional dairy products to thelatest ranges offering added health benefits.

Unit size and formulation also make our producmore affordable: calcium- and vitamin D-enricheDanonino yogurt now comes in both family-sizand individual child portions, and our Volvicand Bonafont waters are sold in family-friendlythree- to eight-liter containers.


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Visitwww.danone10.danone.comto discover 2010 initiatives andaction in our online economic andsocial report

AFFORDABLE PRODUCTS FOR INDIA

Last November, Danone laid thefirst stone of a plant north ofDelhi. Beginning in mid-2011, thefacility will make a new productrange tailored to local nutritional

needs and priced between fiveand ten rupees to reach the nea240 million people in Indias lowincome groups (living on less tha$1 a day or 45.5 rupees).

Medical Nutrition has taken a similar approach:a powdered form of its Nutridrink and Fortininutrition beverages is now sold in Brazil, andwill soon be available elsewhere.

Radical innovation is often the only wayto reach some consumers.Sometimes we have to create a completelydifferent product or range to reduce productioncosts without compromising nutritional value.This begins with a detailed health and nutritionprofile generated by our Nutripack programfor each country. So far we have deployedNutripack in 25 countries including India,Indonesia, China, Brazil, Algeria and Egypt to adapt existing products or create new onesthat meet local needs. In 2010, we addeda study of eating habits, dietary practices,culinary heritage and the symbolic value of food;

the results will help us develop products that fitnaturally into local diets.

Local conditions also spur innovation,motivating us to find alternatives to milk orimported starch. In South Africa, where the coldchain is incomplete, we sell Nutriday yogurtsthat can be stored at room temperature forthree months. For Waters, the challenge is touse local springs and cut transport and logisticscosts, and Danones Aqua brand, the marketleader for packaged waters in Indonesia, hasoften achieved this in partnership with local

communities.

Baby Nutrition, which continues to performwell in Asia, has also relied heavily on innovationto break out of premium segments. And ourGizikita range the name is Indonesian forour nutrition is another example: enrichedwith proteins, iron, zinc, vitamin A, iodine,calcium and folic acid, Gizikita products delivervital nutritional benefits for Indonesias youngchildren and pregnant women at a veryaffordable price.

Promoting social business initiativesto stimulate local economies by producingnutritionally appropriate foods at priceseven the most disadvantaged can afford.The most inspiring example of this is GrameenDanone Foods launched in Bangladesh in 2006and followed by the creation of the danone.communities fund a year later. In 2010 werounded out our social business with two newinvestments: Naandi, aimed at bringing safe

drinking water to 600,000 people livingin 400 villages in three regions of northern

and southern India; and Lmatki (Eat, GrowUp and Succeed), which provides Senegaleseschoolchildren with a fortified snack made fromlocal ingredients. A paste that comes in a tube,Lmatki is 3.6% protein and 30% dry extract,versus only 20% in traditional products of thesame kind.

In Indonesia, 98% of childrunder 5 suffer frommalnutrition.Each portionof the Gizikita line supplies uto 50% of the RDA in vitalnutrients with a retail priceof around 0.15.

The World Bankestimates that in2005, around1.4 billion people wereliving below the

international povertythreshold of $1.25 aday. Thats more thanone in four people inthe developing world.

An estimated2.5 billion people liveon less than $2 a day

1.4 billion

Learn more at:www.danonecommunities.com


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HEALTH

Last November the Pasteur Institute andDanone Research welcomed over300 international researchers to the firstinternational Microbes for Healthsymposium in Paris. Participants discusserecent discoveries in the field of intestinamicrobiota*, shedding new light on the rothese bacteria play in human health.

Key findings included the sheer size of thmicrobiota genome 150 times largerthan the human genome, with a thousandbacteria species and over 3.3 milliongenes and its role in certain pathologieResearchers outlined preliminaryexplanations of the mechanisms underlyinthe health benefits of certain bacteria. Inso doing, they opened new prospects fordeveloping specific health foods withbacterial strains that foster the growth ofbeneficial bacteria within the microbiota.

FIRST INTERNATIONAL

SYMPOSIUMPASTEUR INSTITUTE/DANONE RESEARCH

Danones mission bringinghealth through food to as manypeople as possible guides our

teams every day. Their task is tooffer tasty, balanced foods thatdeliver health benefits to a broadspectrum of consumers andaddress each countrys specialpublic health needs.

Visit www.danone10.danone.comand click on our special report:whatintestinal flora can teach us.

HEALTHISSUES &OUR COREBUSINESSES

* Microbiota: a diverse community of bacteria residing naturain the human intestine, including lactobacilli, bacteroides,enterobacteria, etc.

Danones mission covers abroad range of situations,linked to socio-economictrends as well as public healthissues, both worldwide andlocal. For Danone brands,developing healthy foods is amajor means of leveragingvalue creation, and we rely onthe expertise of DanonesR&D teams, working closely

with stakeholders, to meetthis challenge.In 2010, Danone pursued itsown R&D and partneredwith prominent universitiesand scientific institutions,refining the make-up andnutritional value of ourproducts and advancing foodscience in key areas: thegenome of intestinal flora,

also called microbiota; therole of microbes in health; andthe links between hydration,health and well-being.Every day, science showsthat each of us has specificnutritional needs, whichchange as we move frominfancy through childhood,adolescence and adulthoodto old age, and also reflect

our gender and physicalcondition from pregnancyto aging, from metabolicdeficiency to chronic illness.Danone explores this vastterrain by drawing on thecomplementary strengthsof our four business lines,which span the nutritionalneeds of every generation.

FOOD TO HELP BUILDAND PRESERVE HEALTH


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Danonescommitment to

health is moretimely than ever. Inmature countries,populations are aging,and in emergingcountries, the numberof children is rising.These two groups atthe opposite extremesof life require foodsadapted to their needs.People over 75 are atgreatest risk for

under-nutrition and evenmalnutrition, whilechildren from six monthsup need to shift gradually

from breast milk to amore diversified diet,

one appropriate for theirgrowth and metabolism.In between, day-to-dayhealth is critical, and ourwaters and dairy productscan help.Our mission bringinghealth through food to asmany people as possible has a long future aheadof it. And health is alsolinked to enjoyment: it willalways be both/and, never

either/or. MedicalNutrition alsostudies theeffects of aging especially onmuscles. Evenhealthy peoplelose 50% ofmuscle mass onaverage betweenages 50 and 70.Danone recently launched Fortifit, a producthat retards this natural atrophy, helping

seniors stay independent longer and livebetter. The many innovations now beingaddressed by our R&D teams will expandour offering on markets set to feel the impacof the aging baby boom generation. Morebroadly, Danone expects Medical Nutritionto develop products that can be integratedinto treatment protocols, improving patientsquality of life.

MEDICAL NUTRITIONTO BRING SENIORSA BETTER LIFE

HYDRATION,a booming scienceWater makes up 60% of the humanbody and is the only liquid we need.Quantitatively, it is also the mostimportant nutrient in our diet. Andresearch shows that overindulgingin sweetened beverages is harmful

to health, leading to overweight andobesity in children, and Type 2diabetes in women. Which meansoffering wholesome hydration is

essential for Danone -- but researchers have only recently begunstudying the links between hydration, well-being and health.In 2010 our Waters division researchers focused on three coreissues: identifying useful hydration markers; evaluating the short-term effects of hydration on physical and mental performance;and investigating its long-term impact on kidney health,overweight and basic well-being.

Danones Baby NutritionDivision recentlybrought out a ComplexLipid Matrix thought toplay a role in program-ming adult metabolism.While the amount of fatsin infant foods haschanged very little overthe past few decades,

the type of fat hasworsened, movingtoward a higher ratio

of omega-6 to omega-fatty acids.* Becausethese fatty acids

influence fat tissuedevelopment at thebeginning of life, theright diet in infancycan prevent excess facell formation andreduce the risk of obesin later life.

*Amount refers to thequantity of lipids in food,whereas type refers tothe type of lipids present,their structure and theircomposition.

INFLUENCINGmetabolicprogramming

Bernard Hours,Co-Chief Operating Officer, Danone

In 2005, we drew up Danones Food,Nutrition and Health Charter, settingout our convictions, principles foraction and commitments. Download it

at www.danone.com.


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PEOPLE

Human resources play a criticalrole in the transformation now

under way at Danone. As the groupscenter of gravity shifts towardemerging countries, we face newchallenges in business and in societythat make investing in humandevelopment essential to lastingsuccess in both. Its our responsibility

to create wealth and jobs, tocontribute to society, to bring healththrough food to as many people aspossible, and to protect theenvironment: that is what we meanby engagement. At Danone, ourengagement towards our employeesand our ecosystem, and ouremployees commitment to ourvision, are all drivers for growth.

Our 2010 People Survey* setemployee engagement at Danoneat 87%, higher than the best-performing companies. Thatsextremely encouraging, but its alsoa huge responsibility. It adds to ourcommitment to making Danone aGreat Place to Grow by offering growth

opportunities for employees at everylevel of the company, with supportfrom their immediate supervisor.At the same time, we are continuingto improve fundamentals like safetyand working conditions, and pursuinginnovation through our DanCaresprogram, which is extending basichealth benefits to all our employeesby stages. Danones engagementalso concerns our ecosystem. We aresupporting progress within localcommunities and among our suppliers

and distributors and their employeesthrough numerous initiatives run by ourbusiness units in partnership withNGOs. These efforts are at the intersec-tion of business, labor relations andsocial responsibility, and they are anintegral part of the dual commitment tobusiness success and social progressthat has inspired the group for 40 years.* an anonymous annual survey of all Danone employees

PEOPLE,CRUCIAL LEVEROF OURADVENTUREMURIEL PNICAUD,VICE PRESIDENT, HUMAN RESOURCES

DANONELEADERSHIP

COLLEGE, leveraginthe energies of allemployees

Since it was set up in 2009,Danone Leadership College the largest trainingprogram ever developed atDanone has cultivatedDanone-style leadershipamong the groups 15,000team leaders. The Collegereaches every level ofmanagement, from executivsuite to factory floor and frowarehouse to sales office.

By late 2010, 8,600 peoplehad already been trained byour 315 in-house trainers,with support from outsideproviders. The practical,hands-on program helpstrainees practice proximitymanagement, energizing thteams and uniting themaround each units strategicgoals. By honing their listeniskills and emphasizingengagement, managers learto make the most of eachteam members energyand ideas.

As Danone expands into emerging markets, ourworkforce in these countries continues to grow,presenting challenges for recruitment, training,

employee loyalty and engagement. Our humanresources teams are meeting these challenges,supporting todays growth and looking ahead.


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FIRST LOOK DANONE ECOSYSTEM FUND

Visit: www.danone10.danone.comto discover Danone Inside reports fileddirectly by local employees.And learn more about our Ecosystem fund:htpp://ecosysteme.danone.com

Launched in 2004, our Wise workplace safetyprogram has cut the number of accidents leadingto employee absence by 50% over five years.And it is still generating benefits: in 2010, the numberof accidents was reduced by another 20%, puttingour group at fewer than three accidents per million hoursworked. But even one accident is too many. So last yearwe launched targeted road safety programs in SaudiArabia and five other countries where the problem wasparticularly acute, empowering employees at all levels.

A year later, Saudi Arabia had not had any accidentsleading to employee absences over the full 12-monthperiod. And our safety training programs are no longerlimited to Danone employees: logistics providers andother suppliers can now join in.

WISE:

THE SAFETYIMPERATIVEAt Danone, we believethat our mission promoting health begins at home.So last Februarywe launched theDanCares program:over the next threeyears, it will providebasic health coverage

for all 100,995Danone employees,two-thirds of whom arein emerging economies.Hospitalization,surgery, pregnancyand childbirth, doctors

visits and medicationwill all be covered. Inaddition to promotinghealth, DanCaresrepresents significansocial progress and is a powerful wayto attract employeesand deepen theirloyalty and engage-

ment. We audited56 of the groupsbusiness units andidentified ten forimplementation ofDanCares in 2011.The program will thenbe gradually extendewith all employeescovered by 2013.

DANCARES BASIC

HEALTH COVERAGEFOR EVERY EMPLOYEE

DAN 2.0:strengthening our culture

Launched in 2009, ourDan 2.0 program usestechnology to enhance

Danones networking culture,creating conditions that helporganizations transformthe way they communicateand work together. More than33,000 employees are nowconnected, and they relyincreasingly on the toolsoffered by Dan 2.0, fromvideo- and web-conferencing

to instant messaging. In2010 we launched an equallysuccessful in-house social

network, helping Danonersto work together, innovate,and share their know-howand best practices in onlinecommunities and blogs.Some 7,000 active usershave already joinedthe network, and nearly250 communities have beencreated.

100,995At December 31, 2010, Danone had100,995 employees in 80 countries.Emerging economies high-growthregions now account for two-thirdsof Danone employees.

This 100 million fund,created in 2009, is dedicatedto strengthening andsupporting Danonesecosystem wherever Danonedoes business. For 2010,

20 projects were approved,for example in the field of milksourcing and recycling;12,000 people will benefit.14 new projects are underreview.


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The first thing to notice about 2010 is that marginheld high, edging up 3 bp to 15.16%. This came in acomplex environment marked by volatile raw materialsand the end of the Reset program, which had an impact

on our prices. But despite the difficulties, we closedthe year on a strong note with sales up 6.9%.The second point is the internationalization of ourbusiness, illustrated by the Danone-Unimilk joint venture,which consolidated our number-one place on the Russiandairy-product market. Emerging markets now accountfor 49% of our sales and North America for 10%, whichmeans that our main high-growth markets togetheraccount for some 60% of our business double thefigure ten years ago! So the shape of our business ischanging. And risk still remains limited since, apart fromFrance and Russia, which each accounts for 11%, nosingle country represents more than 8% of our business.

The third point is that free cash flow was up for the thirdyear in a row, with a 20% rise that rewards healthyimprovement in working capital requirement and ourteams focus on generating cash. This is essential forus to be able to turn our operational results into thefinancial results we need to invest in growth and rewardour shareholders as we will this year with a proposed8.3% increase in our dividend to 1.30.

2010

A SOLIDSHOWINGBY PIERRE-ANDR TRISSE, EXECUTIVE VICE PRESIDENT, FINANCE

Danones financial results for 2010,

backed by a 6.9%* rise in sales, arefurther confirmation of a sound strategy.Growth in all four business lines andacross all parts of the world demon-strated the strength of our model.*like-for-like

KEY FIGURES


20%Free cash flow was up 20% in 2010, reaching1,713 million or 10.1% of sales compared wit9.5% in 2009. Capital expenditures came to832 million, representing 4.9% of sales.The healthy rise in free cash flow after dividenddistribution, share buybacks, acquisitions and theUnimilk transaction made room for a 278 millioncut in net financial debt to 3,216 million.

*Excluding put options granted to minority shareholders,amounting to 3,858 million at December 31, 2010.

We have also cut ourcarbon footprint by 22since 2008, and aremaintaining our targetcalling for a 30%reduction by 2012.


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6 %

Danone reported salesof 17,010 million in2010, generatingtrading operatingincome amounting to2,578 million.Fresh Dairy Productscontributed 9,732 millionto sales, Waters2,868 million, BabyNutrition 3,355 million

and Medical Nutrition1,055 million.

17,010m

Fresh Dairy ProductsWatersBaby NutritionMedical Nutrition

20 %

Sales bybusiness line

17 %

57 %

EuropeAsiaRest of world

56 %

14 %

Sales by region

30 %

markets(% of consolidated sales)France: 11%Russia: 11%Spain: 8%

US: 8%Mexico: 5%Germany: 5%Indonesia: 5%UK: 5%China: 4%Argentina: 4%

top 10 Trading operatingincome rose 7.1% to2,578 million in 2010

7.0 % 6.9 %

2010 quarterlygrowth

1st q

uarter

2ndquarter

6.9 % 6.9 %

3rdq

uarter

4thq

uarter

+7.1%

of Danones totalbusiness in 2010 was emerging economies.

49%

Current net income

attributable to the grourose 14.2% to 1,669million in 2010.

By volume, Danone is: no. 1 worldwide in fresh

dairy products no. 2 worldwide in baby

nutrition no. 2 worldwide in

bottled waters no. 1 in Europe in

medical nutrition

Rankings

+14.2%

average annual growthin consolidated sales in2010. This reflects a7.6% rise in volumescombined with an 0.7%negative price-mix impact.

+6.9%

2.71Diluted current netincome per share cameto 2.71, a rise of 8.6%based on reported figures,or 12.7% like-for-like.

Indicators are atconstant scope ofconsolidation andexchange rates. Forcommunication purposeDanone uses financialindicators that are notdefined under IFRS. Fudetails of changes inaccounting methods ca

be found at http://finance.danone.com/

14%High-growth marketssuch as Mexico,Indonesia, Russia, theUS and Brazil are themain focus of groupdevelopment. WithUnimilk, and restated forits consolidation over thefull year, Asia and theRest of the Worldtogether accounted fornearly 50% of sales in2010 and each posted

growth exceeding 14%.

EBIT margin rose 3 basispoints in 2010 to15.16% despite a steeprise in prices for rawmaterials, particularlymilk. Margin was on aparticularly favorabletrack in the second half ofthe year, showing a like-for-like rise of 78 bp fromthe same period of 2009.The Waters divisionposted a 13 bp rise inEBIT margin for the year,and the Baby Nutritiondivision a 17 bp rise.

+3bp


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KEY FIGURES


Identifiable holdersof bearer shares% capital at July 31

100,995 employees *by region

FranceAfrica & Middle EastN & S AmericaRest of EuropeChinaRest of Asia-Pacific

36.9 %

9.1 %15.3 %

9 %

Employees *by age

0.69 %

38 %

29 %

0.94 %

22 %

11 %

Employees * by

business line

35%

Fresh Dairy ProductsWaters

Baby NutritionMedical NutritionCorporate functions

48.2 %

At the General Meetingon April 28, 2011,Danone will askshareholders to approvedistribution of a dividendof 1.30 per ordinaryshare in respect of2010. If this proposalis approved, the ex-dividend date will beMay 10 and the dividendwill be payable fromMay 13.This represents an

8.3% rise on the dividendper share paid in respectof 2009.

1.30

No. of employeesrose from 80,976to 100,995.*

+4.27%2008 2009 2010

in millions

Market capitalizationMarket capitalization 22,200 27,710 30,465in

Closing price for the yearClosing price for the year 43.18 42.83 47.02High for the yearHigh for the year 64.00 44.10 48.50Low for the yearLow for the year 38.60 31.22 39.35

thousands of shares

Average number of sharesAverage number of sharestraded dailytraded daily 3,265 2,895 2,344

4.5 %12 % 5 %

83 %

Individual shareholdersand FCPE (Danoneemployee fund)Treasury stockInstitutional investors

Key stockmarket figures at Dec. 31, 2010

Industrial investmenttotaled 832 million in2010 compared with699 million in 2009(4.9% and 4.7% ofconsolidated sales,respectively). As in 2010,Danone plans to focus2011 industrialinvestment on emergingeconomies and countrieswith high growthpotential, targeting afigure of around 4 to

5% of consolidated salesfor the year to keep pacewith growth, volume andgeographical expansion.

832mEnvironmentalindicators Reduction in carbonfootprint (2008-2010):- 22 % Reduction in waterconsumption(2000-2010):- 41 % Reduction in ratio ofpackaging weight/weightof products sold

(2000-2010):- 10 % % of waste recycled:84%

24.9 %

8.7 %5.1 %

1.2 %

*Includes Unimilkemployees

Under 2020 - 2930 - 3940 - 4950 - 59Over 60


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FOR MORE INFORMATION:

Registration DocumentDownloadable athttp://finance.danone.com

Sustainability Report, Downloadableat www.danone.com, under SustainableDevelopment, then Our vision.

Our 2010 Economic and Social Report is available at www.danone.com andwww.danone10.danone.com. A full review of 2010 developments at Danone,news of business lines and subsidiaries, key issues and challenges in healthy eating,and Danone in pictures taken by our own teams.

DANONE WEBSITESwww.danone.comwww.studies.danone.com - www.research.danone.com - http://www.danoneinstitute.orgwww.danonecommunities.com - http://ecosysteme.danone.com - http://downtoearth.danone.com

Danone15, rue du Helder

75439 Paris - Cedex 09Visitors

17, bd Haussmann - 75009 Partel.: +33 1 44 35 20 20

Corporate Communications,tel.: +33 1 44 35 26 33

www.danone.com

Toll-free number for shareholder0800 320 323,

(from landlines in metropolitanFrance)

Director of publication:Laurent Sacchi

Executive editorStphanie RismontSenior editor

Agns dAnthonayEditorial associateSandrine Fossard

Photos:Chris Terry, Thomas Haley/Sip

Eric Flogny, Laurent Vautrin,Raphael Dautigny, Bruno SchneidHellio-Van Ingen, Getty Images,

Design and production:

(rf. RADA010)

English text: Durban/Blake/Cleme

Bldina, Danone Eaux France,Danone Produits Frais France hasigned the Responsible AdvertiseCharter drawn up by the Sustaina

Development Committee ofFrances Union des Annonceurs

Printed on coated wood-free pap100% recyclable and biodegradable, made from pulp bleache

without chlorine at production sicertified under ISO 9001 (qualitISO 14001, EMAS (environmenand ISEGA (suitable for contac

with food products). Paper contano heavy metals (less than 100ppm). Wood used in paper pulp

comes from forests managed fsustainable development.


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