Danone factory in Bieru?, Poland

Groupe Danone (, ) (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. In 2007 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 yogurts, the company owns several internationally known brands, namely Volvic, the high-end Evian, and Badoit. About 56% of its 2006 net sales derived from dairy, 28% from beverages, and 16% 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 Joint Venture Company, 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 yogurt. 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

Another branch of Groupe Danone is descended from the industrial glassmaker 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 through a series of acquisitions and mergers, including the 1973 merger with Gervais Danone.

Strategic reorientation

The acquisitions initially took the shape of vertical integration, acquiring Alsacian brewer Kronenbourg and Evian mineral water who were the glassmaker's largest customers; thus providing content with which to fill the factory's bottles.^[4] In 1973, the company merged with Gervais Danone, and began to expand internationally. 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: Dairy, Beverages, and Cereals; and divested itself of several activities which had become non-core.

In 1999 and 2003, the Group sold 56% and 44%, respectively, of its glass containers business. In 2000, the Group also 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 businesses (Egidio Galbani Spa) were sold in March 2002;^[7] as were its beer producing activities in China. The company's British (Jacob's) and Irish biscuit operations were sold to United Biscuits in September 2004.^[8] In August 2005, the Group sold its sauces business in the United Kingdom and in the United States (HP Foods),^[7] in January 2006, its sauces business in Asia (Amoy Food) was sold to Ajinomoto^[5]. Despite these divestitures, Danone continues to expand internationally in its 3 core business units, emphasising health and well-being products.^[9]

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.^[2] Also in July 2007, a ?12.3 billion cash offer by Danone for the Dutch baby food and clinical nutrition company Numico was agreed to by both boards,^[10] creating the world's second largest manufacturer of baby food.

Protecting Danone

Due to its narrow focus and relatively small size, Danone is potentially an attractive takeover target for its competitors, namely Nestlé and 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.^[11] Upon realising that a takeover of a national champion such as Danone by a foreign company was indeed possible in the capital markets, the "economically patriotic"^[12] French government stepped in by drafting a law to protect companies in "strategic industries" such as Danone^[13] from takeover. This has been dubbed the "Danone Law"^[14].

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,^[15] and Kraft was also reported in The Figaro as not having ruled out an acquisition on French soil.^[16] The stock market apparently marked down the possibility of a bid by Pepsico following Danone's acquisition of Numico.^[17]

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, Jacques Vincent, ?1,511,140, Emmanuel Faber, ?746,430 ^{http://www.danone.com/wps/portal/jump/DanoneCorporateIntl.Finance.Highlights.GovCorporate.BoardsOfDirectors}.

Main brands

Mineral water

Evian, Volvic, Badoit, Aqua, Naya^[1], Lanjarón, Font Vella.

Food products

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

Advance Medical Nutrition

The acquisition of Royal Numico includes SHS International^[18]. The brands include Ketocal (for the management of the Ketogenic Diet, Lophlex LQ (for the management of Phenylketonuria, Neocate (for the management of Cows Milk Allergy) and Alicalm (for the management of Crohn's Disease).

Joint ventures

Global locations of Groupe Danone factories

Danone has continued to pursue this strategy, and has recently signed joint ventures with companies such as Al Safi in Saudi Arabia (2001)^[20], Yakult in India (2005) and Vietnam (2006), Alquería in Colombia (2007), and Mengniu in China (2006)^[19]

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

India

Under the 1995 joint venture agreement to acquire Britannia Industries, Danone agreed not to launch 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 in India, 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 Avesthagen, a Bangalore-based bio nutrition company, 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% 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 the contract. 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 in order to enter into business in India alone.^[25]

Pakistan

Danone acquired a 49.5% share in Pakistan's "Continental Biscuits Limited" in the year 1984. As part of Kraft's takeover of Danone biscuits division, this stake subsequently transferred to Kraft Foods Singapore.

China

Bright Dairy

In 2001, Danone acquired a 5% stake in Bright Dairy, and later doubled its shareholding in March 2005,^[26] and again, to 20%, in April 2006, becoming the third largest shareholder after Shanghai Milk Group and S.I. Food, each holding 25.17%.^[27] 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.^[28]

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.^[27]

The parties announced in October 2007 that Danone would divest its stake by selling it to the other two main shareholders at a small profit.^[28] Bright Dairy said Danone would pay 330m yuan (?31m) to terminate the existing distribution and production agreement with it.^[29]

Wahaha

The Hangzhou Wahaha Group, the largest beverage producer in China,^[30] 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.^[31]

As the businesses expanded and became more complex, Danone made several attempts to take a stake in the Wahaha companies external to the joint venture, but was rebuffed by Wahaha's General Manager Zong Qinghou.^[32] Danone and Zong Qinghou had signed a deal in December 2006 allowing Danone to buy a majority stake in these non-JV operations. However, Zong had second thoughts about the deal and reneged, claiming the offer was underpriced and held out for a higher price from Danone.^[33]

The dispute took on the shape of a trademark dispute, and Danone filed for arbitration in Stockholm on 9 May 2007.^[28] On 4 June,^[34] Danone filed suit in Los Angeles Superior Court against Ever Maple Trading and Hangzhou Hongsheng Beverage Co Ltd, companies controlled by Zong, his wife and daughter.^[35]

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 aired a television advertisement entitled "In Soviet Georgia" in the United States over a period of many years.
• 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.

Danone Business Game: Trust

"TRUST" is an international business game organised by Groupe Danone and its subsidiaries. The business game is a way to for Danone to identify and recruit possible future employees, that fit the companies values and way of doing business and furthermore enables Danone to improve its ?employer image?. Students participating in the game have to deal with different aspects of the business life whilst running a strategy of a fictive Danone company, on both business and sustainable development aspects. Problem solving skills, analytical skills and resourcefulness are all put to test.

The game consists of three main stages:

• first step of the game: TRUST day. In each participating country students have to set up a 3-year strategy for a fictive subsidiary of Danone. (business and stakeholders? trust goals)

• second step: National final. Students present their business plan to a group of Danone directors from their country. Teams are evaluated and the best one wins a trip to Paris to run the international final.

• The last stage is in Paris, during the world final each national finalist competes against each other

Danone International Prize for Nutrition

The Danone International Prize for Nutrition is an award established in 1997 and presented every two years to honour individuals or teams that have advanced the science of human nutrition.

It is promoted by the Danone Institute International and offers a prize of ?120,000 (approximately $163,000).

Danone Institute International is a non-profit organisation originally established with funding from Groupe Danone.

Prize winners

2007

• Jeffrey M. Friedman, Rockefeller University and Howard Hughes Medical Institute; for research on the role of genetics and leptin, a hormone he discovered, in body-weight regulation.^[36]

2005

• David J. P. Barker, epidemiologist at the Developmental Origins of Health and Disease Division Research Centre of Southampton University, UK and at the Heart Research Centre, Oregon Health and Science University, USA.

2003

• Ricardo Bressani

2001

• Alfred Sommer and team from the School of Hygiene and Public Health at Johns Hopkins University

1999

• Leif Hallberg

1997

• Vernon R. Young

Other

• The company operates the world?s largest yoghurt plant in Minster, Ohio USA which employs more than 400 people^[37]
• In the 2007, large quantities of Danone yoghurt products were recalled in Romania after the yoghurt was thought to have contained unsafe levels of dioxins, however it was later determined that the dioxin levels were below what is considered safe for human consumption.^[38]

See also

• List of French companies
• 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
• "Love or Hate Danone" (article about Danone in China), Liu Jianqiang, China Entrepreneur, 5 April 2007
• Trust by Danone business game website
• Official prize website

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