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February 19, 2010

CAGNY: Danone reiterates focus on emerging markets

Danone has reiterated that it intends to focus on emerging and developing markets in 2010 with a target of increasing "consumer penetration" by 50%.

Danone has reiterated that it intends to focus on emerging and developing markets in 2010 with a target of increasing “consumer penetration” by 50%.

Speaking to analysts at the CAGNY conference in Florida yesterday (18 February), Danone CFO Pierre-Andre Terisse said there were parts of the world’s emerging markets that it still is not covering.

“That is the case with Africa, parts of Latin America, Australasia. We are at the beginning of expansion,” Terisse told analysts. “We have already done lots, but still lots remains to be done. To take the example of Africa, we now have a 100%owned operation in South Africa, which will be a clear area of growth for the future, not only South Africa, but also for the rest of Africa.”

Terisse said emerging countries were driving growth and offered “lots of opportunities” for Danone.

“We are young group, not like some of our competitors, we are young and our growth in developing markets is young,” he explained. “The result is our penetration, all of our access to this population, is new.”

Terisse said there was an opportunity to sell to 1.9bn consumers in the emerging markets but that Danone was currently only hitting 37% of those – or some 700m consumers.

“Our ambition in all the countries we are in, and the countries we are going to enter, is to increase this by 50% in the foreseeable future. To reach 1bn consumers is our ambition…very soon.”

He added: “Emerging counties are driving the growth, as they have done in the past years. That’s the case for China, which has not weakened really during 2008/2009, but is also true for Brazil and Russia, which may have had economic difficulties but will rebound next year.”

Terisse said that in the past Danone had relied on partners to enter emerging countries but that it now had a business model allowing to penetrate those countries alone.

“One way is though acquisitions. If I were here ten years ago talking to you about Danone I would probably have told you that in those countries that is the only way. But now we have a model that allows us to penetrate emerging countries by ourselves on brown field. We have done so in Brazil and with our dairy division in Egypt and baby nutrition in Latin America.

“We are progressively testing, investing, discovering new ways to enter countries which we think will compliment specific products. Emerging economies are certainly going to offer lots of opportunities,” he added.

Last week, Danone booked an increase in full-year profits but the French food giant said it will continue to face a “challenging” financial and economic environment in 2010.

For the 12-month period, underlying net income reached EUR1.14bn (US$1.57bn), a 7.5% increase on 2008.

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