Top 100 Brand in The World – Rank no.49 – Danone – France
|Traded as||Euronext: BN
|Founded||Barcelona, Spain (1919)|
9th arrondissement, Paris, France
|Key people||Franck Riboud (chairman and CEO), Jacques Vincent (vice-chairman and COO)|
|Products||Dairy products, water, baby food|
|Revenue||€19.318 billion (2010)|
|Operating income||€2.578 billion (2010)|
|Profit||€1.67 billion (2010)|
|Total assets||€28.10 billion (end 2010)|
|Total equity||€11.99 billion (end 2010)|
|Employees||101,000 (end 2010)|
The Groupe Danone is a French food-products multinational corporation based in the 9th arrondissement of Paris. It produces fresh dairy products, bottled water, cereals and baby foods, and yogurts. In the United States it is marketed as the Dannon Company.
The company owns several internationally known brands of bottled water: Aqua, Volvic, Evian, and Badoit; in Asia, it owns Yili, Aqua (Indonesia), Sehat (Malaysia, Brunei, Singapore) and Robust, and has a 51% holding in China’s Wahaha Joint Venture Company. About 56% of its 2006 net sales derived from dairy, 28% from beverages, and 16% from biscuits and cereals.
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The original company bearing the corporate name was founded in 1919 by Isaac Carasso in Barcelona as a small factory producing yoghurt. The factory was named Danone, an acronym of the name of his first son Daniel and the number one (Dan for Daniel, One for first) Daniel Carasso.
Ten years later, the company moved from Spain to neighboring France, and the first French factory was built. During the German occupation of France during World War II, Daniel moved the company to New York to avoid persecution as a result of his Jewish faith. 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 in 1959. In Europe in 1967, Danone merged with Gervais, the leading fresh cheese producer in France, and became Gervais Danone.
Another branch of the Groupe Danone descended from 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.
The acquisitions initially took the shape of vertical integration, acquiring Alsatian brewer Kronenbourg and Evian mineral water who were the glassmaker’s largest customers. This move provided content with which to fill the factory’s bottles. 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.
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 three 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 brand Kronenbourg and the brand 1664 were sold to Scottish & Newcastle for £1.7 billion; its Italian cheese and meat businesses (Egidio Galbani Spa) were sold in March 2002; 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. In August 2005, the Group sold its sauces business in the United Kingdom and in the United States (HP Foods), in January 2006, its sauces business in Asia (Amoy Food) was sold to Ajinomoto. Despite these divestitures, Danone continues to expand internationally in its three core business units, emphasising health and well-being products.
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. 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, creating the world’s second largest manufacturer of baby food.
In 2012, Danone Group got more bad financial exposure than its rivals which more than a half Danone sales came from Europe and about 38 percent came from West Europe. In mid-February 2013 Danone Group announced to cut 900 jobs or about 3.3 percent of their 27,000 Europe workforce.
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 20% within two weeks on rumours of a bid approach by PepsiCo, although this intention was denied. Upon realising that a takeover of a national treasure such as Danone by a foreign company was indeed possible in the capital markets, the “economically patriotic“ French government stepped in by drafting a law to protect companies in “strategic industries" such as Danone from takeover. This has been dubbed the “Danone Law".
Speculation was renewed once again in mid-2006, when PepsiCo declared its intention to grow significantly in France through a sizeable non-hostile acquisition, and Kraft was also reported in Le Figaro, a French daily newspaper, as not having ruled out an acquisition on French soil. The stock market apparently marked down the possibility of a bid by PepsiCo following Danone’s acquisition of Numico.
Current members of the board of directors of Groupe Danone are Bruno Bonnell, Richard Goblet d’Alviella, Michel David-Weill, Emmanuel Faber, Jean Laurent, Naomasa Tsuritani, Bernard Hours, Christian Laubie, Hakan Mogren, Jacques-Alexandre Nahmias, Guylaine Saucier, 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.
Danone has its head office in the 17 Boulevard Haussmann building in the 9th arrondissement of Paris. Previously the company’s head office and its 500 employees were located in several buildings on Rue de Téhéran in the 8th arrondissement of Paris. In 2002 the head office moved to its current location. Frank Riboud, the Danone CEO, stated that the company remained in central Paris so the lives of the employees would not be disrupted too much.
Actimel, Activia, Aptamil, Blédina baby food, Brown Cow (yogurt), Crush yogurt, Dannon (United States), Danone, Dann-o-nino, Danimals, Stonyfield Farm, Nutricia, and Royal Numico baby food brands including Cow & Gate, Almiron (Spain) and Milupa.
The acquisition of Royal Numico included SHS International. The brands include Ketocal (for the management of the ketogenic diet, Lophlex LQ (for the management ofphenylketonuria, Neocate (for the management of cows milk allergy), and Alicalm (for the management of Crohn’s disease).
Danone has adopted a strategy of growth through joint ventures, particularly in fast-growing emerging markets, because it lacked the management depth and size to grow quickly. In its markets, Danone has built an attractive portfolio in emerging markets over the past 10 years which represents 30% of its sales.
Danone has continued to pursue this strategy and has recently signed joint ventures with companies such as Al Safi in Saudi Arabia (2001), Yakult in India (2005) and Vietnam (2006), Alquería in Colombia (2007), and Mengniu in China (2006).
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.
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. The partners also agreed on a right of first refusal to the other partner in the event of the other wishing to exit.
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. 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 Avesthagen.
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.
In March 1996 Danone signed an agreement to purchase 20 percent of the Strauss Group, Israel’s second largest food manufacturer. Under the agreement, Danone purchased about 20% of Strauss Dairies (today Strauss Health division) in Nahariya. Since the 1970s, Strauss Dairies had a series of partnership and knowledge agreements with the Danone Group.
Danone acquired a 49.5% share in Pakistan’s Continental Biscuits Limited in 1984. As part of Kraft’s takeover of Danone biscuits division, this stake subsequently transferred to Kraft Foods Singapore.
In 2001, Danone acquired a 5% stake in Bright Dairy and, in March 2005, doubled its shareholding, and again, to 20%, in April 2006, becoming the third largest shareholder after Shanghai Milk Group and S.I. Food, each holding 25.17%. Danone and Bright set up a 50–50 yoghurt 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.
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 mergingShanghai 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.
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. Bright Dairy said Danone would pay 330m yuan (€31m) to terminate the existing distribution and production agreement with it.
The Hangzhou Wahaha Group, the largest beverage producer in China, 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.
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. 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.
The dispute took on the shape of a trademark dispute, and Danone filed for arbitration in Stockholm on 9 May 2007. On 4 June, 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.
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.
Danone Institute International is a non-profit organisation originally established with funding from Groupe Danone.
In February 2013 The Guardian reported that Danone causes health problems by using gifts in kind to midwives to promote formula baby milk in Indonesia. A paediatrician was quoted as saying: “Selling formula is like the killing fields, in my opinion. The babies will die of diarrhoea and they will die of malnutrition."
According to Danone, this no longer happens, and has been replaced by a scheme which runs training for midwives.
In June 2013 the organisation was accused in Turkey of “misleading mothers with a marketing campaign that warned they might not be providing enough breast milk to their babies [and suggesting] mothers use its powdered baby milk to make up any shortfall." Danone responded that it “based its advice on WHO guidance" and claimed that both the WHO and UNICEF “endorsed the campaign." The WHO said Danone did not have permission to use its logo and asked Danone to remove its name from the company’s marketing materials within 14 days while Dr Ayman Abulaban, the UNICEF representative for Turkey, said: “The Unicef Turkey office has not endorsed this campaign." UNICEF also requested that their name be removed from marketing materials.
Danone got caught up the in the 2013 Fonterra recall after thousands of cans of its Nutricia brand milk formula were believed to be contaminated with botulism. After it was discovered the recall was a false alarm, reports suggested Danone could be seeking as much as €300 million in damages from the New Zealand company.