DANONE MENGNIU DAIRY CHINA OVERVIEW THIBAUT HELLEPUTTE GENERAL MANAGER CHINA FRESH DAIRY PRODUCTS CHINA: FRESH DAIRY MARKET POTENTIAL A BIG MARKET WITH HUGE POTENTIAL CHINA FDP MARKET (Billions Euro) CAGR 07-13: +21 % TOP 6 FDP MARKETS IN VOLUME (Millions Tons) 8 1,8 4 2 2,4 6.1 6 1.9 1.0 1.3 1.5 2.4 2.8 1,8 1,8 1,5 3.4 1 0 Y07 Y08 Y09 Y10 Y11 Y13 German Y17 E China Russia France USA Spain FDP PER CAPITAL CONSUMPTION (PCC) ACROSS COUNTRIES 公斤 Kg 36.0 Y12 34.0 26.6 16.0 12.9 12.6 10.9 10.3 8.7 7.6 7.1 1.1 France Germany Spain Russia Source:Nielsen and global team S&I, China apply 0.8 coverage; 2013 number UK Japan Canada Australia South Africa USA Brazil China WITH POTENTIAL OF VALORIZATION Price Index Fresh Dairy/Fresh Milk 403% UK 349% Italy 285% Germany 267% Austria Tasty High Nutrient Density Easy to digest 220% France China Natural 252% Spain Russia Fresh Dairy Value 199% 134% DANONE DAIRY CHINA: BEFORE / AFTER Before JV After JV Danone only Mengniu & Danone Local player National player 1 factory 13 factories 25,000 Tons 650,000 Tons Not profitable Profitable 200 FTE + 3rd party > 3200 FTE + 3rd party OUR CHINESE PARTNERS THE PARTNER IN OUR DEAL No.357 Ranked in Fortune500 Y2013 2 LEADERS TOGETHER: CHINA #1 WITH WW #1 Mengniu Value MS 22 % Activia: Local player 20% MS in Shanghai WHERE ARE WE AFTER 11 MONTHS IN THE JV? AN ALIGNED FRESH DAIRY VISION Become the indisputable leader of Fresh Dairy in China by offering safe, qualitative and superior products through a more diversified portfolio Develop Per Capita Consumption and Market Share Food Quality & Safety : build trust and reputation Product superiority: drive consumer loyalty Attract Consumers (Kids, Seniors…) through Chinese and International brands BUILDING FURTHER FOOD SAFETY AND QUALITY From only experts To all functions alignment & engagement From plant centric quality To consumer centric quality 2014 DIRECTION Revenue EBIT Strong double digit growth Positive growth 1.PORTFOLIO MANAGEMENT 2.OPERATION EFFICIENCY Focus on three high profitable brands: YoyiC, GuanYiRu and Bio Increase asset utilization Simplify SKUs Breakthrough in manufacturing and supply chain Format / Multi-pack Cost Out Value In (COVI) 3.EXPENSE AND CAPEX Focus A&P on top three brands Return On Investment Cautious on capex POINT 0: DIFFERENT BUSINESS MODEL & APPROACH UPSTREAM 10,000 Tons/day 20 % own farm / OPERATION 11 factories / 100 small lines Big lines PRODUCTION On order On Forecast ROAD TO MARKET Distributor Direct sales TOP-LINE Sales driven : Push Marketing driven: Pull FRESHNESS D+1 or 2 to distributors Freshness to consumers 1ST PILLAR: PORTFOLIO MANAGEMENT TOP 3 BRANDS:>50% PORTFOLIO Superiority Innovation Everyday & target group SALES & POINT OF SALES APPROACH Perfect Execution Regional approach Space Brand Block Stock Assortment Iconization Freshness Pricing OOS level PPED level Fresh Dairy category ROOTS Brand maturity TRUNKS 3 Must Win Battles BRANCHES 2ND PILLAR: OUR OPERATIONS Optimized COGs Secure business growth + 100 Ktons /year Superiority Differentiation 3RD PILLAR: CAPEX & EXPENSES RESULTS YTD NEXT STEPS VALIDATED THE NEW APPROACH TO LEVERAGE OUR SCALE 3-YEARS PLAN VALIDATED BY JULY 2014 FOCUS OUR INVESTMENT 3-YEAR PLAN Few key sites to serve our market Define 3 Year Business plan Volume-Format-Region-Inno CURRENT SITUATION 3Y CAPEX PLAN ON KEY SITES Man An Shan Pilot Engineering Capability analysis Detailed CAPEX plan for 5 key sites 2015 Investment for YoYiC+GuanYiRu PROCESS PROJECTS