DANONE DAIRY BRAZIL. Gustavo VALLE

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1 DANONE DAIRY BRAZIL Gustavo VALLE

2 Brazilian economy has been stabilized in the past 3 years % a.a GDP Growth AVG Média : 2.1% AVG Média : 3.4%* % Inflation Inflation 12 past months Estimate Inflation 12 next months * 02 jul jul jul jul Set 06 % GDP T 02 Debt to GDP ratio trend T 03 3T 03 1T 04 3T 04 1T 05 3T T 06 fim 06 Market consensus fim 08 fim R$/US$ Nominal exchange rate set 2.22 Source: Central Bank

3 Brazilian economy has been stabilized in the past 3 years Interest rate: Selic Trade balance % jun 99 dec 00 jun 03 Market consensus Oct dec jun dec US$ billion (mar) Current account Country risk US$ billion Jun 06 Pontos basicos set Source: Central Bank

4 Market potential: Huge opportunity by increasing per capita consumption 35.4 Dairy per capita consumption FRANCE FRANCE GERMANY GERMANY BELGIUM BELGIUM AUSTRIA AUSTRIA PORTUGAL PORTUGAL ARGENTINA ARGENTINA USA USA MEXICO MEXICO BRAZIL BRAZIL Source: Euromonitor BR, MEX, USA and ARG corrected

5 Market potential: Huge opportunity by increasing per capita consumption Socioeconomic Pyramid Analysis NSE/Pop A B (High) 23% (42Mill People) C (Medium) 365 MT (41%) Income HH/ Month=R$ 4886 Food = 10% of Income 1 daily Yog/PC = 5% of food = 0.5% of income 345 M tons (39%) Fresh Dairy Avg. Vol PC kg/cap 33% (61 Mill People) Income HH/Month= R$ 1383 Food = 22% of Income 1 daily Yog/PC = 9% of food = 1,9% of income 5.6 kg/ cap D E (Low) 44% (81 Mill People) Annual PLF Penetration 85.2% (Total Population 184 Mill) 181 M tons (20%) Income HH/Month= R$ 485 Food = 40% of Income 1 daily Pot//PC = 14% of food = 6% of income (3x C class) Total market Fresh Dairy = 891 M tons 2.2 kg/cap 4.8 kg PC Sources: Latin Panel / Nielsen

6 Market potential: Huge opportunity by increasing per capita consumption Low effort to buy a yogurt in ABC classes 35.0% 30.0% D 25.0% 20.0% 15.0% C 10.0% 5.0% 0.0% A Bulgaria B Russia Tunisia Brazil S. Africa Argentina Hungary Poland Czech R. France Source: Euromonitor BR, MEX, USA and ARG corrected

7 Market potential: frequency of consumption and penetration WW Fresh Dairy Annual penetration 94% 99% 85% WW Fresh Dairy Frequency consumption Argentina Spain Brazil

8 Danone Brazil Mission To develop yogurt category, increasing frequency of consumption by creating relevance for consumers through a daily healthy and nutritive habit.

9 Danone has proved a consistent model to develop the category DANONE Net sales growth 23.8% Sales growth vs yo 2.0% 10.6% 15.7% E Source: internal data

10 Danone has proved a consistent model to develop the category Blockbusters growth vs market % Volume growth vs yo 10% 138% 5% 3% MARKET ACTIVIA DANONINHO CORPUS 2005 vs 2004 % Volume growth vs yo 10% 60% 26% 2006 vs % MARKET ACTIVIA DANONINHO CORPUS Source: internal data + Nielsen

11 Danone has proved a consistent model to develop the category Strong TRP growth 9,400 13,200 # TRPs 6, E Source: internal data

12 Danone has proved a consistent model to develop the category DANONE consolidates market share leadership % Share of Market (Value) 29.9% 27.9% 14.6% 29.8% 26.9% 13.3% 30.5% 25.9% 13.4% 32.8% 23.3% 13.5% YTD 2006 DANONE CIA NESTLÉ BATAVO+PARMALAT Source: Nielsen

13 Danone has proved a consistent model to develop the category DANONE Spontaneous awareness: 2000 to 2006 (GFK) NESTLÉ DANONINHO YAKULT PARMALAT ACTIVIA CORPUS Q12: I would like to ask you to tell me the name of all the brands of yogurts, fresh cheese and chilled dairy desserts that you have heard of, even if you have never consumed them. Source: GFK 2006

14 Danone has proved a consistent model to develop the category Strong work through consumer price positioning CONSUMER PRICE DANONINHO INDEX JAN MARK UP REDUCTION mar-05 mai-05 jul-05 set-05 nov mar-06 mai-06 jul-06 CONSUMER PRICE R$/unit NET SALES R$/kg Source: Internal data and Nielsen

Danone has proved a consistent model to develop the category DANONE Excellence in traditional channel Highly efficient business systems built

15 Danone has proved a consistent model to develop the category DANONE Excellence in traditional channel Highly efficient business systems built to hunt small retailers. Network revision: fewer and healthier distributors Excellence Program People Operation Execution Business Management

16 Danone has proved a consistent model to develop the category Excellence in POS execution Source: Internal data

17 Danone has proved a consistent model to develop the category Channel net sales vs Market value growth 20% Trad up to 9 check-outs 22% 26% 14% 28% check-outs 15% 25% Danone Net sales growth 05 vs vs 05 FDP market value growth 0% 05 vs vs 05 Danone Net sales growth FDP market value growth 18% Above 50 check-outs 21% Market 22% 25% 18% DANONE DANONE DANONE 6% -1% -6% 05 vs vs 05 Danone Net sales growth FDP market value growth 05 vs vs 05 Danone Net sales growth FDP market value growth Source: Internal data (only dairy) and Nielsen

18 Danone has proved a consistent model to develop the category Teams adequacy NEW ARRIVALS Potential MGRS - Evolution % new employees in % * * As of July 2006 Mgrs Non-Mgrs E

19 CONCLUSIONS Brazilian economy is stable and becoming stronger Dairy category has a big room for growth Danone Brazil has proved the model to take advantage of such big opportunity The current business model still has opportunities for improvement - Faster growth in small stores - Regional expansion (nordeast and south regions) - To keep on reducing GRP s cost and leveraging A&P Increase.

22 ... A bit of history La Serenísima founded in 1929 as a cheese producer. One of many local businesses. Family business owned by Mastellone brothers that started a sustained growth in the late 1960 s. Strong heritage behind product quality. Started partnership with Danone in We commercialize our products under La Serenisima name.

23 Argentina The country Strong economic recovery following the 2001 crisis GDP (growth vs LY) 11.7% 9.0% 8.9% 8.3% -3.4% -10.5% E

24 Argentina The country Unemployment rate % % % % % 2006 BE 10.0 %

25 Price Index Variation vs LY 118.0% 41.0% 3.7% 7.9% 12.3% 7.1% -1,5% -5.3% 2.0% 6.1% 10.6% 6.4% YTD 2006 WPI CPI CPI = Consumer Price Index WPI = Wholesale Price Index

26 Food Market Sizes Fresh Dairy is a value added food category in Argentina representing almost 20% of the the food market Share Volume Ytd06 (base 100: Food Market) Share Value Ytd06 (base 100: Food Market) Rest Food 13.6% Oil 8.0% Rice 4.8% Oil 7.5% Rice 2.9% PLF 13.6% Cookies 12.5% Rest Food 25.9% Cookies 21.4% Flour 7.5% Dry Pasta 6.3% Milk 33.7% PLF 18.4% Flour 2.3% Dry Pasta 5.1% Milk 16.3% Source: ACNielsen

27 Latam Fresh Dairy Market Sizes Argentina has the largest consumption per capita in the region. Almost two times Mexico s and nearly three times Brazil s. Countries Share 2005 (base 100: biggest Latam Fresh Dairy Market) Mexico 29.1% Venezuela 1.6% Argentina 20.7% Per Capita Fresh Dairy 2005 (Kg.) Colombia 6.9% Chile 6.3% Brazil 35.3% Argentina Brazil Chile Colombia Mexico Venezuela Source: Euromonitor

28 Market Evolution The Fresh Dairy market has been growing strongly and well ahead of the food basket for over four consecutive years. It has almost doubled pre-crisis level TOTAL National Channels Base 100 % same Bim B 02 2 B 02 4 B 02 6 B 02 1 B 03 2 B 03 4 B 03 6 B 1 B 2 B 4 B B 04 Dairy Source: Nielsen 1. Total Basket: 69 Food, Beverages, House & Personal Care 1 B 2 B 4 B 6 B 1 B 2 B 4 B Total Basket1

29 Volume Progress Danone: five consecutive years of strong volume growth. CAGR 4 Years +26% +21% +23% +45% +8% +4% +17% E

30 Revenue Progress (LC) Danone: five consecutive years of strong topline growth. Nearly twice precrisis level in dollar terms. CAGR 4 Years +41% +30% +40% +42% +53% +1% +31% E

31 Brand Portfolio Danone has a strong Portfolio composed of both global and local brands. All with dominant market position. Average SOM 76.1% SOM YTD % Size of Bubble = Sales 100% 90% 80% 70% 60% 50% 40% 30% Total Brands +30% 20% 10% 0% 20% 30% 40% 50% % Top Line Growth 10%

32 Actimel is an international blockbuster with rapid top line growth. +58% +35% +90% +74% +76% Variation % Sales +146% +143% +90% +78% +35% Vol. Share in segment 87% 89% 90% 96% 97%

33 Serenito is a local brand with dominant market position and fast, consistent growth. +7% +47% +12% +20% Tns Variation % Sales +36% +47% +19% +27% Vol. Share in segment 53.0% 55.0% 56.0% 60.4% 62.0%

34 Casancrem is a local brand with growing volumes and a strong share. +40% +62% +41% +25% Tns Variation % Sales 75% 50% 42% 33% Vol. Share in segment 20.5% 41.6% 56.2% 68.9% 69.0%

35 Market Shares Argentina Danone has a leading market position and has consistently expanded it over the last five years. VOLUME VALUE YTD YTD Source: Nielsen Ytd : Ene/Sep 06

36 Fresh Dairy consumption per capita in Kgs The consumption per capita has grown steadily and doubled since E Source: Nielsen

37 Key success elements La Serenísima name is recognized by consumers as the top brand in Argentina Which is the best brand in Argentina? Source: SEL June 2005

38 Preferred supplier Our distribution strength is a key source of competitive advantage and customer satisfaction Brand penetration None /Ns-Nc 4 1 st place 1 st place and 2 nd place Source: Nielsen 1) Total Basket: 69 Food, Beverages, House & Personal Care

39 Media Investment (GRP s) Continuous, heavy media support has made Danone the largest advertiser in Argentina. 166, ,356 GRP s GBA Ene/Oct 06 62,629 55,530 42,564 36,522 29,509 28,799 22,779 22,156 22,046 Danone Unilever SC Johnson Glaxosmithkline Bayer Aguas Danone Procter& Gamble Kraft Pepsi Coca Cola Molinos Rio Plata Source: Monitor de Medios Publicitarios

40 Sustained stream of innovation of both blockbusters and local brands BioPuritas Probio 2 Desserts

41 Argentina s Fresh Dairy Products consumption is well balanced across all Socioeconomic levels Population Distribution [%] Fresh Dairy Consumption Distribution in Volume Fresh Dairy PCC [kg] Fresh Dairy annual Penetration High 7.5% 11.3% Medium 15.2% 19.8% Low 44.2% 43.7% Marginal 33.1% 25.2% Fresh Dairy 2005: 100% Source: Latin Panel

42 We are well positioned to reach benchmark per capita consumption Fresh Dairy volume per capita [in kg] France Spain Argentina Poland Mexico Brasil Source: Nielsen + Country s internal sales

43 Moving forward, keep improving Continuous fast innovation Further leverage our scale Continue strengthening our distribution system Continue building a high performing organization

Danone Model in Motion

Danone Model in Motion Franck Riboud Sept 7 th, 2011 2 Disclaimer This document contains certain forward-looking statements concerning DANONE. Although DANONE believes its expectations are based on reasonable