4 Divisions MEDICAL NUTRITION

BABY NUTRICION

DAIRY

WATERS

DANONE IN THE WORLD

4 Divisions MEDICAL NUTRITION

BABY NUTRICION

DAIRY

WATERS

DANONE IN THE WORLD

17 Billion € – sales in 2010

PRODUCTS BY BUSINESS LINE

Dairy products - No 1 worldwide Baby nutrition - № 2 worldwide

Waters - №2 worldwide Medical nutrition - No 1 in Europe

1) Live to eat vs Eat to live

↑

220 million EUR are invested into R+D every year.

a) Danone Research has a staff of 1,200 including 600 scientists and 450 specialized developers;

b) Partnerships with over 200 scientific institutes around the world;

c) 100% of Danone researches are focused on healthy and nutritional qualities of products

2) “Double Project”

A business can only survive if it improves social wellbeing of people around it.(Antoine Riboud, Marseille 1972)

a) Social Farming + Business

b) Environment

3) Healthy growth

DANONE GLOBAL STRATEGY IN DAIRY

1) Live to eat vs Eat to live

↑

220 million EUR are invested into R+D every year.

a) Danone Research has a staff of 1,200 including 600 scientists and 450 specialized developers;

b) Partnerships with over 200 scientific institutes around the world;

c) 100% of Danone researches are focused on healthy and nutritional qualities of products

2) “Double Project”

A business can only survive if it improves social wellbeing of people around it.(Antoine Riboud, Marseille 1972)

a) Social Farming + Business

b) Environment

3) Healthy growth

DANONE GLOBAL STRATEGY IN DAIRY

1) Live to eat vs Eat to live

↑

220 million EUR are invested into R+D every year.

a) Danone Research has a staff of 1,200 including 600 scientists and 450 specialized developers;

b) Partnerships with over 200 scientific institutes around the world;

c) 100% of Danone researches are focused on healthy and nutritional qualities of products

2) “Double Project”

A business can only survive if it improves social wellbeing of people around it.(Antoine Riboud, Marseille 1972)

a) Social Farming + Business

b) Environment

3) Healthy growth

DANONE GLOBAL STRATEGY IN DAIRY

SOME OF OUR BRANDS IN UKRAINE

DAIRY SECTOR IN UKRAINE – Overall Decline

18,6

9,4

3,72,6 2,5 2,2 2,1 2,2 2,2 2,16

0,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

16,0

18,0

20,0

1990

1995

2000

2005

2006

2007

2008

2009

2010

2011

kT

on

s

5,9

7,89,0

11,2 10,8 10,1 9,7 9,4 9,0 8,8

0,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

16,0

18,0

20,0

1990

1995

2000

2005

2006

2007

2008

2009

2010

2011

kT

on

s

Industrial Farms

Share in milk total production 20%

Quality TBC=600 th/ml

Average Cows 200

Individuals

Share in milk total production 80%

Quality TBC=5 mln/ml

Average Cows 1,7

2011 - estimation

Results

Milk prise (farms) = +63%, but dairy products only 35% on average.

Cost for raw milk price for processors without subsidies – increase much

higher!

Industry is suffering and may disappear.

Transformation individual

into family farms through

Coops + Demo Farms

Vertical Integration

through partnerships

DANONE MILK STRATEGY 3-TIER STRATEGY

Individuals - 80%

Industrial Farms –

16%

Large Farms (1000

and more cows) - 4%

Farm Development

Program + loans

COOPS UNDER PROJECT ARE LOCATED

IN 5 REGIONS OF UKRAINE

COOPS UNDER PROJECT ARE LOCATED

IN 5 REGIONS OF UKRAINE

After 1 year initial results promising

Services supplied

• milk collection and cooling, delivering of drinking water,

• cows insemination & veterinary services,

• forage production (embaling of hay and straw, silage production),

• support in realization of other products from individuals,

• wholesale buying of consumer good for coops members by lower prices

trainings and other.

25 COOPS

31,1 mln. UAH invested (incl. DemoFarm)

2 218 individuals (households families, coops members)

40% increase income for individuals

30% of Kherson Milk coming from COOPS

Project: Milk Communities in Ukraine

Cost: 1M€ + 1.6 million (USA)

Project: DemoFarm

Cost: 0.5 M€

Project objectives: to show 5-year

vision to coops

To enroll future partners (banks,

government, farmers, coops)

Individuals

Micro farmers

Service

Coops

Step 1

FROM INDIVIDUAL FARMING TO

SMALL SUSTAINABLE FARMING

FROM INDIVIDUAL FARMING TO

SMALL SUSTAINABLE FARMING

UKRAINE

1.6 million (USA)

200 heifers purchase and delivered to coops members

Calves has to be given for free to other coops members

as a gift

Project: Milk Communities in Ukraine

Cost: 1M€ + 1.6 million USD (USA)

Project: DemoFarm

Cost: 1.5 M€

Project objectives: to show 5-year

vision to coops

To enroll future partners (banks,

government, farmers, coops)

Individuals

Micro farmers

Service

Coops

Service +

Production

Coops +

Micro Farmers

Farms

Medium or

Small

Step 1 Step 2 Step 3

FROM INDIVIDUAL FARMING TO

SMALL SUSTAINABLE FARMING

Farmer School

Milk Farm

Coops

DemoFarm project aims

to create learning

opportunity to coop

members who is willing to

start family farm

Farmer School is

located/ integrated at

modern milk farm (120

cows) with model

visualization at 3 private

family farms

DemoFarm services:• Farming knowledge &

practice

• Feeding based on

balanced rations

• In-depth vet & genetic

services

small

demo farm

DemoFarm mechanism

• Zero cycle (foundation)

• Frame construction

• Construction of roofing

• Installation of sections

for livestock keeping and

internal utility networks

• Mounting of equipment

Sep

Oct

Nov

Dec

Jan

Demo Farm is under construction

Mega Farm Projects

JV

- JV gives Danone

(with control stake)

control over

production cost of

milk.

- Projects could be

formed in Portfolio

and financed together

with EBRD and

Government.

- 1-2 projects to be

approved in 2011.

Partnership

- Greenfield and

Brownfield

projects.

- Danone provides

long-term contract

(7-10 years) >>

partner builds

farm >> Danone

buys cows.

- 1-2 projects to be

approved in 2011.

3 way Partnership

- Danone in co-

operation with the

Bank offers low-rate

loans in UAH.

- APR 9-14% vs 17-

22% in Market

- Over 15 farms will

use the financing.

• Availability of

lands for crops:

- land size and

quality

- water access

- presence of feed

market

• Partner's

mindset:

- skills/competences

- enterpreneural spirit

- management &

controlling

- immaculate business

image

• Economic

criteria:

- total investment per

animal <8kEuro

- open book approach

- readiness to co-

finance in early

stage of the project

- acceptance of exit

strategy

CRITERIA

IN EGYPT DANONE WENT ALL THE WAY!

First “Dan Farm”

Overview of overall Impact

3500 cows heads by end of 2012

Increase milk supply by 25 Thsd. T

Attract/Invest 13 Mln. Euros (with loans

and interest rate compensation)

High standards in milk production:

Quality, Safety, Productivity, low costs

Improvement of social wellbeing of rural

people

1. Continue our growth

2. Positively impact dairy farmers

3. Support Ukraine’s development in Dairy

(Farming + Processing)

4. Build “Crisis Proof” Business Model

WITH THIS ACTION PLAN WE PLAN TO: