18 / 364
Overview of activities, risk factors
2.5 Other elements related to Danone's activity and organization
DANONE
REGISTRATION DOCUMENT 2015
18
2.5 OTHER ELEMENTS RELATED TO DANONE'S ACTIVITY AND ORGANIZATION
Distribution
Although they vary to reflect local specificities, Danone's distribution
models reflect two main approaches:
•
distribution aimed at major retail chains;
•
distribution to traditional commercial sales points.
Moreover, a significant portion of the products in the early life
nutrition and medical nutrition markets are distributed through
more specialized distribution channels such as hospitals, clinics
and pharmacies.
Danone is constantly streamlining its logistics flows in order to
improve service quality while reducing costs. This policy is based
on an ongoing assessment of its organization, notably through out-
sourcing of distribution in collaboration with specialized companies.
Major retail chains
Danone establishes global partnerships with its main distributors
in order to help develop the sales of its products. These partner-
ships are related in particular to logistics collaboration, online
sales development and food safety management. Matters involving
pricing policies, which are up to each subsidiary, are not included
in these agreements.
In particular, Danone has taken several initiatives to work closely with
large retailers in order to optimize the flow of goods and the inventory
levels of its customers with the Efficient Consumer Response (ECR)
approach. In addition to inventory management, automatic inventory
replenishments and just-in-time delivery, ECR aims at working with
distributors to better manage consumer demand and expectations at
the sales points. To that end, the Company has implemented shared
inventory management systems with its leading distributors, that
are used to coordinate inventory levels among stores, as well as at
the distributors' and Danone's warehouses.
Danone also works with its customers to develop specific marketing
activities such as joint promotions.
Traditional market outlets
Globally, and in the emerging countries particularly, a large portion
of Danone's sales is generated through traditional market outlets
thanks to small-scale sales points networks. An in-house sales
force and exclusivity agreements with wholesalers represent a
competitive advantage for the Company in countries where traditional
commerce and independent supermarkets continue to account for
a significant share of food and beverage sales.
Moreover, in Latin America and Asia, a significant portion of the
Waters Division's products is directly distributed to consumers
(Home & office delivery or HOD).
Finally, in the emerging countries, Danone is developing new local
retail models through large networks of independent sellers.
Specialized distribution channels of hospitals,
clinics and pharmacies
In the early life nutrition andmedical nutritionmarkets, a significant
portion of products aremarketed in hospitals, clinics and pharmacies,
through specialized distributors or following a tendering process.
Danone also maintains an ongoing relationship with healthcare
professionals through its medical representatives, who meet with
general practitioners and specialists (pediatricians, nutritionists,
etc.) as well as pharmacists.
Competition
The Company's competitors in its respective business lines include
(i) large multinational food and beverage corporations such as
Coca-Cola, General Mills, Kellogg's, Kraft Heinz, Mondelez, Nestlé,
PepsiCo, Unilever, (ii) large corporations in the medical nutrition
and early life nutrition segments such as Abbott and Mead Johnson,
(iii) more local companies specialized in certain product lines or
markets such as Fresenius, Lala, Yakult and Biostime, or (iv) retail
chains offering generic or private label products.
The packaged food and beverage sector is highly competitive due to
the large number of national and international competitors. Danone is
confident that its strategy for profitable growth is strongly supported
by its products' quality, taste, affordability and innovative aspect,
and by the powerful brand image conveyed on health, nutrition or
societal and environmental responsibility.
Considering that success in this food and beverage industry is
achieved through strong local market positions, Danone strives
to be the market leader of each segment in every country where it
operates, always in compliance with laws and regulations relating
to competition. This strategy allows for a long-lasting, balanced and
constructive relationship with major distribution networks, by mar-
keting key products yielding growth and profitability for both parties.