Juliette CAMUS

Charlotte DANDO

Rym OUARTSI

Danone dairy products : a well organized implementation in South

Eastern Asia Study of Bangladesh, Thailand and India

Master AINI : Marketing

M. Bennavent

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Summary

INTRODUCTION ............................................................................................................................. 3

I. A new way of consuming: the probiotics ............................................................................ 3

1. Food culture: a comparison between South East Asia and Western Europe ................. 3

2. The probiotics market in South Eastern Asia and Europe ............................................... 3

3. Danone global strategy: a focus on health concerns ...................................................... 5

II. Danone in South Eastern Asia: strategies based on partnership ........................................ 8

1. Bangladesh : a social business ......................................................................................... 8

2. Thailand: a strategic alliance ........................................................................................... 9

3. India: a joint-venture ..................................................................................................... 10

1. Danone legitimacy in South Eastern Asia .......................................................................... 12

4 P’s study ................................................................................................................................... 12

2. Figures and forecasts ..................................................................................................... 13

3. Food Value in Asia ......................................................................................................... 15

4. Balances ......................................................................................................................... 16

CONCLUSION ............................................................................................................................... 16

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INTRODUCTION

Danone Group is one of the leading companies in dairy products and it has known a fast

growth and expansion during the last ten years. Danone developed these last years a

strategy of products towards healthy food and aims to become a global leader in this field.

We’ll study in this report the marketing strategy of Danone to penetrate South East Asian

countries; thru the study of three countries; India, Thailand and Bangladesh; the products

and to get a global view of the strategy of Danone to introduce on new markets products

already manufactured and consumed in Western countries where Danone Group has already

gained shares of the market .

I. A new way of consuming: the probiotics

1. Food culture in South East Asia

In South East Asian countries food is not seen only as a nutriment but also as a source of

energy that can prevent from diseases or cure. Food is above all characterized by an

assemblage of plants and animals. Food is not seen just to feed but also medicine plants are

used in meals and the selection of the right food at any particular time must also be

dependent upon one's health condition at that time. It is believed as in Western countries

that some food diets are disease preventive. In this perspective we can see how Danone thru

its health oriented products aim to get introduced on the asian market, highlighting the

benefits taken from consuming dairy products.

2. The probiotics market in South East Asia and Europe

Presentation

Food and Agriculture Organization (FAO) of the United Nations defined probiotics as “live

microorganisms, which when administered in adequate amounts confer a health benefit on

the host”. Extensive researches highlighted the benefits of these products on prevention and

cure of certain diseases, such as inflammatory bowel disease, lactose intolerance. Its

availability in the form of food and dietary supplements like dairy products and baked

products has increased its consumption among the health-conscious population.

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Since a decade, probiotics are “fashionable”. Many studies and reports analyze the

influence of those products in a global way. The highest number of products innovations has

occurred in the field of probiotic functional foods and beverages: in the past decade, more

than 500 produts of this category has been introduced. Probiotics are also integrated on

presents products such as sausages, muffins, cheese, chocolates…

A report untitled Probiotic Market- Advanced Technologies and Global Market (2009 -

2014) and made by the agency markets and Markets estimates and forecasts this global

probiotics market. It divided its report on different part:

- Products: Functional foods and beverages - dairy products, non dairy beverages,

breakfast cereal, baked goods, fermented meat products, dry-food probiotics; animal

feed probiotics; dietary supplements - food supplements, nutritional supplements

and specialty nutrient.

- Applications: Human application- regular consumption, probiotic therapy,

prevention of diseases and probiotic application for animals.

- Ingredients: Bacteria in probiotic foods - lactobacilli, bifidobacteria, bacillus

coagulant; yeast and others.

A growing market in Asia and Europe

According to this study, the probiotics market is a growing one: it could reach 32.1 billion

dollars in 2014, with a growth of 11.7% from 2009 to 2011. The European Union is the first

consumer of these products with 42% of the market, followed by Asia (30%).

In Europe, the baby-boomer population is really interested in probiotics and in its

healthy benefits. In South Eastern Asia, this is the emerging urban middle class which is

really seduced by these products. Their characteristics correspond totally with the way of

feeding of Asiatic people. With a 1.2 billion people market in India, this is a growing market.

For example, India’s probiotics market has been highlighted by researcher Frost & Sullivan as

a “major growth market of the future”, with annual growth of 22.6 per cent until 2015. They

forecast that the Indian probiotics market could quadruple by 2015.

A market specialized in dairy products

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The dairy products correspond to 70% of the probiotics market share, and they are the

most sold in Europe. However, in South Eastern Asia, Probiotic supplements account for 49%

of sales with foods and beverage at only 4%. Particularly in India, the presence of major

probiotics suppliers and products makers such as Danisco, Chr Hansen, Yakult and Danone is

accelerating growth in probiotics dairy products. Yakult Danone India’s Kiyoshi Oike said in

September 2009 that “though the market for probiotic foods in India is still at a nascent

stage, as pioneers and global leaders in this category we will play a major role in developing

the probiotics food market in India”.

3. Danone global strategy: a focus on health concerns

a. Danone health concerns strategy

The CEO of Danone, Franck Riboud has decided to change the Danone strategy : until

2006, the strategy was focused on well-being. Now, Danone strategy is focused on health

concerns. However, for Danone health has always been an overriding concern:

Danone health concerns

• 1789 : discovery of Evian mineral water’s benefits

• 1886 : 1st biscuit Lu, with cereals

• 1919 : 1st yoghourts Danone sold excusively in pharmacies

• 1964 : 1st fresh cheeses 0% fat content

• 1996 : refocusing on 3 points based on nutrition and health concerns

One year after the group’s decision to focus exclusively on health and the introduction of

the new business lines, Danone had to accept additional responsibility with respect to health

governance.

This strategy to focus on health concerns is totally applied by Danone in South Asia:

- In Bangladesh, thanks to Shotki Doi yoghurts : its objective is to fulfill nutritional

needs to young and poor people

- In Thailand, thanks to products under the Activia brand: Danonino, to promote

growth in children; Actimel, to boost the body's natural defenses; Activia, to aid

digestion; and Vitalinea, to manage weight.

- In India, thanks to the Yakult Yoghurt, this is a probiotic.

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All the star products sold in South East Asia are products with health concerns. This

strategy corresponds totally to the global Danone Strategy, which is a principle of health

governance.

b. Health concerns in Asia

By setting up in South Eastern Asia, Danone has launched 3 main products:

- In Bangladesh: the Shotki Doi yoghurt

- In Thailand: the Activia brand

- In India: the Yakult yoghurt

Shotki doi in Bangladesh

The product launched by Danone in Bangladesh is a yoghurt called “Shotki Doi” (“yoghurt

to give strength”). It was specially developed to fulfill the nutritional needs of children in

Bangladesh. It is made with cow milk, date molasses and sugar. A single 60g cup provides

30% of a child’s daily requirements of vitamin A, iron, zinc and Iodine.

The initial Shotki recipe was not sweet enough for Bangladeshi taste. Therefore, it was

made sweetest.

Range of products in 2009:

- Shokti Doi 4 cups: plain yoghurt: 60g – 6tk; 80g – 12tk

- Mango yoghurt: 60g – 7tk; 80g – 12tk;

Activia in Thailand

In Thailand, the main products launched by Danone have different names, in order to

create separate market positions. All these products are probiotics, with healthy benefits:

- Danonino: to promote growth in children;

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- Actimel: to boost the body's natural defenses

- Activia: to aid digestion; and

- Vitalinea: to manage weight.

Danone has also created a website for Activia with frequently asked questions regarding

the benefits of consuming Activia on health, digestion and even allowing to use weight.

Yakult yogurt

Launched at the end of 2007, the Yakult yogurt is not totally new.

Actually, it exists since a long time in Japan, Yakult Honsha’s original

country. All studies about the product had been ever done and the

scientific evidence of the yogurt quality was already proved. In Japan,

Yakult yogurt is recognized as a FOSHU (Food for Specified Health Uses)

product, by the Ministry of Health, Labour and Welfare.

In France, we can find this product under the name of Actimel, a

product made by Danone France. The composition of Yakult yogurt is the same: 6,5 billion

good bacteria are included in 65 ml of a yogurt bottle. This bacterium is called Lactobacillus

casei.

Balance

Danone has jumped into the bandwagon of probiotics, with the same strategy in South

East Asia: it has launched probiotics yoghurts in the 3 countries concerned (Bangladesh,

Thailand and India). However, the implementation strategies were quite different in those

areas.

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II. Danone in South Eastern Asia: strategies based on partnership

1. Bangladesh : a social business

History of the project

This enterprise is a social business project, created by a joint-venture between the

Grameen Group and Danone Group in Bangladesh.

In 2005, Franck Riboud, Chairman and CEO of Group Danone and Muhammad Yunus,

funder of Microcredit met in Paris and decided to establish a partnership. In March 2006,

they created the Grameen Danone Foods Ltd (GDFL) based in Bangladesh.

This project is the first investment supported by “Danone communities”, an investment

fund created to support businesses that aim to be sustainable, with social and societal

objectives.

Between 2007 and 2008, first adaptations to the product were made and the year 2008

suffered from a crisis with the increase of raw materials’ prices. Today, after having resolving

this crisis, the main objective of the GDFL is to expand the project.

Project

The project was creating a yoghourt helping to fulfill the nutritional needs of children. In

this way, a plant was set up near Dhaka in Bogra, and as a social business, uses only locally

available ingredients in order to reduce the costs and the consumption of energies, and

promote local communities development. The Grameen Danone factory’s yearly capacity is

3000 tons. In may 2009, only 25% of the capacity of the plant was used. It has been

designed to rely on local labor rather than sophisticated machinery, avoiding expansive

maintenance problems and allowing poor and uneducated people working in: 40 jobs was

created thanks to this plant. In addition to the social way, the plant is environmentally

friendly: it is partially sourced with solar energy, collecting rain water…

Strategy

GDFL’s mission is “to reduce poverty by a unique proximity business model that will

provide daily healthy nutrition to the poor of Bangladesh”. According to Danone Group,

there are 4 main objectives:

- To bring health through nutrition at very affordable price for all Bangladeshi children

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- To improve living conditions of the poorest of the community by involving them in all

stages of the business model

- To preserve non-renewable resources as much as possible

- To be profitable to ensure economic sustainability

Professor Muhammad Yunus explains that “this is a unique opportunity to create a

business totally dedicated to social objectives, a company whose ambition is not to generate

profits for its investors, but committed to serve the interests of people without incurring

losses”. Franck Riboud said “I am utterly convinced that our future depends on our ability to

explore and invent new businesses and new types of enterprises”… “a great opportunity to

make progress in that direction and take another huge step towards fulfilling our mission: to

bring health through food to as many people as possible”.

This strategy corresponds with the will of the Group Danone to specialize itself in

probiotic products (decision taken by Franck Riboud in 2007).

2. Thailand: a strategic alliance

Project

On 25th January 2007, Danone has announced plans to work alongside a local

counterpart Dutch Mill Co. to distribute and manufacture a range of fresh dairy products

within Thailand. Dutch Mill Co., Ltd. is one of Thailand's largest manufacturers and

marketers of dairy products. The company has such products as UHT yoghurt drink, UHT

fresh milk and ice lolly. Dutch Mill employs a total of 1,300 employees .Its market is in

East and Southeast Asia.

Strategy

The group's decision to form a strategic alliance with Dutch Mill marks the growing

importance of the country's dairy sector to processors and packagers. Danone's operations is

keen to increase its presence in the region through the growing market for health orientated

dairy products in Thailand.

According to the company, consumption in Thailand alone for fresh dairy products is

around 4 kilos a year in average per capita consumption. This figure according to predictions

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made last year by Kasikorn Research Center, will continue to rise due to growing demand in

the country for healthier products.

The group added that niche categories like the ready-to-drink yoghurt were expected to

drive growth in Thailand's yoghurt sector by 15-20 per cent per year. It added that other

specialty products including high-calcium milk are also expected to grow in popularity.

Danone argues that establishing itself with a company that already boasts a number of

popular brands in the country, like Dutch Mill, will allow it to better adapt to challenges

within the market. As such, through its new local arm, Danone Dairy Thailand, the company

will combine its own technical and marketing resources with Dutch Mill's distribution and

production capabilities. Yol Phokasub, Chief Operating Officer of Dutch Mill Co., believes that

the partnership will benefit both companies operations in the country. "Thanks to Danone's

technical and R&D capabilities, we expect to shorten the time-to-market for value added

products and thus contribute positively to improve the Thai dairy industry".

3. India: a joint-venture

Project

Danone is one of the main leaders in the yogurt sector in the world. Its presence in major

powerful countries in Asia, as China with its partner Wahaha, reinforces its presence

legitimacy in South Asia. Among several other countries, Danone wanted to be active on the

yogurt Indian market, recently awake. Weakened by disagreements with Wadia Group in

India, Danone found some new partners to emphasize its presence on the yogurt Indian

market.

In December 2007, Danone started a new joint-venture with Yakult Honsha, a Japanese

company leader in probiotic products. Together, they set up a 50/50 joint venture called

Yaktult Danone India (YDI) to launch a new product on the yogurt market.

In April 2009, Danone put an end to its joint-venture with Wadia Group caused by a

discrepancy related to a will from Danone to start the Yakult joint venture. This action has

been done without the Wadia’s agreement and not legally allowed in India. This last

experience in India did not help Danone to start its new experience and, in the same way, to

save its image.

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The reason why Danone France built this joint venture with Yakult is very obvious. Yakult

is considered in India, and widely, in Asia, as a pioneer in probiotic products. Yakult’s

reputation was already made and helped Danone to build its own one. A lonely arrival onto

the market without any joint venture would have been risky as Danone was unknown in this

part of the world.

Strategy

The YDI’s strategy is totally new in India. As in Bangladesh, a strategy based on social

and health is launched. The goal is to promote health by the way of a dairy product. The cow

status gave a significant advantage to YDI: all cow productions are considered in India as a

holy gift from their god powers. Therefore, milk is naturally viewed as a health and pure

piece of food. But this data also has a drawback: giving its holy position, milk is a drink

dedicated to rich people and higher casts in India.

Probiotic products are very new in India. YDI is a pioneer on the market. These

products contain live micro organisms helping digestion and preventing from diseases. This

argument is very significant for probiotics sales. YDI plays on this argument to differentiate

its product from competitor’s products.

Balance

The whole strategy of Danone is based on partnership in South Eastern Asia. Even if there

are strong differences on the way the partnership is making ( a social business in Bangladesh,

a strategic alliance in Thailand or a joint-venture in India), Danone wanted to be cautious by

entering the South Eastern market with a partner who well known this big and growing

market, full of opportunities.

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1. Danone legitimacy in South Eastern Asia

4 P’s study

Product Price Promotion Place

Bangladesh

Shotki Doi : a

yoghurt to fulfil

nutritional

needs of

children

Cheap : less

tahn 0,05€

- Mini events

- Nutritional

information

- TV advert

campaign

- Little shops

(and now

bigger ones)

- Door to

door

Thailand

Activia: a

probiotic to

improve transit

middle

range:0,35€

Local website giving

health advises

super markets

in malls and

big cities, 7-

11 super

markets

India

Yakult : a

probiotic

yogurt

Middle and

upper range :10

rupee for 1

bottle (0,15€)

- Ambassador

: Indian

actress Kajol

- Yakult ladies

- Adverstising

in magazines

Yakult Ladies

(door-to-door)

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2. Figures and forecasts

a. Bangladesh

figures

Forecasts

P&L 2007 2008 2009 2010 2011 2012Actual Actual Budget Forecast Projections Projections

Plants 1 1 1 1 2 2

VOLUME (TNS) 76 149 500 1 500 4 500 6 000

Net Sales (CANN) 4 268 10 455 41 566 124 500 373 500 498 000

CANN / Kilo (TK) 56,2 70,2 83,1 83,0 83,0 83,0

5 635 12 353 19 047 23 955 40 500 62 000

Operating Profit (ROP) (16 797) (20 953) (23 312) (15 372) 22 139 35 500

ROP % (394) (200) (56) (12) 6 7

Free Cash Flows (72 101) (15 292) (38 148) (99 672) 22 639 40 500

GDFL FINANCIALPROJECTIONS

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b. Thailand

Forecasts

Thailand is the most developed countries between the two other ones. It enjoyed a GDP

growth by 2.6% in 2008 and by 1.6% in 2009, despite of the global crisis. Moreover, Thais are

now focused on their health, particularly in middle and upper classes. This way of thinking is

special to Asia: a well-being attitude is part of culture and this is one of the strengths of

Danone for the future. Milk consumption is rather new for this population and a range of

products could appear within next years.

More than that, Danone wants to use Thailand as a base country to export its products all

over Asia. Because the industry is well-adapted to produce dairy products, Danone chose

Thailand: the work force is still affordable and transport costs are low. In the meantime,

Thailand is a good test country to assess opportunities in other Asian markets.

c. India

Figures : Dairy product sales from January to June 2009

Country

Sales quantity

(thousands of

bottles/day)

Year on Year (%) Started business

India 9 204,6 Jan 2008

Forecasts

Forecasts for the next years to 2011 are very positive. Milk consumption will increase by

200% according to milk specialists which a good news regarding Danone position in India.

Moreover, we know that Asian people need milk consumption to avoid intestinal diseases, a

plague in this region, named irritable bowel syndrome.

All these factors led to Indians to focus on their well-being. A strong will of health care

increases in India, especially in the upper and middle classes. In the same time, middle class

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in growing, due to an elevation of standard of living, which will increase market shares for

milk products.

3. Food Value in Asia

For the three countries studied in this case, the food value is very essential. The

difference between the European culture and the Asian culture on this point is strong

enough.

In Europe, food is a way to feed and to satisfy ourselves. We also use food to create a

social and/or a professional link between people. Food is also considered as a pleasure as

well as a need.

In Asian countries, food is more than that. Over all, food is a way to cure people. It is

considered as well as a med and that is why people have a great respect towards food. They

cook in a very ritual way and the meal time is a holly moment.

This vision is not as wrong as we can imagine. Numerous foodstuffs in Asian countries

have effective impacts on health. For example, the use of spices has a great effect on people

health and protects Asians from some diseases as liver deficiency or memory problems.

In Bengladesh, food is very precious and rare. People care a lot about it and pay

attention to what they eat. The actual poverty in the country leads Bangladeshis to eat bad

quality food. The presence of a group as Danone is considered as a real chance and

attending this kind of project could be a good way to teach people how to run food

production and in this case, yogurts. As well as a healthy product, the Danone presence is a

chance for the poorest people in Bangladesh.

In India, food is a cure before a need to feed itself. The real aspect of the food is to

gather families. The use of fingers to eat is also one of the major points of their habits and

we can bring this habit together with our way of taking our meds: the gesture is the same.

Concerning yogurts, milk is considered a holly product and is totally taken for a med by

Indians.

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In Thailand, food, and especially milk, is vey essential. As the most developed countries

regarding the two other ones, Thais are more aware of food nutritional supply and use it as a

need and less for a cure. Governmental programs have been created to encourage people to

eat well and have a strong power on population.

4. Balances

Between Thailand, India and Bangladesh, we can analyze that most of cultural points are

similar. Their values regarding food and health care in general are nearly the same. Their

milk consumption need is significant as their basic food culture is more founded on rice

consumption and spices, which are also essential for heath. They all give in their culture a

healthy way to food as a cure element, a very different conception regarding the European

culture.

As their standard of living is not as high as in European countries, except from Thailand,

food is precious and need care. Milk also comes from cows, a symbolic animal in India and

Bangladesh. Taking care of this product is natural.

The three products launched in these countries know a great success because their

marketing strategies were well-adapted to the cultural dimension of each of them. Joint-

venture for India, social project for Bangladesh and a strategic alliance for Thailand helped in

this way to put ahead Danone’s products.

CONCLUSION

Introducing a global brand in a new market requires a global strategy. Even if the

ways of introducing a product were different in these countries they all followed the

same principles, get to know the market, get a local partner and adapt to local tastes.

With this strategy Danone aims to introduce new products and expand its presence

in South East Asia taking profit from previous experiences.