The Dynamics of Danone Group International Strategy

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The Dynamics of Danone Group International Strategy

Groupe Danone is a French multinational corporation in the 9th arroundisement of Paris that produces dairy products, cereals, bottled water, baby food and yogurt. Among the internationally known brands that the company owns are bottled water Aqua, Volvic, Avian and Badoit. The company is behind the biggest European yogurt brand Activia and has company has over 30 years’ experience in infant nutrition. The company was originally founded by Isaac Carasso in 1919 in Barcelona Spain. The company was then moved to France ten years later and a factory built. Currently the company has four subsidiaries that are operating in United Kingdom. The company is committed to business success, social progress, protecting its resources and minimizing its impact on the environment. The company’s mission is to bring health through food and beverages to a maximum number of people around the world. Danone has more than 300 scientists worldwide who are dedicated to research on infant nutrition. The company looks at the universe as unique and has a powerful nature for values; openness, proximity, humanism, and enthusiasm CITATION Hun08 l 1033 (Hunter, 2008).

The company has transformed from selling in Spain, France and Italy to an international supplier of dairy products, bottled water and health foods. The company also has focus on international large markets like Mexico, Indonesia, china, Russia, US, and Brazil. Danone is concerned with management of its increasingly disparate business empire. In some countries the company has been able to expand through acquisitions and by organic growth or joint venture in others. The company’s efforts to go international have seen it penetrate new markets like Russia which is has become its biggest national market. In china the company faced a setback when it sold 51% of its interests in its drink joints to its partner wahaha. The company is divided into four business areas which are fresh dairy products, water, baby nutrition and medical nutrition CITATION Mel06 l 1033 (Melewar, 2006).

Danone’s expansion and growth strategy is acquisitions and joint ventures. The company has been able to beat its rivals by production of unique quality products hence penetrating in new markets like Russia which has become its biggest national market.

The company’s net sales per business line have been increasing since 2007. The trading operating income has also been in the rise since 2007. The total operating income has been rising too since 2007. The total sales and operating income has increased from 12.7 million Euros in 2006 to 19.3 Euros in 2011. The trading operating income increased from 1.5 million Euros in 2007 to 2.8 Euros in 2011. The sales grew from 21% in 2007 to 62% in 2011 CITATION Hug07 l 1033 (Hughes, 2007)

According to the first half semester 2014 financial reports, the company has faced challenges from false safety alerts, record inflation in milk prices and weak currency strengths in emerging markets. This has resulted into net sales going up by on 2.2%. The trading operating margins have gone by11.27 percent. The underlying distributed margin per share is also 11.1% down at Euro 1.16 per share. However the business still remains solid with sales stabilizing in Europe and emerging markets reporting strong growth. The consolidated sales fell back 5.3% in the first half to 10467 million Euros. According to the half year 2014 balance sheet, the company’s net debt 8678 million Euros up from 7966 million Euros in December 31 2013, the net financial debt is 5580 million Euros up from 4722 million Euros in December 31 2013. This clearly show that the debt is huge and in continuously increasing. This poses a threat to growth expansion plans of Danone Group of companies. http://media.corporateir.net/media_files/IROL/95/95168/Docs/DANONE%20-%202014%20Interim%20financial%20report%20GB.pdf)

Reference

Hunter, M. L., Le Menestel, M., & De Bettignies, H. C. (2008). Beyond control: Crisis strategies and stakeholder media in the Danone boycott of 2001. Corporate Reputation Review, 11(4), 335-350.

Melewar, T. C., Badal, E., & Small, J. (2006). Danone branding strategy in China. The Journal of Brand Management, 13(6), 407-417.

Bourlioux, P., Koletzko, B., Guarner, F., & Braesco, V. (2003). The intestine and its microflora are partners for the protection of the host: report on the Danone Symposium “The Intelligent Intestine,” held in Paris, June 14, 2002. The American journal of clinical nutrition, 78(4), 675-683.

Hughes, S. B. (2007). Using Form 20-F reconciliations to internationalize an accounting course. Journal of Accounting Education, 25(3), 137-151.