DANONE MENGNIU DAIRY CHINA OVERVIEW THIBAUT HELLEPUTTE GENERAL MANAGER CHINA FRESH DAIRY PRODUCTS

CHINA: FRESH DAIRY MARKET POTENTIAL

A BIG MARKET WITH HUGE POTENTIAL

CHINA FDP MARKET (Billions Euro)

CAGR 07-13: +21 %

TOP 6 FDP MARKETS IN VOLUME (Millions Tons)

1.0 1.3 1.5 1.9

2.4 2.8 3.4

6.1

0

2

4

6

8

Y07 Y08 Y09 Y10 Y11 Y12 Y13 Y17 E

2,4

1,8 1,8 1,8 1,5

1

German China Russia France USA Spain

36.0 34.0

26.6

16.0 12.9 12.6 10.9 10.3 8.7 7.6 7.1

1.1

France Germany Spain Russia UK Japan Canada Australia South Africa USA Brazil China

FDP PER CAPITAL CONSUMPTION (PCC) ACROSS COUNTRIES 公斤 Kg

Source:Nielsen and global team S&I, China apply 0.8 coverage; 2013 number

WITH POTENTIAL OF VALORIZATION

403%

349%

285%

267%

252%

220%

199%

134%

UK

Italy

Germany

Austria

Spain

France

Russia

China

Price Index Fresh Dairy/Fresh Milk Fresh Dairy Value

Easy to digest

Tasty

High Nutrient Density

Natural

DANONE DAIRY CHINA: BEFORE / AFTER

Before JV After JV

Mengniu & Danone

National player

13 factories

650,000 Tons

Profitable

> 3200 FTE + 3rd party

Danone only

Local player

1 factory

25,000 Tons

Not profitable

200 FTE + 3rd party

OUR CHINESE PARTNERS

THE PARTNER IN OUR DEAL

No.357 Ranked in Fortune500 Y2013

Mengniu Value MS 22 %

2 LEADERS TOGETHER: CHINA #1 WITH WW #1

Activia: Local player

20% MS in Shanghai

WHERE ARE WE AFTER 11 MONTHS IN THE JV?

AN ALIGNED FRESH DAIRY VISION

Become the indisputable leader of Fresh Dairy in China by offering safe,

qualitative and superior products through a more diversified portfolio

Develop Per Capita Consumption and Market Share

Food Quality & Safety : build trust and reputation

Product superiority: drive consumer loyalty

Attract Consumers (Kids, Seniors…) through Chinese and International brands

BUILDING FURTHER FOOD SAFETY AND QUALITY

From only experts To all functions alignment & engagement

From plant centric quality To consumer centric quality

2014 DIRECTION

1.PORTFOLIO MANAGEMENT 2.OPERATION EFFICIENCY 3.EXPENSE AND CAPEX

Focus on three high profitable brands: YoyiC, GuanYiRu

and Bio

Simplify SKUs

Format / Multi-pack

Increase asset utilization

Breakthrough in manufacturing and supply

chain

Cost Out Value In (COVI)

Focus A&P on top three brands

Return On Investment

Cautious on capex

Revenue Strong double digit growth

EBIT Positive growth

POINT 0: DIFFERENT BUSINESS MODEL & APPROACH

Direct sales

Big lines

/

On Forecast

Marketing driven: Pull

Freshness to consumers

Distributor

11 factories /

100 small lines

10,000 Tons/day

20 % own farm

On order

Sales driven : Push

D+1 or 2 to distributors

UPSTREAM

OPERATION

PRODUCTION

ROAD TO MARKET

TOP-LINE

FRESHNESS

1ST PILLAR: PORTFOLIO MANAGEMENT TOP 3 BRANDS:>50% PORTFOLIO

Superiority Innovation

Everyday & target group

SALES & POINT OF SALES APPROACH

Pricing

Space

Assortment Iconization

Brand Block

Freshness

Stock

OOS level PPED level

Fresh Dairy category

Brand maturity

3 Must Win Battles

ROOTS

TRUNKS

BRANCHES

Perfect Execution

Regional approach

Superiority Differentiation

2ND PILLAR: OUR OPERATIONS

Secure business growth Optimized COGs

+ 100 Ktons /year

3RD PILLAR: CAPEX & EXPENSES

YTD

RESULTS

PROCESS

PROJECTS

NEXT STEPS

VALIDATED THE NEW APPROACH

TO LEVERAGE OUR SCALE

3-YEARS PLAN

VALIDATED BY JULY 2014

FOCUS OUR INVESTMENT

Few key sites to serve our market

CURRENT SITUATION

Man An Shan Pilot

Engineering Capability analysis

3Y CAPEX PLAN ON KEY SITES

Detailed CAPEX plan for 5 key sites

2015 Investment for YoYiC+GuanYiRu

Define 3 Year Business plan

Volume-Format-Region-Inno

3-YEAR PLAN