Danone Group: The Kenyan Adventure Team F: Antoine Chaume Jean-Louis Chen Lorenzo Cancian-Kavoliunas

Mandate AnalysisFinancialsImplementation Danone group wants to expand and optimize its current operations particularly in Asia-Pacific, Latin America, Middle- East, Africa (ALMA) Assess the expansion strategy into Kenya and which option (A or B) is the most attractive for the Danone Group

Recommendation MandateAnalysisFinancialsImplementation Assess the expansion strategy into Kenya and which option (A or B) is the most attractive for the Danone Group Danone must address their current operational challenges before pursuing Option B

Analysis MandateAnalysisFinancialsImplementation Growth DriversKenyan Opportunity Population growth 15 cities with strongest growth on the planet 53% sales coming from emerging markets 44 Million residents High infant mortality Breeding ground athletes Life expectancy 62 years Danone’s products can be integrated and accepted by the Kenyan market and lifestyle

Analysis MandateAnalysisFinancialsImplementation Decreasing ProfitabilityReasons for Decrease Slowdown in top line growth Shrinking Operational and Net Profit Margins Decreasing earnings per share Operational costs Raw Materials Inflation costs Currency conversion Internal problems for Danone need to be addressed

Financials: Operating Inputs and Assumptions MandateAnalysisFinancialsImplementation Main differences are marketing expenses, employees and industrial costs Financing Net Income Option A: 9.79% Option B: 4,89% FCF Option A: 8.96% Option B: 4.28%

Financials: Revenue Buildup - A MandateAnalysisFinancialsImplementation Consumption in Option A is relatively higher

Financials: Revenue Buildup - B MandateAnalysisFinancialsImplementation

Financials: Margins MandateAnalysisFinancialsImplementation

Financials: NPV Analysis MandateAnalysisFinancialsImplementation Relatively the same payback period, although B has a lower NPV than Option A

Financials: Danone Group MandateAnalysisFinancialsImplementation Danone cannot ignore its current decline in profitability and must address these issues at hand

Alternatives MandateAnalysisFinancialsImplementation Option AOther Option Geopolitical instability Production safety Currency Risk Penetrate into Kenya by purchasing an existing dairy company Ensure operations and strategy in line with Danone Less implementation heavy Both options are viable however risks are difficult to mitigate

Recommendation MandateAnalysisFinancialsImplementation Assess the expansion strategy into Kenya and which option (A or B) is the most attractive for the Danone Group Danone must address their current operational challenges before pursuing Option B

Implementation MandateAnalysisFinancialsImplementation 3-6 Months1 Year Assess operations Set-up financial controls to optimize Begin operational improvements Hedge currencies (swaps) Begin expansion into Kenya Margin improvement crucial, expansion into Kenya to drive sales 2+ Years Assess expansion profitability Continuously improve supply chain Potentially enter into Option A if high profitability

Risks and Mitigations MandateAnalysisFinancialsImplementation RisksResult Geopolitical expropriation (war) Health care Demand not met Currency Increase in costs Financial instability Hinder shareholder value All risks with Option B can be mitigated somehow Mitigation Partner with government and social initiatives In line with Danone’s values Hedging Currency

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