Danone : First-quarter 2017 sales

First-quarter 2017 sales

Press release - Paris, April 20, 2017

• Low start to the year, in line with expectations : LFL sales growth at +0.7% (+3.0% in reported)

  WhiteWave Acquisition

• Key mid-term value creation metrics confirmed

• Expected 2017 recurring EPS accretion upgraded from "solid" to "strong"

  Upgraded 2017 guidance

• Double-digit recurring EPS growth at constant exchange rates

(compared to the 3.10€ recurring EPS reported in 2016)

All references in this document (including "Q1 2017", "WhiteWave acquisition" and "2017 guidance" sections above) to like-for-like changes, "like-for-like New Danone" changes recurring operating income, recurring operating margin, recurring net income and recurring EPS correspond to financial indicators not defined in IFRS that are used by Danone. Their definitions, as well as their reconciliation with financial statements, are listed on pages 7 & 8.

CEO EMMANUEL FABER'S COMMENTS

"Q1 has been an important time for all teams at Danone. As anticipated, sales are showing a slow start to the year. In a continued volatile environment, we have made progress on our key priorities across our categories. In particular, to address headwinds and sub-optimal execution in the Fresh Dairy category in Europe, which sequentially impacted our performance, we continue to adapt our plans. In addition, in a matter of only a few weeks, we simplified our global organization, and localized further our decision-making. This new organization allowed us to decouple the company's growth & efficiency agenda, with the Protein program launched to support both our short term results and our growth journey.

At the same time we are entering into a new chapter with the acquisition of WhiteWave. With leading positions in some of the fastest-growing, health-focused global categories, this combination will drive our Alimentation Revolution, our business performance, and will accelerate our 2020 profitable growth journey. I am particularly impressed with the performance of Alpro in Europe, which paves the way to a successful roll- out across many more countries in the future. In the US, last week's closing ended a prolonged process which caused growing managerial and business disruptions in a low growth context for the food sector. The combined experience and capabilities of the DanoneWave management team and the extensive work done by the integration team since July will fully deliver our synergy plan from day 1, address the current business challenges, and capture the business opportunities ahead starting from H2.

I am therefore fully confident that we will drive strong value creation from the WhiteWave acquisition, and deliver the attractive financial benefits we outlined last July. Reflecting this in the short term, we are now upgrading our Danone FY 2017 guidance to double-digit recurring EPS growth at constant exchange rate.

2017 is a year of construction that will strengthen Danone as an even more resilient company, best prepared to seize tomorrow's opportunities, with the right portfolio of products and brands to serve our consumers meaningfully in a balanced array of geographies. And with fully committed teams".

Q1 2017 SALES

€ million except for %

Q1 2016 Q1 2017 Reported

Total 5,306 5,464 +3.0% +0.7% -2.6%

Consolidated sales stood at €5,464 million, up 0.7% like-for-like, reflecting a -2.6% decline in volume and a

+3.3% rise in value. Reported sales were up +3.0%, including changes in exchange rates (+2.8%) and in the scope of consolidation (-0.5%).

The exchange-rate effect reflects the positive impact of changes in the Russian ruble, Brazilian real and the US dollar. Changes in the scope of consolidation result primarily from the deconsolidation of Dumex China since May 31, 2016.

The Fresh Dairy Products division reported sales down -2.3% like-for-like, including a -5.3% decline in volume and a +3.0% rise in value.

In Europe, sales continued to be impacted by difficult market conditions and Activia's performance. As announced in February, Danone is implementing all necessary initiatives to reverse this trend. Local execution plans are being reworked (packaging, communication campaigns and activation) and will be rolled out gradually, country by country in the course of the second quarter. They will be complemented by new product launches in Activia's range. In parallel, local brands such as Les deux vaches in France, Danio in Poland and in Italy as well as Oikos in Italy have continued to be successfully developed.

Within the CIS and North America region1, Danone generated stable growth.

• In the US, slower category growth and price pressure from competitors weighed on first-quarter sales. Backed by strong brands, market leadership and reinforced communication and innovation plans, Danone will continue to pursue its growth agenda as planned in 2017.

• In Russia, Danone once again demonstrated its resilience, in a consumption context which remains difficult. The enhancement of its brand portfolio's value through rising prices and very positive mix management continued to offset a decline in volumes in lower-end segments.

  The ALMA2 region reported a slightly negative performance, as consumption trends in Brazil worsened. Initiatives are being rolled out to boost the brand portfolio and protect the profitability equation. These include a Portfolio Revenue Growth Management (PRGM) program aimed at optimizing the product mix, establishing the best price-promotion-format positioning for each brand. At the same time, communication plans are being adjusted and innovation projects reinforced.

  1 North America = United States and Canada

  2 ALMA = Asia-Pacific / Latin America / Middle East / Africa

  WATERS

  The Waters division reported sales up +1.7% like-for-like, including a -1.3% decrease in volume and a +3.0% rise in value. Danone is continuously gaining market share with leading positions both in aquadrinks and plain water, supported by strong category fundamentals and brand activation plans.

  The division's overall performance reflected a slightly lower start to the year in Europe compared to previous quarters due to a high basis of comparison and Mizone's adaptation in China. In China, where non-alcoholic beverages remained in transition, Danone continued to focus on protecting Mizone's market share and fueling growth initiatives at the right pace and through disciplined investments.

  EARLY LIFE NUTRITION

  Early Life Nutrition sales rose +4.1% like-for-like, including a 0.1% rise in volume and a +4.0% increase in value.

  This solid performance reflected major gains in developing a direct distribution model in China, where "direct" sales rose by a very strong double-digit growth supported by its growing presence in specialized stores and direct e-commerce through successful initiatives, such as the recent launch of Aptamil Platinium on the ultra- premium segment.

  In parallel, the transition of the "indirect" channel for China, induced by a fast-changing regulatory environment, continued and should last until the new regulations are fully enforced, creating volatility in the performance from one quarter to the other.

  Danone also pursues its investments in Tailored Nutrition, a major growth driver in the short and medium term. This segment, which already represents around 10% of division revenue, rose strongly in the first quarter.

  MEDICAL NUTRITION

  Medical Nutrition sales rose by a steep 8.8% like-for-like, with volume and price mix contributing +4.8% and

  +4.0% respectively.

  These figures reflect the division's very strong performance in Europe and continued growth in emerging markets, mainly driven by China.

  China, Turkey and Benelux were main contributors to growth, observed across all categories, with a strong contribution from the Neocate and Nutrison brands.

  WHITEWAVE INTEGRATION: IMMEDIATE IMPLEMENTATION OF NEW ORGANIZATION

  DANONEWAVE

  Danone and WhiteWave combine their activities for North America to operate as a Strategic Business Unit, named "DanoneWave". As previously disclosed, the combination will include Danone Dairy's and WhiteWave's current North American businesses under the leadership of Lorna Davis, who has been appointed Chief Executive Officer of the combined entity.

  This new organization is scaled to accelerate Danone's growth journey towards 2020 and is specifically designed to immediately generate the synergies announced last July, set the operational business back in motion after the impact of a lengthy process of closing, while preserving WhiteWave's entrepreneurial spirit and its innovation capacity.

  As part of this new organization, Danone is pleased to announce that Blaine McPeak, WhiteWave's former Chief Operating Officer (COO), is appointed COO of DanoneWave effective as of the closing date. Blaine McPeak is responsible for the business operations, building, commercializing and implementing the strategic growth plans of the new entity.

  In parallel, the dedicated Integration team, in place since last July, will ensure the rapid and smooth integration of businesses, starting to deliver the synergy plan immediately.

  DANONE'S NEW CATEGORIES AND REGIONAL BREAKDOWN

  To reflect Danone's recent evolution, including WhiteWave's integration, the Company will use a new divisional and regional breakdown to report its operations, starting Q2 2017:

  • DanoneWave includes Danone Fresh Dairy Products' and WhiteWave's current North American businesses;

  • Fresh Dairy Products includes Danone's Fresh Dairy Products in Europe, CIS and ALMA3 as well as WhiteWave's business in Europe, Latin America and China;

  • In line with the organization announced last February, Early Life Nutrition and Advanced Medical Nutrition will report as a single category to foster synergies and accelerate momentum for both businesses;

  • Waters will be reported as previously.

    As of Q2 2017, the performance will be reported based on two different regions:

  • Europe and NORAM4 will report as a single region;

  • Rest of the World's (RoW) perimeter will cover current ALMA4 and CIS regions.

3 ALMA = Asia-Pacific / Latin America / Middle East / Africa

4 North America = United States and Canada