1. Danone Case Study
Purchasing and Sustainability
Group H
Amit Kumar Singh
Diana Marcela Torres Vergara
Valerie von Landsberg-Velen
Siyi Xu
El Mehdi Zrihni

2. II
Executive Summary
As one of the leading company in the field of fast moving consumer goods, Danone
recognized already in 1972, that its responsibility did not stop at the gate of the factory. This
company knew that it has to fulfil a dual project – economic and social. Since then Danone
implements projects all over the supply chain to achieve its aim. Looking at the upstream
activities, the RESPECT program is one if those projects. Because Danone already works at
a mature level in its purchasing department, it needed an elevated program as supporter.
This program helps to identify, evaluate and improve suppliers in regard of their CSR
activities. As it is important for Danone that its suppliers follow similar principles, the
guidelines are enclosed in the contract.
Even if Danone faced some challenges during the implementation, thanks to
RESPECT the supply base could be evaluated and developed further. However, Danone
can still further strengthen its purchasing activities by broaden the scope of the RESPECT
program and collaborating between different regions.

3. III
Table of Content
Executive Summary ................................................................................................................ II
Table of Content..................................................................................................................... III
Table of Figures .....................................................................................................................IV
List of Tables ..........................................................................................................................IV
1 Introduction ...................................................................................................................... 1
2 Diagnose the level of purchasing and supply management maturity at Danone ............. 1
2.1 Strategy..................................................................................................................... 2
2.2 Sourcing.................................................................................................................... 3
2.3 Organization Visibility and Influence ......................................................................... 4
2.4 Performance Measurement & Communication, Skills Training................................. 4
2.5 Supplier Evaluation, Development and Sustainable Supply Base............................ 5
3 Evaluate the Reasons for the Danone RESPECT Programme and discuss its Role in
Evaluating and Developing the Danone Supply Base............................................................. 5
4 Future Outlook ................................................................................................................. 8
5 Conclusion ....................................................................................................................... 9
Bibliographie............................................................................................................................V

4. IV
Table of Figures
Figure 1: Danone’s Portfolio Sales Distribution of 2014.......................................................... 1
Figure 2: Strategic Alignment of Danone’s Purchasing Strategy ............................................ 2
Figure 3: Kraljic’s Matrix for Purchasing Categories of Danone.............................................. 3
Figure 4: Process of RESPECT Program to select and evaluate suppliers ............................ 6
List of Tables
Table 1: Maturity Rating of Danone for different Categories ................................................... 2
Table 2: Suppliers registered on SEDEX 2014 ....................................................................... 7

5. 1
1 Introduction
Danone is a multinational company that was mainly founded by Isaac Carasso in
Barcelona in 1919. The worldwide company has now four fundamental business lines:
waters, fresh dairy products, early-life nutrition, and medical nutrition. As shown in Figure 1,
fresh dairy products make up for 52% of Danone’s sales with a turnover of 11.1 billion euros.
It is followed by early-life nutrition with 21% sales, waters with 20%, and finally medical
nutrition with 7% of the sales.
Figure 1: Danone’s Portfolio Sales Distribution of 2014
1
The multinational company has one global mission which is “Bring health through
food to as many people as possible”. Thus, in order to achieve its mission, Danone tries to
offer high quality food, to adapt the products to several cultures, and to explore on scientific
food research.2
Furthermore, based on the Danone case we will start by defining the level of
maturity; then, move to discuss the RESPECT program, and finally provide some
suggestions that Danone might follow in the aim to develop purchasing in the future.
2 Diagnose the level of purchasing and supply management maturity at Danone
To measure the level of maturity of purchasing for Danone, we follow the Purchasing
& Supply Management (PSM) maturity model where a list of characteristics is evaluated to
categorize them under one of the four stages: Clerical, Developing, Supportive and Strategic
Contributor. Every category has a range of objectives that are supposed to be met under the
parameters shown in Table 1. In order to evaluate them in detail we rate them “Very-low”,
“Low”, “Medium”, “High” and “Very-high”. The reasons for the ratings below in Table 1 are
explained later in this section.
1
Danone Registration Document 2014, p. 13
2
http://www.danone.com/en/#

6. 2
Table 1: Maturity Rating of Danone for different Categories
3
2.1 Strategy
The rating based on the classification in Table 1 gives us a fair indication of the
mature strategy of the purchasing department of Danone. The alignment to the corporate
strategy can be explained by the internal and external factors who influences these linkages.
As shown in Figure 2, sustainability is at its core with having an objective to make healthy
products while maintaining a sustainable food chain and to make the products available to
everyone and everywhere.
Figure 2: Strategic Alignment of Danone’s Purchasing Strategy
4
3
Johnsen et al, Purchasing and Supply Chain Management: a Sustainability Perspective, Chapter 3

7. 3
As a significant part of the company, purchasing strategy is aligned with the
corporate and business strategy. It is affected by innovation and stakeholder expectations.
Danone takes steps to achieve a sustainable and collaborative supply. It creates different
programs, such as RESPECT program and AIM-PROGRESS group to enable the company
to purchase as the way it is expected. For the purchasing strategy, the purchasing
department works in partnership with suppliers in order to have a sustainable supply with
better quality.
2.2 Sourcing
In order to create and to maintain a sustainable supply base, the upstream activities
enable Danone to develop and secure high-quality supplies both locally and globally for the
key raw materials: milk, water and fruits & sugar. The Kraljic’s Matrix in Figure 3 shows the
importance of the different purchasing categories.5
Therefore, purchasing departments’
continuous efforts focus on consolidating selection criteria for creating value. The RESPECT
program is one tool that helps to achieve this aim.
Figure 3: Kraljic’s Matrix for Purchasing Categories of Danone
As fresh dairy products contribute to over 50% of the sales, milk holds a strategic
significance for Danone. There are collection centres where milk is collected and then sent
to subsidiaries or plants. The prices of the milk are set locally over contractual periods as
they differ from one country to another. It shows that Danone either uses single or parallel
supply locally; suppliers have a strategic partnership with Danone’s subsidiaries based on
commitment and trust. Danone believes in investing on suppliers and even helps them to
develop. This is the reason why Danone helps local milk producers to manage their farms
4
Johnsen et al, Purchasing and Supply Chain Management: a Sustainability Perspective, Chapter 3
5
Danone Registration Document 2014, p. 17

8. 4
and supports them with necessary services like installation of water purification plants for
farms, veterinary treatment etc.
Packaging materials including cardboard and plastics are sourced globally to
optimize skills and volume effects. The prices are influenced by the interaction of supply and
demand as well as the economic cycles, the global demand and the oil prices.
For water, the company has installed water purification plants and are focusing on
preserving natural resources for un-interrupted supply in future.
2.3 Organization Visibility and Influence
The Group follows a very complex hybrid structure for purchasing: a central
purchasing team monitors and implements the purchasing policy at each level of raw
materials categories.6
On the one hand it holds the power to decide on the purchasing
strategy while on the other hand there are separate purchasing teams in every country,
which operate for the different categories. DanTrade, a parallel sourcing subsidiary, was
created to centralize all the purchasing activities of the Group. In the future it will bring
together all such activities and it will give high level of visibility to this collaborated
purchasing division in the organization.7
2.4 Performance Measurement & Communication, Skills Training
Every year Danone subsidiaries measure the maturity of their policies and
corresponding performance levels against sixteen ’key practices’ contained in five themes:
human rights, human relationships, environment, nutrition and health and governance.
Danone follows a standard for sharing the information and communicate it to the respective
stakeholders. The Group reports on its impacts and performance based on internationally
recognized standards and has developed its Sustainable Development report so as to
comply with the guidelines of the GRI 4 (Global Reporting Initiatives). Particularly, there are
Sustainability reports and Registration reports shared with stakeholders to communicate the
relative challenges and performance of the business. The Group has implemented an
integrated information system within its subsidiaries in order to optimize and streamline the
information flow while taking advantage of global synergies and limiting risks.8
6
Danone Registration Document 2014, p. 22
7
Interview with Anne-Laure Poulet, Respect Program Coordinator
8
Danone Sustainability Report 2014, p. 6

9. 5
2.5 Supplier Evaluation, Development and Sustainable Supply Base
Supplier selection and evaluation is done by the RESPECT program which is
elaborated in the document in section 3. Danone applies principles of sustainability for
healthy food. For that reason Danone works with suppliers collaboratively to develop the
supply base, integrating scientific institutions to develop packaging materials made of bio-
plastics which will have a positive impact on recyclability. For sustainable agriculture and
farms, Danone works farmers to training them and improve the quality of the materials
produced. Danone also seeks to reduce water consumption reducing 4% in 2014.
Overall, the maturity of purchasing of Danone is evaluated as high based on the
practices followed. Different social, economical and environmental aspects are included in
the corporate strategy which is directly linked with the purchasing strategy.
3 Evaluate the Reasons for the Danone RESPECT Programme and discuss its
Role in Evaluating and Developing the Danone Supply Base
In order to achieve its purchasing strategy, Danone implemented a program named
RESPECT program. At the beginning of this section, the reasons for developing the program
are introduced. Afterwards, the program will be explained shortly, in order to show its
connection with the supply base at the end.
There are four major reasons for Danone to implement the RESPECT program.
The first reason is to accomplish the mission of the company. Danone has many
stakeholders. As they are all concerned about Danone’s activities, Danone should be able to
give answers to its stakeholders. As a food company, Danone should demonstrate that its
behaviour is consistent with its purchasing strategy. The RESPECT program meets
stakeholders’ expectations in order to improve its overall performance.
The second reason is to reduce supply chain risks and avoid disruptions in Danone’s
supply chain. Based on the information of the Sedex platform, Danone creates a risk
mapping for its suppliers, where Danone can mitigate risks in this way. By reducing the risk,
Danone and suppliers can create true relationship and transparency. Danone can have a
better performance on supply chain risk management. Moreover, it can even lead to long
term sourcing with high quality suppliers.
The third reason is to keep sustainability. As early as 1972, Antoine Riboud, CEO of
Danone that time, was drawing attention on corporate social responsibility. He mentioned
not only economic but also social aspect were significant for Danone’s development. So, in
each business activity, there is the awareness of sustainable development. And now, the

10. 6
RESPECT program is the key point that can enable Danone to achieve its goal
economically, socially and environmentally.
The last major reason is to prepare for tomorrow. Danone considers that preparing
tomorrow is the business of today. The New CEO of Danone created a program named
“Danone manifesto”9
for promoting sustainability in global business. The RESPECT program
can contribute to indirect benefit to achieve this goal.
These reasons led Danone to create and implement the RESPECT program. It was
created in 2005, expanding Danone’s Fundamental Social Principles (FSP). RESPECT has
the goal to assure that every supplier complies and respects those FSP in its supply chain,
except milk suppliers. Danone ensures compliance with its FSP by including a clause in the
contract. Suppliers have to register on SEDEX (Supplier Ethical Data Exchange) and to
provide information about processes related with CSR.
Danone is looking for improving constantly its process, so that RESPECT is regularly
audited by different members to be updated with the latest practices about CSR.
As shown in Figure 4, the third step is a risk mapping in order to point out those
suppliers, which need to implement corrective measures. They have to go through an
external audit and finally an action plan will be implemented.
Figure 4: Process of RESPECT Program to select and evaluate suppliers
10
9
Interview with Anne-Laure Poulet, Respect Program Coordinator
10
Danone sustainabilty Report 2014, p. 59

11. 7
Table 2 shows the number of suppliers registered in SEDEX by category/region in
2014, with Europe representing the highest amount. Danone had integrated the 89% of its
suppliers in SEDEX. Currently, Danone works to involve all its suppliers in the platform.
Table 2: Suppliers registered on SEDEX 2014
11
The RESPECT Program helps Danone with the evaluation and the development of its
supply base. There are several benefits resulting from the implementation of the program.
First of all, the FSP are guidelines for the evaluation of the supply base. The suppliers
are assessed with these principles, so that Danone can follow up on every improvement.
Moreover, due to the usage of the SEDEX platform, Danone was able to create a new way
of searching for suppliers. As suppliers can decide which FMCG companies can access their
information, Danone might discover a new supplier.
Furthermore, one feature of the program makes a faster evaluation of a supplier
possible: “mutual recognition”.12
This feature comes along with the collaboration of the AIM-
Progress companies. Those companies are all working in the field of fast moving consumer
goods. Due to the AIM-Progress they share information about social responsibility and how
each company manage its suppliers in regard of this field.13
But not all companies use the
same protocol for their audits. So they implemented the agreement, that different audits from
other companies are as valid as their own one. Overall, it is obvious that this arrangement
supports Danone in order to work sooner with a supplier.
A third benefit of RESPECT is that Danone is able to build strategic relationship with
its suppliers. If the supplier went through the whole process and it was able to be in
conformity with the criteria, the first step in the direction of a strategic relationship is taken.
As the supplier might engage more in social responsibility and works thus closely together
11
Danone Sustainability Report 2014, p. 62
12
Interview with Anne-Laure Poulet, Respect Program Coordinator
13
Interview with Anne-Laure Poulet, Respect Program Coordinator

12. 8
with Danone, the two companies collaborate on more levels than just the normal buyer-
supplier relationship, thus building a closer relationship.
Finally, the program helps Danone to improve the performance of its suppliers as
well as strengthen its relationships. When the supplier is not conforming with the audit
criteria, Danone implements an action plan and works with the supplier in order to improve
performance. Danone does not stop the supplier process after a non-conformity in the audit,
but rather helps the supplier.
However, the RESPECT program does not only have benefits. There are also
challenges that Danone faced when it started the program.
The biggest challenge was people engagement.14
Not only from the side of the
supplier but also internally in the procurement department. When the program started, some
suppliers did not understand why they should go through this process, as they already
worked with Danone for a long time. They felt as if Danone did not trust them anymore. This
feeling weakened the relationship in the first place. However, when the suppliers understood
the reasons behind it and that it was not to regulate them, the relationship could end up even
stronger. But along with this challenge came the engagement internally: the procurement
staff – as they are responsible to contact suppliers and explain the whole process – also
needed to comprehend the aim and the mission. So it was up to Danone to develop and
train the employees’ skills. Once the knowledge was built and the efficient processes and
training was in place, the engagement did not cause many problems anymore.
Lastly, one challenge still exists – because of the long approval process, it takes time
from contacting a supplier to finally work with him. It is a time- and resource consuming
process. The procurement department need to bear this in mind.
Overall, the multiple reasons for and the benefits, that outweigh the challenges, of
the RESPECT program show that Danone made a good decision to implement it. It supports
the company in its mission and it follows the path of the dual-project – social and economic.
4 Future Outlook
The maturity reached by Danone especially concerning the purchasing department
has a lot to do with its pertinent strategies. Moreover, thanks to the RESPECT program
Danone has succeeded to merge between sustainable policy and both purchasing and
sourcing policy. Besides, concerning the future of DANONE’s procurement department
dealing with the purchasing activities, we would suggest to the worldwide company to:
14
Interview with Anne-Laure Poulet, Respect Program Coordinator

13. 9
1 Develop Sustainable and innovative supply chain management:
Danone keeps nature at heart of the food chain and has set four priorities for 2020:
Climate, Water, Packaging and Agriculture. Therefore, its efforts to reduce environmental
footprint is continuous. They should follow this path further and implement their goals all
along the supply chain.
2 Merge both Farm and Respect programs:
Danone has several programs all over the world and each program is implemented for
specific reasons. However, in order to have a centralized program Danone should think
about merging those two programs because they are quite similar in terms of objectives and
reasons.
3 Work on further collaboration between Regions:
Danone should collaborate between different regions to improve the performance of the
buyer supplier relationship by setting some defined standards that should be followed. Thus,
it will help to develop the purchasing department in a way several countries from the same
region can develop their own purchasing skills and end up by taking centralized decisions.
4 Implement IT in the supply chain of fresh diary product:
The multinational agro-food company has to include more technology applications such
as: big data, cloud systems, agent based software, analytics, data mining, etc. Those
technology applications might help Danone’s purchasing department to achieve its mission
efficiently.
5 Focus on core industry and outsource the logistics:
Danone should think about outsourcing the logistics and focus more on the core industry
which includes water, fresh dairy products, early-life nutrition, and medical nutrition For
instance, in Morocco Nestlé is outsourcing logistics to DHL in the aim to emphasis on the
core industry and avoid being disturbed by other logistics factors.
5 Conclusion
The purpose behind this report was to study, analyse, and identify the maturity
reached by Danone especially on the purchasing domain. Moreover, this report was to
evaluate both the reasons and the vision of the RESPECT program based on a sustainable
supply chain. Then, the analysis leads us to think about what Danone might do in the future
to avoid some anomalies.

14. 10
The strategies of Danone among the purchasing department showed the maturity of
the system in a way the company emphasis on improving constantly, taking into
consideration both the RESPECT program and sustainability. Those aspect help to Danone
to get a strong supply base supported by the collective cooperation between suppliers and
alignment of them with the objectives of the company.
On the other hand, the large number of suppliers of Danone makes the purchasing
model of the multinational company really complex. However, they can try to improve the
whole process by making it more transparent.
In a nutshell, Danone creates and implements constantly many programs all over the
world with aim to achieve profitability based on a sustainability approach.

15. V
Bibliographie
„Danone Registration Document 2014“. Company Reports. Retrieved March 6, 2016 from
http://finance.danone.fr/phoenix.zhtml?c=95168&p=irol-reportsannual.
„Danone Sustainability Report 2014“. Company Reports. Retrieved March 6, 2016 from
http://finance.danone.fr/phoenix.zhtml?c=95168&p=irol-reportsannual.
„Danone Mission and Strategy“. Danone Mission and Strategy. Retrieved March 6, 2016
from http://www.danone.com/en/#.
Johnsen, Thomas E.; Howard, Mickey; Miemczyk, Joe: Purchasing and supply chain
management: a sustainability perspective.
Interview: RESPECT Program Coordinator, Anne-Laure Poulet (2016): „RESPECT
Program“.