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As filed with the Securities and Exchange Commission on March 19, 2003

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)

¨    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)

OF THE SECURITIES EXCHANGE ACT OF 1934

x    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2002

¨    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-14734

GROUPE DANONE

(Exact name of Registrant as specified in its charter)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

Ordinary Shares, nominal value € 1.0 per share: 137,335,122

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes    x    No    ¨

Indicate by check mark which financial statement item the Registrant has elected to follow.

Item 17    ¨    Item 18    x

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PRESENTATION OF INFORMATION

In this annual report, the “Company” refers to Groupe Danone, and “Danone” or the “Group” refer to Groupe Danone and its consolidated subsidiaries. All references herein to “U.S. dollars”, “dollars”, “cents” or “$” are to the currency of the United States; references to “France” are to the Republic of France; references to “French francs” or “FF” are to the currency of France prior to the introduction of the euro; and references to “euro” or “€” are to the currency of the European Union.

The Company’s next general meeting of shareholders has been called for April 1, 2003. As provided under French law, the meeting is to be adjourned in the event of lack of the required quorum. The date set by the Company for the meeting in the likely event the first meeting is adjourned is April 11, 2003. Accordingly, in this annual report, the date indicated for the next general meeting of shareholders is April 11, 2003.

Unless the context requires otherwise, all references herein to “markets” for particular products, or to market share, refer to markets for packaged products and exclude products which may be otherwise marketed or sold. All references herein to “fresh dairy products” and the dairy products business or markets refer to processed dairy products and exclude milk, cream and butter. The market share and volume data contained in this annual report have been compiled by the Company based in part upon statistics and other information obtained from several third-party sources. In addition, the Company utilizes its own surveys of competitors’ sales and customers’ purchases and inventory levels. The main third-party sources of information are A.C. Nielsen, IRI and certain local market research companies specialized in specific markets. The Company has also commissioned studies on specific matters by Zenith and Euro Monitor Information Services. Unless indicated otherwise, information regarding market share and ranking is based on volumes of sales.

The Company maintains and publishes statistical information relating to its business in metric units, such as metric tons and thousands of liters. One metric ton equals 1,000 kilograms or 2,204 pounds, and one thousand liters equals approximately 264 gallons.

Various amounts and percentages in this annual report have been rounded and, accordingly, may not total 100%.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain of the statements contained in this annual report that are not historical facts, including, without limitation, certain statements made in the sections entitled “Item 3. Key Information—Risk Factors”, “Item 4. Information on Groupe Danone”, “Item 5. Operating and Financial Review and Prospects” and “Item 11. Quantitative and Qualitative Disclosures About Market Risk”, are statements of future expectations. Forward-looking statements (within the meaning of Section 27A of the United States Securities Act of 1933, as amended) can be identified by the use of forward-looking terminology such as “believes”, “expects”, “may”, “is expected to”, “will”, “will continue”, “should”, “would be”, “seeks” or “anticipates” or similar expressions or the negative thereof or other variations thereof or comparable terminology, or by discussions of strategy, plans or intentions. Although the Company believes its expectations are based on reasonable assumptions, these forward-looking statements are subject to numerous risks and uncertainties. Risks that could cause actual results to differ materially from the results anticipated in the forward-looking statements include, among other things:

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Readers are urged to carefully review and consider the various disclosures made by the Company that attempt to advise interested parties of the factors affecting the Company’s business, including the disclosures made under the captions “Item 3. Key Information—Risk Factors”, “Item 4. Information on Groupe Danone” and “Item 5. Operating and Financial Review and Prospects” in this annual report, as well as the Company’s other periodic reports on Form 6-K submitted to the Securities and Exchange Commission. The Company does not intend, and does not assume any obligation, to update any industry information of forward-looking statements set forth in this annual report to reflect subsequent events or circumstances.

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PART I

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

Selected Financial Data

The Company publishes its consolidated financial statements in euro. However, the Company’s financial statements for 1998, 1999 and 2000 were originally prepared in French francs, and have been translated into euro for purposes of this document at the rate of FF 6.55957 = € 1.00, the applicable legal rate of conversion established on January 1, 1999. The euro did not exist prior to January 1, 1999, and the exchange rate used may not reflect the French franc/euro exchange rate that would have applied if the euro had existed at such times. Solely for the convenience of the reader, this annual report contains translations of certain euro and French franc amounts into U.S. dollars at specified rates. These translations should not be construed as representations that the converted amounts actually represent such U.S. dollar amounts or that the original amounts could be converted into U.S. dollars at the rates indicated or at any other rate. Unless otherwise stated, the translations of euro into U.S. dollars have been made at the rate of $ 1.0485 per € 1.00, or € 0.95 per $ 1.00, the noon buying rate in New York City for cable transfers in euro as certified for customs purposes by the Federal Reserve Bank of New York (the “Noon Buying Rate”) on December 31, 2002. See “—Exchange Rate Information” below for information regarding the euro and French franc/U.S. dollar exchange rates from 1998 to the present.

Unless otherwise indicated, the financial information contained in this annual report has been prepared in accordance with French generally accepted accounting principles (“GAAP”), which differ in certain significant respects from U.S. GAAP. See Note 2 to the Company’s audited consolidated financial statements for the years ended December 31, 2000, 2001 and 2002 (the “Consolidated Financial Statements”) included elsewhere in this annual report for a description of the principal differences between French GAAP and U.S. GAAP, as they relate to Group Danone and its consolidated subsidiaries, and a reconciliation to U.S. GAAP of net income and stockholders’ equity.

The tables below present selected consolidated financial data for the Group for the five-year period ended December 31, 2002. Such data have been extracted or derived from the consolidated financial statements of the Group, and are qualified by reference to, and should be read in conjunction with, the Consolidated Financial Statements and the Notes thereto and “Item 5. Operating and Financial Review and Prospects” included elsewhere in this annual report. The Consolidated Financial Statements have been audited by PricewaterhouseCoopers, independent accountants, as indicated in their report thereon, dated February 13, 2003, which also appears in this annual report.

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(See notes on following page)

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Exchange Rate Information

Under the provisions of the Treaty on European Union signed by the then 12 member states of the European Union in early 1992, a European Monetary Union, known as the EMU, was implemented on January 1, 1999, and a single European currency, known as the euro, was introduced. The following member states participate in the EMU and have adopted the euro as their national currency: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, The Netherlands, Portugal, Spain and Greece. The legal exchange rate between French francs and euro was established on January 1, 1999 at FF 6.55957 = € 1.00.

Since January 1, 1999, the euro has been the lawful currency of the EMU states. New public debt is issued in euro and outstanding obligations denominated in national currencies have been converted at the legal rates established on January 1, 1999 (unless specific contracts provide for an alternative exchange rate). Euro banknotes and coins entered circulation on January 1, 2002. During a limited period of time (from January to February 17, 2002), the French franc subsisted as a non-decimal denomination of the newly introduced euro banknotes and coins. The French franc was completely withdrawn on February 18, 2002.

The following table sets forth, for the periods and dates indicated, certain information concerning the Noon Buying Rate in New York City for cable transfers for foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York expressed in French francs per $ 1.00 or U.S. dollars per € 1.00, as the case may be. These rates are provided solely for the convenience of the reader and are not the rates used by the Company in the preparation of its Consolidated Financial Statements included elsewhere in this annual report. For its general financial reporting, the Group uses the rate published by the Banque de France. No representation is made that French francs or euro could have been, or could be, converted into U.S. dollars at these rates or any other rate. January 15, 1999 was the last day that the Federal Reserve Bank of New York published Noon Buying Rates for the French franc.

Fluctuations in the exchange rate between the euro and the U.S. dollar will affect the U.S. dollar equivalent of the euro-denominated prices of the shares and, as a result, will affect the market price of the ADSs in the United States. In addition, exchange rate fluctuations will affect the U.S. dollar equivalent of any cash dividends received by holders of ADSs.

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For a discussion of the impact of exchange rate fluctuations on Danone’s results of operations, see “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Impact of Changes in Exchange Rates”.

Risk Factors

In addition to the other information contained in this annual report, prospective investors should consider carefully the risks described below. The risks described below are not the only ones facing the Group. Additional risks not currently known to the Group or that the Group currently deems immaterial may also impair its business operations. The Group’s business, financial condition or results of operations could be materially adversely affected by any of these risks.

The actual or alleged contamination or deterioration of the Group’s products, or of similar products of other producers, could hurt the Group’s reputation and its operating results and financial condition

The Group’s business could be negatively affected by the actual or alleged contamination or deterioration of certain of its principal products, or of similar products sold by other producers. A substantial portion of the Group’s products, such as fresh dairy products, must be maintained within certain temperatures to retain their flavor and nutritional value and avoid contamination or deterioration. Depending on the specific type of food product, a risk of contamination or deterioration exists at each stage of the production cycle, including the purchase and delivery of food raw materials such as milk, the processing and packaging of food products, the stocking and delivery of finished products to distributors and food retailers, and the storage and shelving of finished products at the points of final sale. With respect to bottled water, the natural sources of Danone’s supply may be subject to pollution. In the event that certain of Danone’s products are found, or are alleged, to have suffered contamination or deterioration, whether or not while such products were under Danone’s control, the Group’s net sales, results of operations and financial condition could be materially adversely affected. In addition, reports or allegations of inadequate product quality control with respect to certain products of other food manufacturers could negatively impact sales of the Group’s products.

The Group’s sales may be affected by overall economic trends in its principal geographic markets

As a producer principally of consumer foods and beverages, Danone’s results of operations may be affected by the overall economic trends of its principal geographic markets. In periods of economic slowdown, like the current one, consumer purchase decisions may be affected by specific consumer behaviors, thus creating negative pressure on the sales volume of many of the Group’s products.

Seasonal consumption cycles and weather conditions may result in fluctuations in demand for some of the Group’s products and impact results of operations

Some of the Group’s product markets are affected by seasonal consumption cycles and weather conditions which can have a negative impact on the Group’s interim and annual results. In particular, bottled water and beverages experience peak demand during the summer months. As a result, the Group’s sales are generally higher during these months. Conversely, relatively cool summer temperatures may result in substantially reduced sales of bottled water and thus may have a material adverse effect on the Group’s results of operations.

Price increases and shortages of food and packaging raw materials could adversely affect the Group’s results of operations

The Group’s results of operations may be affected by the availability and pricing of raw materials, principally materials needed to produce Danone’s food and beverage products, including mainly milk, wheat, sugar and cocoa, and materials needed for packaging its products, including mainly PET and PVC plastics and light cardboard for cartons. Factors such as changes in the global or regional levels of supply and demand, weather conditions and government controls could substantially impact the price of food and packaging raw

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materials. A substantial increase in raw material prices (if not passed on to customers through price increases) or a continued interruption in supply could have a material adverse effect on the Group’s financial condition and results of operations.

Competition may lead to a reduction of the Group’s margins and a decline in profitability

The markets for each of Danone’s main business lines are highly competitive markets on which large international groups and numerous local actors are present. In Western Europe, the markets served by Danone tend to be relatively mature and competition for market share is therefore particularly intense. With respect to the Group’s activities outside Western Europe, certain international food and beverage groups also have important positions in certain product lines and in certain emerging markets and seek to expand such positions or enter new markets. In addition, as a result of the development of private labels by major retail and grocery chains, certain of Danone’s customers also offer their own competing products, which could pose a commercial conflict between Danone’s customers as such and as direct competitors. Failure to remain competitive would have a material adverse affect on the Group’s operating results and financial condition. As a result, the Group must continually strive to strengthen the selling power and premium image of its brand names, differentiate its products and improve the efficiency and management of its operations in order to maintain or increase its profit margins.

The Group’s strategy relies significantly on acquisitions, which involve risks

The Group’s strategy is to be a leading brand in each of the markets in which it operates. This strategy involves the pursuit of growth opportunities through acquisitions and alliances. The Group’s business may be harmed if it is unsuccessful in the integration process or fails to achieve the synergies and savings it expects from these acquisitions.

The Group’s dependence on key customers and increased market concentration could negatively affect the Group’s ability to achieve its targeted margins and reduce its competitiveness

While the final consumers of Danone products are individual retail customers, Danone sells its products principally to major retail and grocery chains. The distribution market has become increasingly concentrated, and in many of the Group’s markets, the Group’s top three customers in such markets have more than 50% of the market share. In 2002, the Group’s ten largest customers worldwide accounted in the aggregate for approximately 35% of the Group’s consolidated net sales. Five of those customers are French companies and the Group’s largest client, Carrefour, represents more than 10% of the Group’s consolidated net sales. Any increase in the Group’s dependence on key customers or market concentration generally could negatively affect the margins and competitiveness of the Group.

Changes in governmental regulations could harm the Group’s business

As a producer of consumer foods and beverages, the Group’s activities are subject to extensive regulation by national authorities and international organizations, including regulation with respect to hygiene, quality control, beverages or packaging and tax laws. The Group’s activities may also be subject to all kinds of barriers or sanctions set up by countries in order to restrain the international trade of products. The Group’s activities could be adversely affected by significant changes in such regulation.

The activities of the Group are also subject to increasingly restrictive regulation with regard to the release or discharge of substances or waste into the environment, the protection of the environment and the protection of health and human safety. The introduction of higher standards or more stringent regulations could necessitate investment and result in substantial costs for the Group.

Instability in markets where the Group operates could harm its business

The Group’s operations are subject to the risks and uncertainties attendant to doing business in numerous countries which may be exposed to, or may have recently experienced, economic or governmental instability,

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particularly in China, Latin America, certain regions of Asia and the Middle East. Also, a number of countries in which the Group’s operations are conducted have less developed and less stable legal environments, maintain controls on the repatriation of profits and invested capital, impose taxes and other payments and put in place restrictions on the activities of multinational companies. Management believes that it has taken and continues to take appropriate measures to minimize the risks arising from the Group’s international operations. However, there can be no assurance that the financial results of the Group could not be materially affected by a downturn in the economic conditions or growing instability in any of these countries or by any regional crisis.

The Group may not be able to adequately protect its intellectual property rights

Given the importance of brand recognition to its business, the Group has invested considerable effort in protecting its portfolio of intellectual property rights, including trademark registration such as, for example, the trademarks Danone, Evian, and LU. The Group also uses security measures to protect its patents, licenses and its proprietary formula. However, the Group cannot be certain that the steps it has taken will be sufficient to protect its intellectual property rights adequately or that third parties will not infringe upon or misappropriate its proprietary rights. Moreover, some of the countries in which the Group operates offer less protection for intellectual property rights than Europe or North America. If the Group is unable to protect its proprietary rights against infringement or misappropriation, its future financial results and its ability to develop its business could be harmed.

The Group’s results of operations and financial condition could be harmed by changes in exchange rates

The Group publishes its consolidated financial statements in euro. In addition, in 2002, approximately 54% of the Group’s consolidated net sales and approximately 64% of its operating income were generated by subsidiaries in the euro zone. However, a substantial portion of the Group’s assets, liabilities, sales, costs and earnings are denominated in currencies other than the euro, particularly in U.S. dollars, as well as in other currencies influenced by the U.S. dollar, British pounds, Chinese yuan or Polish zloty. As a result, the Group is exposed to fluctuations in the values of such currencies against the euro with respect to the translation into euro of amounts to be reflected in its consolidated financial statements. These currency fluctuations, especially with respect to these principal non-euro currencies, can have a significant impact on the Group’s results of operations. In particular, the appreciation of the euro relative to other currencies decreases the euro value of the contribution to the Group’s consolidated results and financial condition of subsidiaries which maintain their financial accounts in such other currencies. In addition, to the extent the Group incurs expenses and effects sales in different currencies in cross-border transactions, fluctuations in exchange rates can also affect the profitability of such transactions. As a result of the Group’s international strategy, the contribution by international activities to net sales, operating results and margins is expected to increase over time.

The Group’s results of operations and financial condition could be harmed by a failure of its information systems

The Group is increasingly dependent upon information technology network systems to obtain the numerical data which it uses as a basis for its operating management decisions. Any failure of these applications or communications networks may delay or taint certain decisions and result in financial losses.

Labor disputes may cause work stoppages, strikes and disruptions

The Group has in the past implemented and intends in the future to implement restructuring measures, including plant closings and headcount reductions, in order to lower production costs, improve efficiency of its facilities, exploit synergies and cope with the demands of a changing market. Restructurings could harm its employee relations and result in labor disputes, including work stoppages, strikes and disruptions, which in turn could have an adverse impact on the Group’s business or financial results.

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Item 4.    Information on Groupe Danone

History and Development

Groupe Danone is a société anonyme, a form of limited liability company, organized under the laws of the Republic of France. It was incorporated on February 2, 1899. Under Groupe Danone’s statuts, revised in 1941, the Company’s existence was limited to 141 years, i.e., until December 13, 2040, except in the event of earlier dissolution or extension. Its principal office is located at 7, rue Téhéran, 75008 Paris, France, and its telephone number is +(33-1) 44.35.20.20. The Company’s agent in the United States is The Dannon Company Inc., located at 120 White Plains Road, Tarrytown, New York, 10591-5536, USA.

The Company is registered with the Register of Commerce and Companies of Paris (Registre du Commerce et des Sociétés de Paris) under number 552 032 534.

The Company’s origins date back to 1966 when the French glass manufacturers, Glaces de Boussois and Verrerie Souchon Neuvesel, merged to form Boussois Souchon Neuvesel, or BSN. In 1967, BSN had sales of flat glass and glass containers of approximately € 150 million. In 1970, BSN began a program of diversification in the food industry and successively purchased Brasseries Kronenbourg, La Société Européenne de Brasserie and La Société des Eaux Minérales d’Evian, which at the time were major customers of BSN for glass containers. As a result of these acquisitions, BSN became France’s market leader in beer and bottled water, as well as infant food, which was at that time one of Evian’s product lines. In 1973, BSN merged with Gervais Danone, a French food group with significant sales in dairy products and pasta, thereby becoming France’s largest food and beverage group with consolidated sales in 1973 of approximately € 1.4 billion, of which 52% consisted of food and beverage sales.

Throughout the remainder of the 1970s and the 1980s, BSN focused on expansion in the food and beverage industry, primarily in Western Europe, after disposing of its flat glass business. This expansion included the acquisition of major breweries in Belgium, Spain and Italy; The Dannon Company, the leader in yogurt production in the United States; Générale Biscuit, a French holding company which owned LU and other major producers of biscuits in Europe; the biscuit subsidiaries of Nabisco, Inc. in France, Italy, the United Kingdom and Asia; and Galbani, Italy’s leading cheesemaker. As a result, with consolidated sales of € 7.4 billion in 1989, BSN became Europe’s third largest diversified food group, ranking first in France, Italy and Spain.

Beginning in the early 1990s, BSN pursued a strategy of consolidating its main business lines, developing synergies in Western Europe and expanding into growing markets. Moreover, BSN paved the way for a strategy of development outside of Western Europe. As a result, BSN increased the scope of its operations and strengthened its portfolio of brands through a number of significant acquisitions and joint ventures. Within Western Europe, BSN acquired Volvic in France to strengthen its position in the bottled water sector. Outside Western Europe, BSN pursued an active acquisition strategy to expand internationally in Asia-Pacific, Latin America and Eastern Europe, and in selected markets like South Africa and the Middle East.

In 1994, BSN changed its name to Groupe Danone, adopting the name of the Group’s best known international brand, with a view to consolidate its position as an international food and beverage group and to reinforce the marketing strength of the Danone brand name.

In 1997, the Company’s management decided to focus on three core activities on a worldwide basis (fresh dairy products, beverages, and biscuits and cereal products). The Group has since completed several significant divestitures in grocery, pasta, ready-to-serve meals and confectionery activities, mainly in France, Belgium, Italy, Germany and Spain. In 1999, the Group sold 56% of the capital of the holding company of its glass containers business and in 2000, the Group sold most of its European beer activities to different companies in the industry, including Scottish & Newcastle. In 2002, the Group sold Kro Beer Brands, owner of the brands Kronenbourg and 1664, among others; its Italian cheese and meat activities (Galbani); as well as its beer producing activities in

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China. See “Item 10. Additional Information—Material Contracts”. These divestitures since 1997 represented net sales of approximately € 5.3 billion in the aggregate. This strategy enabled Danone to concentrate its financial and human resources on product lines with strong commercial potential for which the Group holds a leading position in the world and to pursue its expansion outside Western Europe, through internal growth and strategic acquisitions, which in the aggregate represented consolidated net sales of approximately € 1.7 billion since 1997.

Since 1998, the Group has been organized around three core activities which together represented nearly 97% of the Group’s consolidated net sales at December 31, 2002:

Key Events in 2002

Following the first half of 2002, which was negatively affected by the difficulties faced in certain local markets (mainly for Robust in China and in the bottled water activities in the United States), the Group’s internal growth increased significantly in the second half of 2002, reaching 6% over the course of the year on a comparable basis (after eliminating changes in the scope of consolidation and currency exchange rates). Operating margin, which increased for the eighth consecutive year by nearly 61 basis points, reached 11.7%. The growth of the beverage business line came back to 8% on a comparable basis during the second half of 2002 to reach a level similar to that reached in previous years. Fresh dairy products confirmed during 2002 its role as the Group’s leading growth segment with a strong increase of its revenues, reaching 9.4% on a comparable basis, which includes an increase of 10.1% in the yogurt and similar products product line. Asia confirmed its position as the Group’s leading emerging market with approximately 15% of the Group’s total revenue. During 2002, Asia achieved a high internal growth of nearly 10% and a significant improvement of its operational margins, which now exceeds the Group average.

Following the competitive developments of the bottled water market in the United States, the Group announced two strategic agreements with The Coca-Cola Company to bring a new perspective to the development of the Group’s brands and to provide the Group with access to the powerful distribution network of The Coca-Cola Company, the leader of the non-alcoholic beverage market in the United States. Since July 1, 2002, the distribution of the brand Evian in North America has been carried out by The Coca-Cola Company, and the Group entered into a partnership with The Coca-Cola Company for the production, marketing and distribution of its brands of bottled water in the United States, particularly Dannon and Sparkletts. Following this agreement, which came into effect on July 1, 2002, the Group contributed five production sites and certain brands (either directly or through a licensing agreement) to a jointly held company, in which The Coca-Cola Company has a majority interest of 51%. As of July 1, 2002, these activities were accounted for under the equity method.

In order to consolidate its international presence, the Group maintained its international growth strategy by increasing its control of companies in which it does not own 100%, by reinforcing its current market position to achieve leadership positions locally and by expanding into other countries to develop the Group’s core business lines.

In fresh dairy products, the Group significantly strengthened its position in the United Kingdom through the acquisition from Uniq Plc of the brand Shape, the second leading brand in the low-fat fresh dairy products segment. This transaction enabled the Group to become the third leading company in the market in the United Kingdom for fresh dairy products and accelerate its focused growth strategy in the health food market.

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In the water segment, the Group increased its holding of Zywiec Zdroj, the leader of bottled water in Poland, the largest market in Central Europe, from 50% to 88%, consolidating its presence in this country following the creation, in 2000, of a joint venture with San Benedetto (Polska Woda). With the acquisition of Frucor at the beginning of 2002, the Group entered into the beverages market in New Zealand and Australia. The Group is the leader in the Asia-Pacific market for energy drinks with the brand “V”, and has a leadership position in the market for bottled water and fruit juices in New Zealand (in particular with the brand Mizone).

During the fourth quarter of 2002, the Group consolidated its worldwide leadership in the Home and Office Delivery water market (“HOD”) through various acquisitions in this segment: (i) Patrimoine des Eaux du Quebec, a leader of the Quebecois market; (ii) Chateaud’eau International, a leader on the French market and a significant player in a rapidly developing European market; and (iii) Sparkling Spring Water Holdings, a player in North America and Europe (completed early in 2003).

Among the key events in 2002, the Company was affected by (i) the sale of Kro Beer Brands, which owns the brand names Kronenbourg and 1664, to Scottish & Newcastle, under the framework agreement signed on May 18, 2000, (ii) the reorganization of the Group’s bottled water business in North America, through agreements with The Coca-Cola Company, and (iii) the effects of the monetary crisis in Argentina, which has considerably reduced the interests of the Group in that country both in terms of total assets and equity invested as well as revenues. See Note 3 to the Consolidated Financial Statements.

For a description of Danone’s principal capital expenditures and divestitures, including investments in other companies in 2002 and in the two preceding financial years, see “Item 5. Operating and Financial Review and Prospects—Overview—Acquisitions and Investments”.

Business Overview

Danone is one of the world’s leading food companies, with worldwide sales and operating income of approximately € 13.6 billion and € 1.6 billion, respectively, in 2002. Danone is the world’s leading producer of fresh dairy products and packaged water, and the second largest producer of biscuits and cereal products. Danone’s portfolio of brands and products includes national and international market leaders such as Danone (Dannon in the United States), the world’s leading brand of fresh dairy products; Evian, the world’s leading brand of bottled still water; Volvic, the Group’s other major international brand of bottled still water; LU, Europe’s leading biscuits brand and a strong presence in the rest of the world; Wahaha, the leading Chinese brand of bottled water; and Aqua, the leading brand of packaged water in Indonesia. In addition, the Group also produces sauces (internationally known brands such as HP Foods, Lea & Perrins and Amoy) and infant food in France (Blédina). Overall, approximately 70% of world sales were realized through leading positions in local markets.

The Group’s strategy relies upon (i) a concentration on three categories of products which have substantial elements of health and well-being, (ii) strong and grouped brand names, kept dynamic by sustained advertising campaigns, (iii) a balanced geographical distribution between developed countries and emerging countries and (iv) an ambitious strategy of innovation supported by an ever-growing knowledge of consumer expectations.

The Group’s strategy of international expansion, through both internal and external growth, has led to a significant increase in net sales outside Western Europe. These sales represent 41% of total net sales in 2002 compared to less than 15% in 1995.

The brand name Danone (Dannon in the United States) currently represents almost 40% of the Group’s sales and experienced internal growth of more than 9% in 2002. In addition to fresh dairy products, the brand has been extended to certain other products, such as bottled water in the United States and certain European countries as well as biscuits in Asia. Four of the Group’s brands (Danone, LU, Evian and Wahaha) represent almost 60% of the Group’s net sales.

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The continued internal growth of the Group in recent years is based upon the Group’s ability to sell quality products satisfying demands of local markets by (i) improving the products sold by recently acquired companies, (ii) introducing products available to large numbers of consumers in emerging countries to develop mass consumption of packaged food products thereby creating demand for the Group’s brands for the future, and (iii) taking advantage of the Group’s marketing know-how to sell value-added products already distributed in other countries, to accompany the increase in purchasing power and consumer trends. The Group believes that demographic trends and economic developments in Asia and Latin America will lead in the medium term, despite possible economic difficulties linked to the present economic climate, to significant market expansion. The progressive improvement in the purchasing power of local populations, together with the development of a middle class, is expected to increase demand for bottled beverages and brand name food products.

Danone’s main product for export is bottled water, mainly under the brand names Evian and Volvic. Evian was exported to more than 120 countries in 2002 and has strong market shares in the United States, Canada, the United Kingdom and Germany. Volvic is the leading still mineral water in Germany, a particularly dynamic market, and the leading imported water in Japan.

Business Strategy

The Group principally operates in three markets: (i) fresh dairy products, (ii) beverages and (iii) biscuits and cereal products. It is a market leader with a strong international presence in health/well-being, and a strong positioning that is supported by the Group’s prestigious brands.

Management believes that the Group’s business lines, whose growth rate in the past few years has exceeded the international average of the food and beverage industry, have a strong potential for development due to significant regional disparities in consumption habits, a worldwide dynamic trend for health-oriented products, and the development of a middle class in several emerging countries.

The Group will continue to follow a strategy whereby its three business lines will grow profitably, as a model of development to guarantee the Group’s values and specificity.

Danone believes that it can sustain an internal growth rate of 5% to 7% by (i) having a portfolio of activities concentrated on dynamic health-oriented products, (ii) substantially advertising and promoting a few chosen major brands, (iii) having a significant presence in emerging countries, (iv) occupying leading positions internationally in each business line built on strong leading positions in local markets and (v) offering promising innovations based on satisfaction of consumers.

Internal sales growth is expected to continue to be a leading force for improving the Group’s economic performances, due to the continuing leadership of products generating a favorable mix effect and the achievement by the Group of a critical size in several emerging markets. Concurrently, the Group will continue to promote numerous initiatives aimed at increasing its global efficiency and transversality (a global procurement program and optimization of the “supply chain” in each of the Group’s business lines, growing utilization of CPGmarket.com (platform of on-line purchasing) by each of the subsidiaries of the Group in Europe and the rest of the world), increased use of industrial capacities, an establishment of shared services for the human resources and finance functions, and the deployment of the SAP integrated management system started in 2002 in connection with project Themis. In an international recessionary climate and in the absence of a significant crisis, Danone expects that its consolidated net margin should continue to improve by 20 to 40 basis points per year.

The Group will continue its acquisition policy to consolidate current positions with the goal of holding a solid leading local market position in each of its business lines. With a significant free cash flow, defined as cash remaining from operating activities after capital expenditures, and a level of net debt representing 39% of stockholders’ equity at December 31, 2002, the Group can mobilize the necessary resources for its development.

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Products and Markets

The tables below show, for each of the years 2000, 2001 and 2002, consolidated net sales and operating income by principal geographic areas and business lines.

Geographic Areas

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Business Lines

Fresh Dairy Products

With net sales of fresh dairy products in 2002 of approximately € 6.3 billion, representing approximately 3.2 million tons, Danone is the leading producer of fresh dairy products worldwide, with nearly 18% of the world’s market share and an average market share of greater than 25% in each of its 10 most significant markets, which is three times more than its closest competitor. Danone’s principal products in this business line are yogurts and similar products which, together, accounted for over 90% of Danone’s total net sales of fresh dairy products in 2002, with the remaining 10% represented by infant food sold principally in France under the Blédina brand and from the sales of Galbani cheese and cured meat (consolidated during the first four months of 2002).

Principal Markets and Brand Names.    Sales in France accounted for 27% of net sales of fresh dairy products, sales in the rest of the European Union accounted for 40% and sales in the rest of the world accounted for 33%. Danone’s principal markets for fresh dairy products in Western Europe are France, Spain, Germany, the Benelux countries and Italy which, together, accounted for 61% of Danone’s sales of fresh dairy products in 2002. In the rest of the world, the Group’s principal markets are the United States, Mexico, Brazil and Poland.

In France, Danone is the market leader for fresh dairy products with over one-third of the total market. Danone markets yogurts and similar products and other fresh dairy products principally under the Danone brand name. The Group is also the market leader in France for infant food with its brand Blédina.

In Spain, Danone has a 55.96% interest in Danone S.A., Spain’s leading producer of fresh dairy products with a share of the Spanish market of approximately 50%. Danone is also the leading producer of yogurt in Italy, with a market share of more than 25%.

In Germany, Danone is an important player in a very fragmented market.

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Danone also markets its products in Belgium and Portugal where it holds the leading position through locally established production subsidiaries and in The Netherlands, Denmark, the United Kingdom, Austria, Switzerland, Finland and Sweden through marketing subsidiaries and franchises that sell Danone’s product lines.

In Greece, Danone also has a 30% ownership interest in the company Delta Dairy which specializes in fresh dairy products.

With the acquisition from Uniq Plc of the brand Shape in August 2002, the second-leading brand of low-fat fresh dairy products in the United Kingdom, the Group expects that Shape will allow Danone to double its net sales on a full-year basis in the United Kingdom and that Danone will become the third largest player in the fresh dairy product market in the United Kingdom.

In Eastern Europe, Danone is the leading producer of fresh dairy products in Poland, Hungary, the Czech Republic, Slovakia, Bulgaria and Romania. In each of these countries, the Danone brand name has one of the highest levels of brand awareness in the market. In addition, the Group is a key player with an industrial presence in Russia and has a marketing presence in the Ukraine, Croatia and the Baltic countries.

Danone is the leading producer of fresh dairy products, in terms of both net sales and volumes in Latin America, and the second leading producer in North America. Danone is in a leading market position in Brazil, Mexico, Argentina and Canada, and is number two in the United States.

In Asia Pacific, Danone is present in China and in other countries such as Australia and Japan through licenses, joint ventures or partnerships. Through its association with Shanghai Bright Dairy in China, Danone is pursuing the establishment of the Danone brand in a still relatively small market.

Danone also has minority interests in major producers of fresh dairy products in Morocco, Algeria, Tunisia, Saudi Arabia and Israel. In South Africa, Danone has a majority interest in Danone Clover and a 26.15% minority interest in Clover SA.

New Products.    Danone is continuously involved in the introduction of new products and lines while trying to develop, as quickly and widely as possible, a worldwide market for high-potential products. At the same time, Danone is continuously reviewing or relaunching some of its key existing products to meet consumers’ expectations, in terms of recipes, formats or packaging.

In 1995, Danone introduced Actimel, an organic dairy product, which is now sold in more than 20 countries and continues to enjoy very strong growth in sales. In 2002, net sales of Actimel increased by 35%, reaching close to € 480 million. The successful launch of this product in Argentina, Poland, Mexico and Russia confirms the potential of this type of product in emerging countries.

In 2002, the low-fat product line Taillefine/Vitalinea and health-oriented line Bio/Activia recorded a growth rate of more than 15% in each of their sales, respectively.

The youth market products Petit Gervais aux Fruits confirmed their success, in particular with the launch of the drinkable versions in Russia and Brazil.

In the United States, La Crème, a creamy and low-fat dairy dessert, has confirmed its success, demonstrating the evolution in local tastes. This trend should enable the Group to introduce to the dynamic, yet still small, U.S. dairy market, products developed in other regions of the world.

Market Trends.    Overall, the market for dairy products worldwide has grown relatively steadily over the past several years. This market has grown continually in Western Europe, driven by the innovative and dynamic nature of health-orientated products. In the United States, the market increased over the past few years, making it

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one of the most dynamic in the food industry in the United States. Emerging markets have generally enjoyed favorable conditions that have at times been affected by economic difficulties. Management believes that the introduction of new products, particularly health-oriented products, desserts, drinkable yogurts and infant foods, will allow Danone to continue to improve its market position. In addition, management believes that premiums often associated with innovative products will help raise the total value of the market for fresh dairy products.

Danone expects to see continued growth in demand for infant food in France, driven by trends toward increased consumption of convenience foods under the influence of new lifestyles and the success of new and innovative product lines that combine practicality and nutritional quality.

Beverages

Danone’s beverage activities comprise packaged water and other non-alcoholic beverages. In 2002, net sales of beverages were € 3.7 billion, of which 18% are accounted for by sales in France, 21% by sales in the rest of the European Union and 61% by sales in the rest of the world.

With 15.5 billion liters of packaged water sold in 2002 and a market share of 12%, Danone is the leading producer of packaged water in the world based on volume. Danone produces three of the five leading brands of bottled water in the world: Evian, Wahaha (China) and Volvic; and Aqua, the leading brand of packaged water in Indonesia. Danone is also the second leading producer of packaged water in Europe, and the leading producer of packaged water in Asia Pacific and Latin America.

Principal Markets and Brand Names.    The Group maintains strong market shares in Western Europe, where there is a long tradition of consumption of still and sparkling bottled water. Danone’s principal market for bottled water is France, where Danone has approximately 22% of the national market in terms of volume, mainly through its Evian, Volvic, Badoit, Salvetat and Arvie brands. Danone is also the leading supplier of bottled water in Spain, with approximately 21% of the Spanish market through its Lanjarón, Font Vella and Fonter brands. In Italy, Danone is a major supplier of bottled water, through its Italaquae S.p.A. subsidiary, which markets the Ferrarelle (sparkling water) and Boario (still and sparkling water) brands. In Germany and the United Kingdom, two markets experiencing rapid growth of the still water sector, the group has a leadership position with its Evian and Volvic brands.

In Eastern Europe, Danone is the market leader in Poland, the largest market in the region, with the Group’s subsidiary Zywiec Zdroj, acquired in 2001, and the joint venture, Polska Woda, entered into in 2000 with the Italian group San Benedetto.

In North Africa and the Near and Middle East, Danone owns a 50% interest in a significant producer of bottled water in Turkey and acquired in 2001, in collaboration with the Moroccan conglomerate ONA, a 30% interest in Sotherma, a leader in the bottled water market in Morocco.

In the United States, the Group has a significant presence in the HOD market, especially from its Sparkletts, Alhambra and, beginning in 2003, Sparkling Springs brand products. In addition, Danone is a leader in the bottled water market through its premium brand Evian which is now marketed by The Coca-Cola Company. Danone is active in the United States domestic market for water mainly through the Sparkletts and Dannon brands, through the partnership created in 2002 with The Coca-Cola Company pursuant to which Danone transferred 51% of its domestic bottled water activities in the United States to The Coca-Cola Company.

The Group is the market leader in Canada, with approximately 30% of the Canadian market of packaged water under its Crystal Springs, Labrador, Naya and Evian brand names. This position will be reinforced in 2003 by the acquisition of the company Sparkling Springs Water Holdings. In October 2002, the Group acquired the Quebecois company Patrimoines des Eaux, the third-leading producer of HOD water in the Canadian market and the leader in the city of Quebec.

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In Latin America, Danone is the market leader in packaged water. In Mexico, the Group is the market leader in terms of value, where it owns 100% of Bonafont, the leading Mexican producer of bottled water and 50% of Pureza Aga, number two in the Mexican home delivery market. Based on size, the Mexican bottled water market is one of the largest markets worldwide and the largest emerging market. The Group also has a leading position in bottled water in Argentina with brands such as Villa del Sur and Villavicencio and is the market leader in water in Uruguay.

In Asia, Danone has a leading position in packaged water with a market share of approximately 24%. In China, the Group is the market leader with more than 50% of the packaged water market, selling 2.8 billion liters in 2002 primarily under the Wahaha and Robust brands. The Group is also the market leader of dairy drinks in this country.

In Indonesia, the Group holds a 74% interest in Aqua. Aqua has a leading position in the country with more than 50% of the market. A significant part of its revenue is achieved in large containers. In 2002, the brand name Aqua had the leading position worldwide for water with 3.3 billion liters of water sold.

In Japan, during September 2002, the Group entered an agreement with Kirin Beverage Corp., one of the leaders in the Japanese beverage market, and Mitsubishi Corp., with the aim of accelerating growth of the Volvic brand in Japan and participating in the growth of the domestic segment of the market. The Group is already leader in value of the bottled water market in Japan and has a dominant position in the “premium” segment with its imported water brands Volvic and Evian.

New products.    Once again, innovations contributed significantly to growth, and the Group confirmed its ability to respond to the development of trends in consumption.

The flavored water segment, where sales were particularly strong, acquired new product types and brands. The Group launched new flavored waters, Volvic Fruits, destined for the youth market. The Taillefine product line was also expanded with two new types of flavored water available in one liter bottles, enabling the combination of health, pleasure and practicality. Danone Activ’ Aro was also launched on the Belgian and English markets.

New packaging formats were introduced in several countries. The launch of a five-liter format branded under Lanjaron, the second-leading national brand in Spain, will take advantage of the developing segment of large containers (garafas), which, with growth of 10% in 2002, accounts for over 40% of the Spanish market for still water. The successful launch of the two-liter carafe Montdore, the SMDA (Source du Mont Doreen Auvergne), targets families looking for a product that is both practical and aesthetic. Evian Nomade, launched in Japan during the summer, contributed strongly to the continuing growth of the brand in Japan during 2002.

Market Trends—Packaged Water.    Packaged water is one of the most dynamic segments of the world’s food market due to consumption trends favoring safety and/or health components of food consumption. Despite already relatively high levels of per capita consumption, the European market, the largest in the world, continues to experience steady growth. Outside Western Europe, the global trend in consumption of bottled water has shown a regular progression. Certain countries, including the United States, China and Indonesia, are experiencing significant growth.

Biscuits and Cereal Products

With net sales in 2002 of approximately € 3.2 billion, representing 1.2 million metric tons, Danone is the world’s second-leading producer of biscuits and cereal products. Danone’s biscuit products include cookies, which represent more than half of biscuit and cereal products net sales, as well as savory snacks, crispbreads and crackers, and packaged cakes.

Principal Markets and Brand Names.    Sales in France account for 36% of biscuit and cereal products net sales, 30% in the rest of the European Union and 34% in the rest of the world.