Danone moves to satisfy Chinese taste for dairy food

May 20, 2013
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Numico production line … it all grew out of a milk formula/AFP
Numico production line … it all grew out of a milk formula/AFP

, PARIS, May 20 – French food industry group Danone announced on Monday tie-ups in China with the aim of establishing a strong position amid growing demand for dairy products in the vast Chinese market.

Danone, a world leader in the dairy food industry, will invest about 325 million euros ($418 million) to create two joint ventures with Chinese interests to tap the growth of Chinese demand for fresh dairy products, the firm said.

Danone said that it would create a venture with Cofco, a state-owned food industry company which would open the way for a strategic partnership with Mengniu, a Chinese dairy product company.

Initially, Danone will hold 4.0 percent of Mengniu with the intention of increasing this stake in line with future market conditions, the French firm said.

The second venture will be linked directly to operating activity.

The venture will group assets from the two companies and achieve total sales on the basis of figures for 2012 of 500 million euros.

Danone said this activity would account for an estimated 21.0 percent of the Chinese market and would comprise 13 factories in China.

It would benefit from the two brands, Danone and Mengniu.

The second venture would also develop synergies by using expertise from Danone in terms of quality and innovation and would benefit from the market leadership and “vast” distribution network operated by Mengniu which would hold 80.0 percent of the new business.

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