PARIS: French food industry group Danone said yesterday it is ramping up its presence in the growing Chinese market for dairy products with two deals to tap sales of yogurt and health foods.
Danone said it was investing about ¤325m ($418m) to strengthen its place in the potentially vast Chinese market, via two joint ventures in distribution and production. The intention is to build on a joint market share of about one fifth of the Chinese market for dairy products.
The two ventures are with dairy company Mengniu and its majority-owner COFCO, which says it is “the largest supplier of diversified products and services in the agricultural products and food industry in China”.
A joint statement said that the strategy targeted “the production and sales of chilled yogurt products in China, combining their respective assets in this category.”
The statement said: “Danone’s BIO (Activia) brand will put the new fresh dairy business in a solid position to build its strong leadership in the active health sector.”
Danone Chief Executive Franck Riboud said that the deals “will create the winning combination to unlock the potential of the fresh dairy products category in China.”
With the support of COFCO’s expertise in the Chinese food industry “our brands will benefit from significantly wider reach to the largest number of Chinese consumers,” he said.
COFCO said that it was “devoted to utilising renewable natural resources to provide healthy and nutritious food.”
Under the agreements, Danone is to create a venture with COFCO opening the way for a strategic partnership with Mengniu, a leading Chinese dairy product company with an extensive distribution network in which COFCO holds a majority stake.
Initially, Danone will hold 4.0 percent of Mengniu.
“But we have the intention to go above 4 percent up to 10 percent in the coming months,” said a Danone spokeswoman. “We believe in the future of this company and want to participate in its decision making processes.”
The second venture will be directly with Mengniu, a Hong Kong-listed firm established in 1999, and will group assets from both companies which had total sales in China last year of ¤500m.
Danone said this activity would account for an estimated 21.0 percent of the Chinese market and would comprise 13 factories in China.
AFP
