Danone Fight in China Dairy Market

Danone Fight in China Dairy Market

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France’s Danone invested $550 million in kids鈥 food maker Yashili International Holdings

The deal strengthens Danone’s ties with China’s top dairy firm — Yashili’s largest investor and comes as the French firm’s key Dumex baby nutrition brand seeks to win back consumers after accusations of high prices, bribery and tainted milk scares last year.

The 25 percent stake purchase is also the first major investment since Danone split its chairman’s dual roles in September, handing the CEO job to Emmanuel Faber.

Kepler Cheuvreux analyst Jon Cox said the deal “made sense” and limited the chances of a large value-destroying deal in the short term: “It reduces the chance of big bang M&A, say involving (US firm) Mead Johnson, which the market was concerned about.”

Sources familiar with the matter told Reuters earlier this month that Danone wanted to pursue a takeover of US formula maker Mead Johnson Nutrition Group.

Analysts have also speculated Danone might sell its Medical Nutrition business and push deeper into markets like China and Africa with acquisitions.

China Opportunity of Dairy Market

China is Danone’s fourth-largest market, accounting for around 7 percent of its group sales. But global dairy firms such as Danone, traditionally dominant in the lucrative premium end of the milk powder sector, are having to fend off increasingly savvy local brands.

Beijing is also pushing consolidation to strengthen domestic players. Acquiring the stake in Yashili strengthens Danone’s links to the Chinese firm’s largest shareholder and the country’s biggest dairy firm, China Mengniu Dairy Co Ltd, whose stake will be diluted as a result of the deal. Danone owns a stake of around 10 percent in Mengniu, according to a February statement.

About Yashili Dairy

Established in 1983, experienced more than 20 years, Yashili grow up as the world famous modern large-scale enterprises from a small workshop which just has more than ten employees and the capital is less than RMB50,000.

The group now is composed of seven companies鈥攆oodstuff, dairy, nutrition health care, packaging and printing, etc.Nowadays the headquarters occupied 138 thousand square meters, and the new industrial city occupied more than 1200 acres, also have the producing bases of milk & soybean milk powder sources in Heilongjiang, Shanxi, Zhengzhou, etc.

About Danone Group

The Danone group is a French food-products multinational corporation based in the 9th arrondissement of Paris. It produces dairy products, bottled water, cereals, baby foods and yogurts. In the United States it is marketed as the Dannon Company.

The company owns several internationally known brands of bottled water: Aqua, Volvic, Evian, and Badoit; in Asia, it owns Yili, Aqua (Indonesia), Sehat (Malaysia, Brunei, Singapore) and Robust, Bonafont in Mexico, and has a 51% holding in China’s Wahaha Joint Venture Company. About 56% of its 2006 net sales derived from dairy, 28% from beverages, and 16% from biscuits and cereals.

Extending read:聽How Attractive Dairy Market 鈥 New Dancers in China,聽Evergrande Group Entering Dairy Industry

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