Owner of renowned Evian water and Activia yogurt, Danone, will be spending approximately EUR325 million or US$417 million to put up a joint venture with Mengniu of China. In addition, Danone will also be investing in the largest dairy producer of China and further broaden its local market. According to a statement released today by Danone, Its primary indirect interest will be an estimated 4% in China's Mengniu Dairy Co. with the plan to raise it in the long run. In addition, it will also arrange a business partnership with Mengniu in China for its yogurt production. The partnership will help Danone to increase its sales in the yogurt market of China, which according to the estimates of Euromonitor International, will increase by 57% to RMB71.6 billion by 2015. Mengniu's partnership would have a greater competitive advantage since food scandals have been coming out, pushing the demands for a much stricter quality control in the country.
According to a Hong Kong-based analyst at BNP Paribas Securities Asia, Charlie Chen, "The deal will help strengthen the research and development and capability of Mengniu's yogurt business, and potentially help them increase market share in China." Mr. Chen further explains, "Through its venture with Arla and Danone, Mengniu is also building a better brand image among customers."
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