Danone’s new partnerships to advance dairy sector in China

Danone has signed an agreement with COFCO, the state-owned largest food company in China, to form a joint venture. COFCO will sell 148,014,022 shares in China Mengniu Dairy Company to the joint venture, meaning COFCO and Danone will own 51% and 49% respectively in the newly formed company.

Danone will become a strategic shareholder in Mengniu, owning an indirect interest of approximately 4% at the initial stage, with an aim to increase the interest in Mengniu based on market conditions in the future.

In addition, Danone and Mengniu have signed a framework agreement to establish a joint venture for the production and sales of chilled yoghurt products in China. The companies say the venture will achieve synergies by introducing Danone’s expertise in quality and product innovation while leveraging Mengniu’s leadership and distribution capability in China’s yoghurt category.

“Joining the strengths of Danone, COFCO and Mengniu will create the winning combination to unlock the potential of the fresh dairy products category in China,” said Franck Riboud, Danone Chairman and CEO.

“Backed by COFCO’s extensive expertise in the Chinese food industry and by Mengniu’s nationwide leading platform in the dairy sector, our brands will benefit from significantly wider reach to the largest number of Chinese consumers.”

Mengniu has also recently signed a strategic partnership with Arla Foods; however, this partnership is unaffected by the agreement. “Arla welcomes Danone as Mengniu’s partner in the locally produced chilled yoghurt category,” said Finn S Hansen, Executive Vice President of Arla Foods and a member of Mengniu’s Board of Directors.

“Together with our ongoing initiatives in the Arla/Mengniu milk technology centre in Beijing, we are confident that Danone’s engagement with Mengniu will increase consumers’ trust in locally produced dairy products - for the benefit of all players in the Chinese dairy market.”