The world's leading yogurt maker Danone announced that it has agreed to acquire a 8.3% stake in the Chinese dairy company Mengniu, and it will establish a joint venture with Mengniu in China.
Prominent Achiever Ltd, in which Danone owns a 51% stake, will buy these shares from Cofco Group, the major shareholder of Mengniu. Cofco owns the remaining 49% stake in Prominent Achiever.
In addition, Danone will invest CNY1.25 billion to build a joint venture with Mengniu for the making of yogurt products. Mengniu will own the 80% stake in the new JV, while Danone will hold the remaining 20%. The initial cooperating period of the JV is 30 years.
Pierre-Andre Terisse, chief financial officer of Danone, said in April 2013 that during the first quarter of 2013, its operating revenue of baby nutrition products increased by 17% and the main reason for the growth was China's needs for food safety. Therefore, exporting more from Europe to China is not sustainable.
However Mengniu itself has been the target of health and safety concerns in China in recent years. IN 2008, Starbucks selected Baxy as its new milk supplier because the milk products of its original milk supplier Mengniu were tainted by melamine. Mengniu also suffered losses in 2008 and a loss of brand reputation in subsequent years because of the healthy products it was distributing.