James O’Donnell, Asia Director, Bord Bia- Irish Food Board

French dairy company Danone has confirmed its latest strategic partnerships in the Chinese market with the announcement of a series of deals with China’s largest state-owned food company, COFCO, and dairy giant Mengniu.   The framework agreement inked with Mengniu sees a return to strategic relations between the French and Chinese partners, with Danone having pulled out of a previous partnership focussed on the growing Chinese yogurt market due to lack of government support.

This latest agreement with Mengniu sees a €325m investment by Danone, with government owned COFCO taking a majority stake, while Danone will take 49% and an indirect share of Mengniu of about 4%.  Danone and Mengniu will also enter a joint venture which will see the pooling of their respective chilled yogurt production capabilities to give a combined market share of 21% in a rapidly growing sector, which Euromonitor valued at €500m in 2012.

The move by Mengniu follows a partnership agreement signed with Scandinavian owned Arla Dairies in 2012 in an effort to shore up flagging domestic dairy demand resulting from a series of food scandals in recent years.  Crucially, the partnership will benefit the Chinese partners through safe process technology, and will enable the French partner access to the surging Chinese dairy market.  In China, finding the right partner is key to market success.