CHINA: Danone to sell Dumex in China for increased stake in Mengniu | Progresiv

Danone has announced plans to sell its Dumex infant milk powder business in China to Yashili International Holdings, in turn allowing the French-based company to increase its stake in Mengniu Dairy.

The move will allow Danone to exit China’s infant formula sector following a decline in demand for Chinese-made products, prompted by continuing food scandals such as the country’s food safety regulator’s request for three milk producers to recall infant formula powders contaminated with dangerously high levels of nitrate in June.

Falling consumer confidence in the market has led to increased Chinese investment overseas, particularly in New Zealand, where infant formula products are seen as being of higher quality. In May, we reported that Hong Kong-based He Run International Investment had unveiled plans to build a 50 million dollars dairy factory on New Zealand’s North Island.

Described as “a decisive shift in strategy” by the Financial Times, the sell off will allow Danone to increase its stake in World Dairy Innovation Awards winner and Yashili’s parent company, Mengniu Dairy.

Mengniu were presented with the award for the best new brand or business for China’s first visually traceable milk, as part of the World Dairy Innovation Awards in Amsterdam on 24 June.

Details of Danone’s increased stake in Mengniu were revealed in the company’s half-year results for 2015, which also showed a 4.6% and 4.5% hike in sales during the first and second quarters respectively. It said that solid, profitable growth during the first half of the year had been “shaped by favourable trends in currencies and commodities, and by a significant increase in investments”. (www.foodbev.com)