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DANONE inks two Chinese dairy deals

French yogurt giant DANONE has reached an agreement to invest 325 million euros ($417 million) in China’s Mengniu Dairy Company. Demand for foreign dairy products has skyrocketed in China since the 2008 melamine scandal caused a loss of confidence in domestic dairy products. Through the French deal, Mengniu will utilized new technology in production of what they promise will be much safe dairy products. The investment will give DANONE Group a four percent share of the largest milk company in China.

Under a second agreement, DANONE will set up and own 20 percent of a joint venture to make and sell chilled yogurt in China. Mengniu had 16 percent of the Chinese yogurt market in 2010; the new joint effort is expected to double that by 2015.

This is not DANONE’s first venture into China, they pulled out of a yogurt-making deal with Mengniu five years ago saying it was not progressing as expected.

Mengniu formed a joint-venture with Denmark-based Arla Foods last June to develop dairy products and rebuild consumer confidence in Chinese dairy products. Arla says the DANONE deal will not affect their partnership.