Danone, the world’s biggest yogurt maker, announced on February 12 that it has agreed to pay $663 million to increase its stake in China Mengniu Dairy Co., China’s largest milk producer, from 4 to 9.9 percent. Mengniu also announced in the same statement that state-owned food processer COFCO Group, Danone, and Arla Foods—whose combined shares total 31.5 percent— will form a new joint venture company called COFCO Dairy Investments.

Danone first purchased a 4 percent share of Mengniu in May 2013. This purchase set up a joint venture between Danone and Mengniu to produce and sell chilled yogurt products in China.

Danone’s continued partnership with Mengniu will have mutual benefits for both parties. Mengniu will gain Danone’s quality control and improve its production efficiencies according to Bessie Wu, chief financial officer of Mengniu. Danone hopes the partnership will allow it to increase sales in China. China’s yogurt market sales are expected to increase 57 percent to $12 billion by 2015, according to Euromonitor International.

Posted by Catherine Matacic