Danone plans to sell the Dumex infant formula brand to a unit of China Mengniu Dairy Co amid a downturn in demand for locally made baby food in that market. Danone has agreed to sell Dumex to Yashili International Holdings Ltd, and will use the proceeds from the sale to take up more shares in Mengniu, a State-linked milk producer, the two Chinese companies said in a statement on Friday [24 July 2015]. The Paris-based food company separately said it took an impairment charge of 398 million euros ($437 million) as it revised Dumex’s sales prospects lower…Full Article: China Daily July 2015

Key Points

  • According to the CFO of Danone, the French company expects to increase its stake from ~7.9% to 9.9%.
  • In 2015, China’s infant milk powder is estimated to be worth CNY 121.1 billion (~US$20 billion).
  • In October 2014, Danone paid US$566 million to increase its stake in Yashili to ~25%.
  • In August 2013, Dumex was fined US$28 million by China for price-fixing.

ChinaAg Comments

  • In 2014, Yashili recorded a net profit loss of 40% due to poor demand and rising costs.
  • From 2013 to 2014, Yashili’s market share in China decreased from 5.1% to 4.6%. In addition, rival Beingmate Baby & Child Food Co. announced a 72% profit decline during the first half of 2014.
  • In June 2013, China Mengniu Dairy agreed to purchase a majority stake in Yashili International for over HK$11 billion ($1.42 billion). Mengniu bought its 75% stake in Yashili from chairman Zhang Lidian’s family and from the Washington DC-based Carlyle Group (private equity firm).
  • In July 2010, Carlyle’s share in Yashili grew 29.2%, but fell to 24.4% in November 2010 after Yashili successfully completed an IPO, which diluted Carlyle’s ownership stake.
  • In September 2009, Carlyle Group acquired a 17.3% stake in Yashili.
  • Founded in 1999 in Inner Mongolia, Mengniu Dairy is one of the leading dairy product manufacturers in China, with “MENGNIU” as its core brand. The Group has a diverse product range including liquid milk products, (such as UHT milk, milk beverages and yogurt), ice cream, and other dairy products (such as milk powder and cheese).
  • Founded in 1983 and headquartered Guangdong province, Yashili International is one of the leaders in the pediatric milk formula industry, as well as having a leading position in the soymilk powder market in China. Its leading brands are “Yashily” (soymilk powder and pediatric rice flour), “Scient” (pediatric milk formula), “Zhengwei” (breakfast cereal) and “Youyi” (milk powder for adults).

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