Danone SA, the French dairy giant, has offloaded its struggling Dumex China unit to a subsidiary of China Mengniu Dairy Co Ltd for 150 million euros ($159 million). The Paris-based company said the sale to Yashili International Holdings Ltd, which is yet to be approved by the relevant authorities and Yashili shareholders, would create “a strong local infant milk formula brand platform”. Acquiring the loss-making infant formula producer’s China unit will help Yashili to expand its distribution network in first- and second-tier cities and improve its overall brand value, said industry experts…Full Article: China Daily Dec 2015

Key Points

  • If approved, the sale will expand/increase Yashili’s market presence to Shanghai, Nanjing, and Hefei.
  • In 2015, the largest infant formula companies by market share were Nestle SA (8.6%), Beingmate Group (7.2%), and Mead Johnson (6.5%). Danone’s Nutricia and Dumex ranked 11th and 12th at 3.2% and 2.9%, respectively.

ChinaAg Comments

  • In July 2015, Danone announced plans to sell its Dumex division to China Mengniu Dairy’s Yashili International Holdings. Danone would in turn use the proceeds to increase its stake in China Mengniu Dairy. According to the CFO of Danone, the French company expected 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 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 August 2013, Dumex was fined US$28 million by China for price-fixing.
  • 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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