Danone Sours on China Tie-Ups – James T. Areddy

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The Danone Group, a global food-and-drink company whose brand names include Dannon yogurt and Evian water, broke off a deal to partner with Mengniu Dairy Co, one of China’s largest dairy producers.

As the Wall Street Journal’s James T. Areddy writes:

Groupe Danone SA’s decision to abandon a planned joint venture in China to make its signature yogurt products shows how the French foods giant is losing its appetite to tie up with local partners in this booming but complicated market. . . .

Company officials say that over a decade of experience in China means Danone is positioned to hire directly from a growing pool of local professional talent. Danone can also rely on major distribution contracts with hyper-marts to boost sales, instead of trusting a local partner to open doors, they say. Danone’s growing “maturity” in China means that with new brand rollouts, “we are confident to do it maybe on our own,” says a spokeswoman, Stephanie Rismont Wargnier. [Full text]

While Danone expressed confidence in its ability to work in the Chinese market independently, a Reuters article by Donny Kwok quotes an observer who sees things differently:

“Yoghurt-making is not rocket science, and Chinese companies like Mengniu can live without Danone,” said Wang Yiguo, analyst at China Jianyin Investment Securities. “But Danone’s China business would be affected if it loses such a major partner.” [Full text]

In the last year, Danone has had trouble with other Chinese partners like drink-maker Wahaha and Bright Dairy & Food. China Digital Times has been following the Danone story for some time. Click here to read more.

[Image of a Mengniu dairy facility via Time]

December 19, 2007 7:00 PM
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Categories: Economy