Danone sets sights on China dairy sector

The world’s biggest yoghurt maker, with brands such as Actimel and Activia, estimates the Chinese yoghurt market – currently worth 2 billion euros in annual sales – will more than double in the next five years.

On the hunt for growth beyond a stagnant Europe, Danone and its rivals, such as Nestle and Unilever, have found it difficult to sell consumer goods in the world’s second largest economy and most populous country, where the market is dominated by local firms.

Danone’s previous attempts have misfired. Five years ago it walked away from a yoghurt joint venture with Mengniu, which is China’s top milk producer. Soon after it suffered a bitter commercial dispute with soft drinks firm Hangzhou Wahaha Group.

Coming after a scandal in 2008 over melamine-laced milk in China, when six infants died and 300,000 fell ill, Danone’s partnership with Mengniu is expected to ease concerns over quality because foreign brands are perceived as offering higher safety standards.

China is Danone’s fourth-biggest market after Russia, France and the United States, and contributes 6 per cent of its total revenue. Danone sells Activia yogurt under the brand Bio and Dumex infant formula in China.

It is the most exposed among big food groups to the eurozone crisis.