CHINA: Danone, Mengniu end dairy venture

By just-food.com | 18 December 2007

Danone and Chinese dairy giant Mengniu have ripped up their joint venture in China.

Danone, which held a 49% stake in the venture, joined forces with Mengniu last year to produce and distribute fresh dairy products for the Chinese market.

However, the French food giant, which is entangled in a bitter dispute with another partner in China, said the one-year old venture would end today (18 December).

Danone said it and Mengniu had agreed to pull the plug on the venture as conditions for further investment in the business had not been met.

"Both parties have also agreed that the termination of the joint venture will not affect future cooperation opportunities such as the co-packing and distribution of yogurt under the Bio brand," Danone said.

The end of the venture is the latest blow to Danone in China with the company's drinks business with Wahaha turning increasingly sour.

Danone joined forces with Wahaha in 1996 and has a 51% stake in the original venture.

Relations between the two sides turned sour after Danone accused its partner of selling drinks under the Wahaha trademark outside the venture without permission.

In May, Danone filed for arbitration against Wahaha in Sweden in a bid to resolve the dispute.

Last week, a court in Hangzhou ruled that the period under which Danone could file its case against Wahaha had lapsed.

Danone, which has won court approval to freeze the assets of companies linked to Wahaha, has publicly urged for an "amicable solution" to the dispute.

Sectors: Dairy, Emerging markets

Companies: Danone