Snow Brand Milk Products and Swiss giant Nestlé subsidiary, Nestlé Japan, have announced the establishment of a joint-venture company from 1 February. The joint company, to be called Nestlé Snow, will develop lactic acid drinks, chilled soft drinks, yogurt and chilled dessert products to be sold under the Nestlé and Nestlé Snow brand names.

Snow Brand, which has been trying to improve sales and its reputation after the mass food-poisoning debacle last summer, will no doubt welcome the link with Nestlé and said it would produce and sell the joint venture's products. Nestlé's quality control system will be introduced to the manufacturing factory. The first in a series of new products, Nescafe cup coffee, will be launched in February 2001.

But what does Nestlé stand to gain from the deal? Industry sources are speculating that the Swiss giant could be preparing a takeover some months or years down the line. Nestlé has something of a history moving in on beleaguered companies, first offering its technical expertise and distribution strengths, and then buying them when they are undervalued and can be bought for a song. In the 1990s, the Swiss company bought Perrier water after a Benzine poisoning crisis had weakened the brand.

While Nestlé might not be hoping to buy Snow Brand, it will certainly have an eye to strengthening its own position in Japan, where its dairy products are lagging behind its coffee, confectionery and pet food divisions as a result of strong competition from local players Morinaga and Meiji, as well as new-found friend Snow Brand.