Danone is considering whether to buy out the other shareholders in its venture in Russia.
The French food giant merged its Russian operations with local dairy processor Unimilk in 2010. The company took a 57.5% stake in the Danone-Unimilk venture, with investors in the Russian firm owning the remaining 42.5%.
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A spokesperson for Danone in Russia confirmed comments made by a senior company executive, who said yesterday the company was “considering” increasing its stake in the venture to 100%. No decision, the executive insisted, had been made. Moreover, under the shareholders’ agreement, Danone has until 2022 to buy out its Unimilk partners.
Danone has faced criticism over the performance of the venture since it was set up two years ago. The management team running the venture has been changed, the portfolio revamped, unprofitable lines discarded and, Danone said in February, improving its profitability.
Danone co-COO Emmanuel Faber told the Consumer Analyst Group of Europe conference last week that the company expected sales and margins from the venture to improve this year.
“You will see more growth coming from Russia in 2012,” Faber said. “Unimilk will continue to contribute to the expansion of our margin in 2012. We expect Russia this year to deliver both in terms of top-line and margin expansion, well into the plan of 400 to 500 basis point improvement. If I go to the shorter term, 100 basis points this year. So things are moving it the right direction and according to plan.”
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By GlobalDataEarlier this month, Danone-Unimilk confirmed it completed two investments planned by Unimilk before the merger and increased its stake in two local dairies.
Over the next seven years, Danone-Unimilk plans to spend around US$700m in Russia on improving production facilities and bringing them in line with the French company’s “standards of quality and food safety”.
