WhiteWave Foods Co. is joining forces with China Mengniu Dairy Co. to help quench the country’s growing thirst for milk and other dairy products.
Through a joint venture (JV) with China Mengniu Dairy, White Wave will produce, market and sell a broad range of products to Chinese consumers. The JV also covers purchase of Mengniu-owned Yashili Zhengzhou, which holds the production facility where the products will be produced.
Gregg Engles, WhiteWave chair and CEO, said the JV will greatly help the company by jumping into a market where demand for dairy is booming.
“This JV is consistent with WhiteWave’s strategy to expand into new geographies,” he said. “It provides a unique opportunity for us to access the Chinese market, one of the world’s largest consumer markets with a rapidly growing, multi-billion dollar nutritious products segment.”
Chinese demand for dairy is growing, and analysts anticipate that trend will continue for the foreseeable future. Analysts with market research outfit ReportsNReports estimate the demand for dairy products will grow nearly 12% annually for the next several years, with much of that product being imported.
Mengniu China Dairy is the largest dairy firm in China; the company reported sales for the first half of 2013 of approximately $20.7bn. For that reason, Engles said, the company makes an attractive partner for entering the growing Chinese dairy market.
“Through the joint venture, WhiteWave will be extremely well positioned to expand its business to this important geography,” he said. “Although we still have a lot of work to do before we begin distributing product, this is another compelling step for WhiteWave as we continue on our path to change the way the world eats for the better.”
Share and share alike
Under the JV terms, WhiteWave will obtain a 49% stake, and China Mengniu Dairy will own 51%. The anticipated purchase price is approximately $85m USD. This figure includes about $62m for the equity, with the balance for repayment and assumption of debt.
Company representatives report that both parties anticipate putting forth additional funds to support the start-up, and to help commercialize the operation.
Before the JV can hit the ground running, the partnership is subject to government approval. Company representatives report they expect to get the okay sometime in the first half of 2014.
Additionally, the acquisition of the Yashili production plant requires the JV to be approved by the Chinese government, and the acquisition needs the blessing of Yashili’s minority shareholders to proceed.