China's dairy giant Yili to bid for Danone's Stonyfield

A customer chooses milk products at a supermarket in Xuchang, Henan province. [GENG GUOQING/FOR CHINA DAILY]

Inner Mongolia Yili Industrial, China's biggest food and dairy group, plans to bid for the entire stake of Stonyfield, an organic yogurt producer that Groupe Danone holds a majority stake, for about 5.9 billion yuan ($850 million), Yili announced on Wednesday.

The deal is in its preliminary stages and whether the company will win the bid is determined by many uncertain factors, Yili said in the announcement.

This is another large scale acquisition attempt for China's dairy giant Yili, which dominates standard temperature milk markets, to strengthen its competitive advantage in low temperature yogurt markets as a new profit-making engine. Last month, it withdrew from a bid to acquire a 37 percent stake of China Shengmu Organic Milk Ltd for 4.6 billion yuan.

New Hampshire-based Stonyfield Farm is the world's largest organic yogurt producer which includes many popular American yogurt brands such as YoBAby and YoToDDler. The income of Stonyfield was $370 million last year with $50 million in net profits.

The consumption of dairy products in China has increased to 55 million tons in 2016 from 42 million tons in 2006 while the price of per kilogram of fresh milk has increased to 3.53 yuan from 2 yuan during the same period, according to Dairy Information Network.

With the increasing number of newborns following the relaxation of the one-child policy and an increasing number of aging people, the demand for dairy products in China is expected to continue to grow.

Over the past decade, the country's imports of dairy products grew 14 percent annually on average and China is expected to import 14.2 million metric tons of dairy products this year, an increase of 11 percent since last year, according to the Ministry of Agriculture's report on China Agricultural Outlook (2017-26).

Analysts expect the deal, once approved, will shift the industry landscape of low temperature dairy in China and raise awareness of Chinese dairy brands worldwide.