Mengniu invests in dairy's future

Mengniu Dairy Co has invested a combined 744 million yuan (US$106 million) for minority stakes in Shanghai Milkground Food Tech Co to step up product expansion, especially in the high-end dairy sector.

It will invest 287 million yuan for a 5 percent stake in Shanghai-listed cheese maker Shanghai Milkground Food Tech Co, according to a stock exchange filing on Monday.

Mengniu will also contribute 457.6 million yuan of registration capital for a 42.9 percent stake in Jilin Guangze Dairy Technology Co, a wholly owned unit of Shanghai Milkground Food, while the Shanghai company holds the remaining 57.1 percent.

The investment is still subject to anti-monopoly regulatory approval.

The two parties have also agreed to share sales and marketing resources and to complement each other to actively promote and develop new cheese categories, according to a separate partnership deal.

Jilin Guangze Dairy hopes to use the capital to further expand production capacity and maintain its strong foothold in the country’s cheese sector and to further lift business scale and profitability.

Shanghai Milkground Food reported a 53.8 percent revenue increase in the first half and cheese businesses more than doubled to 340 million yuan. One of its core products, a frozen cheese stick snack, saw sales of 170 million yuan.

Mengniu also hopes to add more premium products to its offerings with more shoppers welcoming western style dairy products instead of just drinking milk.