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Danone joins Fonterra in stressing India potential

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Danone became the second dairy giant in two days to stress the potential for opportunties in India, as the group highlighted its emerging market muscle amid difficult times in its core European markets.

The water-to-yoghurt group, which earlier this year paid $355m for Wockhardt Nutrition, India's top-ranked baby food group, said that parts of the market there looked better than in China.

India's growth in infant nutrition, a largely dairy-based sector, "will outpace China's", said Laurent Marcel, the head of Danone's India nutrition operations.

Indeed, the division plans to double its sales in the next three years, Mr Marcel said.

Bid rivals?

The comments come a day after Fonterra, the world's biggest dairy exporter, revealed it was setting up a Delhi office to "gain a better understanding of", and "explore opportunities in", India's dairy market, responsible for one-sixth of world production.

Many commentators have compared India, with its growing and increasingly affluent population, to China, whose rising demand for dairy has raised it to a major importer.

And both Danone and Fonterra are reported to be interested in increasing their Indian presence through the purchase of a controlling stake in Hyderabad-based Tirumala Milk Products, the second-ranked private supplier of liquid milk in the country's southern states.

Tirumala, said to have an enterprise value of some $450m, is being put up for sale by shareholders including Carlyle, the private equity giant, which owns a 20% stake.

Core market woes

For French-based Danone, India's potential growth represents a means of helping offset the weakness in its historic European markets, where demand is being sapped by weak economies and high unemployment.

The group in June warned on profits, blaming a "swift deterioration in consumption" in southern Europe, in much of which economic conditions remain particularly poor.

Danone earlier this month was revealed to have become a target for Nelson Peltz, the activist fund manager, with a record of fostering shake-ups at the likes of Heinz and Kraft, who said that the French group's performance could be improved by cutting costs and returning cash to shareholders.

Danone shares closed 0.5% higher at E49.00 in Paris.

By Agrimoney.com

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