May 21 - Chinese firms are increasingly looking to reputatable European ones to boost their image at home. In the latest tie-up French food group Danone is investing in Mengniu. Hayley Platt looks at whether the deal is a way for the Chinese company to restore faith in its baby milk after a contamination scandal.
Chinese baby food doesn't have the best of reputations A series of contamination scares in recent years has hit sales and many mums now buy from abroad. Mengniu was one of those affected. Six children died and thousands fell ill after melamine was found in its milk products, It hopes a new deal with Danone will help it restore consumer confidence. It's giving the French food group a slice of one of the world's fastest growing diary market in return Mengniu gets an association with a respected foreign brand. David Haigh is CEO of Brand Finance. SOUNDBITE: David Haigh, CEO Brand Finance, saying (English): "The real problem that Mengniu are going to have is that when it comes to baby milk health care professionals, mothers, grandmothers have very long memories and everyone remembers the Nestle milk scandal of the 80s and 90s when they were selling milk powder to Africa and they were accused of having threatening the health of African people. People still remember that, now Mengniu will have to work for a long time to recover the trust." Danone is the world's biggest yoghurt maker, with brands such as Actimel and Activia. It'll invest more than $400 million in Mengniu. Some of that will fund a joint yoghurt making venture in China - Danone's fourth-biggest market after Russia, France and the U.S. It estimates China's yoghurt market - currently worth 2 billion euros in annual sales - will more than double in the next five years. But could Danone damage its own brand by association? SOUNDBITE: David Haigh, CEO Brand Finance, saying (English): "Any company that goes in there lending its endorsement to a company that's had a food scandal is taking a major risk so they will have to have done a lot of due diligence to be sure that Mengniu are actually going to behave the right way or they could destroy their own brand, so I think it's good for both of them but only if it's managed right." But the risk may be worth taking. China's likely to be biggest consumer market in the world within 10 - 15 years.