Danone and Yakult to close ranks in probiotics

- Last updated on GMT

Related tags: Probiotics, Probiotic, Danone

Japanese probiotics pioneer Yakult and French yoghurts and biscuits
maker Danone said today they will set up a new alliance to push
growth of their functional foods businesses and cement their
leading positions in the probiotics market.

The agreement, which will see closer cooperation on R&D and entry into new markets, will raise Danone's edge in the European probiotics market, where it competes alongside other dairy leaders Nestlé and Muller.

It could also benefit other players in the probiotic sector, as the companies' new 'Global Probiotics Council' promotes the healthy bacteria to consumers, regulatory authorities and the scientific communities.

Danone is already the largest shareholder in Yakult with a 20 per cent stake but the two have not worked closely before now. Danone's first 5 per cent stake in Yakult, bought in 2000, did little to improve cooperation in the probiotics sector and when Danone upped its stake in Yakult to 20 per cent last April, buying €300 million in shares on the open market, the Japanese firm faced speculation that its shareholder would attempt a hostile takeover bid.

Danone has now agreed that it will not increase its current stake in Yakult in the next five years and will not seek to gain a majority share of the company in the five years following this point.

Under the new alliance it will however nominate two candidates to Yakult's board of directors, while Yakult places one director with Danone's board. A joint office will be set up to identify areas of collaboration.

Sales in probiotics are growing rapidly, as consumers become increasingly aware of the importance of gut health. In Europe, dairy is the biggest area for human food applications. Probiotics are set to triple in value over the next six years, to reach $137.9 million (€118.5m) in 2010 in Europe, with the US market projected to reach $394 million, according to Frost & Sullivan.

Yakult had sales of around Y240 billion in 2003, from its 23 markets, with sales of its probiotic drink increasing last year following reports that the bacteria could prevent Sars.

The new alliance is not expected to affect existing relationships between the companies and other partners.

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