Danone did not reveal how much it paid for the stake but said that Hui Yuan - market leader of a fast-growing beverage category - would give it a strong position in China.
"This agreement reflects Groupe Danone's strategy of strengthening its position in the Chinese beverage market, where it achieved sales of over 6 billions litres in 2005," said a statement from the company.
Hui Yuan has a 17 per cent share of China's juice drinks market, where annual growth for the last three years has been higher than 15 per cent.
And with annual per capita juice consumption in China averaging only 2 litres, compared with 11.5 litres in Hong Kong and Taiwan, and up to 40 in western European markets, the Chinese juice market offers promising scope for development, said Danone.
It also pointed out that Hui Yuan has a very strong position in the health-oriented juice segments, with a market share of 30 per cent in nectars and 42 per cent in pure juice, giving it a good brand image.
At a press conference in Beijing yesterday, Zhu Xinli, chairman and president of the Chinese company, said he would use the new funds for "building the company brand and sales channels, improving research and development, and expanding production capacity".
Hui Yuan has also attracted investment from Warburg Pincus, the Netherlands Development Finance Company (FMO) and Value Partners, which together with Danone's stake own 35 per cent of the company.
"Co-operating with these strategic investors will help strengthen our competitiveness and dominant position in the country's fruit juice market," said Zhu.
