As far as veteran Israeli dairy firm Strauss is concerned, the introduction of multinational Danone as a 20% partner in means going up a notch in four areas: management, logistics, marketing and advertising. Aside from the payment received - an estimated $50 million which will certainly assist Strauss in increasing its holdings in Elite - the company will also be able to benefit from Danone's extensive technologies and developments.
The association with Danone will also enable Strauss to save millions now invested in developing new products, and instead rely on the multinational's know-how. This practice is already being carried out by Strauss' ice cream division which is now partnered with Unilever.
Danone, which is based in Paris, has an estimated $17 billion annual volume of activity. The corporation is considered one of the six leading foodstuffs manufacturers in the world. Danone is rated number one in the field of chilled milk products, such as yogurt, cheese and dairy desserts, and second in the mineral water field, with Evian and biscuits, with Lu. Danone and Unilever have a joint development agreement in the fields of ice creams and yogurt desserts.
"This agreement changes Danone's status towards Strauss from involvement to commitment," said Strauss CEO Shlomo Liran. "The fundamental difference is in the ownership agreement. Danone is committed, by virtue of the fact that the company now takes part in Strauss' revenues, and will sit on the board of directors." One of Strauss' directors will be Danone International chairman and CEO Franck Riboud.
Now that Danone has entered into partnership with Strauss, the future of the Danone label's advertising budget is hazy. In 1996, the advertising budget was $1 million, with a similar sum allocated for 1997, but is not yet clear if Tamir-Cohen, which currently handles the account, will continue to do so. This is due to Danone's worldwide policy of working with the local associates of advertising agency Young & Rubicam and Grey Advertising International.
Liran said if Danone requested the account be transferred, Strauss would regard this as a suggestion, as Danone was only a 20% partner. "We will hear what Danone has to say on the matter. If we are convinced this will be good for us, why should we say no?"
The agreement give Strauss the benefit of using Danone's international commercial advertisements and will save on advertising costs.
There are currently 43 Danone products manufactured by Strauss on the market. Strauss is soon to enter the chilled baby food market, in which Danone is a world leader.