An office director of San Yuan confirmed the move to Shanghai Daily, but gave no details of the deal, such as buying price and number of shares to be purchased.

Beijing Kraft Foods Co., Ltd. reportedly will sell an 85 percent stake to San Yuan, said Beijing Youth Daily.

Jointly invested by Kraft Foods International and Beijing Agricultural Industrial and Commercial United Co. in 1993, Beijing Kraft has a total investment of US$99 million, of which an 85 percent stake is held by its foreign investor.

Beijing Kraft sells yogurt, dairy-desserts and milk for retailers and cheese for food chains such as McDonald's in the North China market.

However, the company has been struggling with losses for years as more domestic dairy product makers enter the market by providing a complete product variety at competitive prices.

San Yuan, for example, holds a dominant 90 percent of the fresh milk supply in Beijing and provides similar dairy products with Kraft under its three well-known brand names - San Yuan, Yan Shan and Lu Niao.

Established in 1997 with its net property worth 480 million yuan (US$58 million), San Yuan holds a 50 percent stake in Beijing McDonald's Co., Ltd., one of its three investors. The other investors are Beijing Milk Co. and China-Sweden Dairy Training Center in Beijing.

The cooperation between San Yuan and Kraft, if realized, could be another example of foreign entry into the domestic dairy industry.

In November, Groupe Danone formed an alliance with Shanghai Bright Dairy & Food Co., Ltd. by taking a 5 percent stake in China's largest dairy producer.

(Eastday 12/29/2000)