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onsumer goods firm Indofood CBP Sukses Makmur (ICBP) '€” part of Indofood Group '€” has acquired the entire stake of Spanish-French food company Danone'€™s dairy produce subsidiary, in an attempt to boost its own dairy output.

Indofood CBP revealed in a statement published on the Indonesia Stock Exchange (IDX) website that the local giant, through its dairy subsidiary, Indolakto, inked on Friday a sales and purchase agreement with Danone Dairy Investments Indonesia Pte. Ltd. and Danone Asia Pte. Ltd., to obtain 100 percent stake of liquid milk producer Danone Dairy Indonesia.

'€œThe transaction will be carried out with a price set at Rp 250 billion [US$20.53 million], in accordance to price adjustment mechanism as conditioned in the sales and purchase agreement,'€ Indofood CBP said in the statement.

The transaction was expected to conclude in December, once Indofood CBP meets all the requirements in the agreement, including obtaining approval from the Investment Coordinating Board (BKPM).

'€œThe transaction is aimed at increasing our production capacity to meet demand for dairy products in the western part of Indonesia, as well as strengthening our company'€™s position in Indonesia'€™s dairy industry,'€ the statement went on.

Indofood would also acquire Danone Dairy Indonesia'€™s trademark and industrial design for its top product, Milkuat, the company said.

Indofood CBP currently operates six business segments, namely noodles, dairy, snack foods, food seasonings, nutrition and special foods and beverages.

The company'€™s dairy unit is the second-biggest revenue contributor after its noodle products, which dominate the country'€™s noodle market under the brand Indomie.

According the company'€™s January-September financial sheet, dairy contributed around 17 percent to the company'€™s Rp 22.78 trillion consolidated net sales for the period with Rp 3.94 trillion. Meanwhile, the company'€™s noodle unit made up 66.9 percent of the total sales.

Indofood CBP'€™s dairy sales grew by 10.98 percent year-on-year (y-o-y) for the nine-month period, while its consolidated sales went up by 20.66 percent during the reported period. Its net profit rose by 11.6 percent to Rp 2.07 trillion.

Investa Saran Mandiri analyst Kiswoyo Adi Joe said that the company'€™s move to acquire Danone'€™s liquid milk unit was a good step to boost its dairy unit'€™s profitability as well as provided an alternative for its maturing noodle business.

'€œIndofood CBP'€™s noodle unit'€™s market has become more and more saturated. Nearly everyone consumes Indomie, which indicates not only its supreme position in the noodle industry but also possible difficulty in creating a new market,'€ Kiwoyo said.

'€œTherefore, the company needs to find an alternative to boost its income and its dairy unit can be a good solution for it. Although the country already has many established players in the dairy industry, the market itself still offers a lot of opportunities to explore as milk consumption is still relatively low in Indonesia.'€

Kiswoyo further added that the acquisition was also expected to help Indofood CBP push up the profitability of the dairy unit.

Indofood CBP'€™s earnings before interest, tax, depreciation and amortization (EBITDA) margin for its dairy unit slumped from 10.1 percent in the first nine months of 2013 to 4.2 percent in the same period this year, company data shows.

Kiswoyo said that the EBITDA margin decline might be caused by Indofood CBP'€™s lack of dairy product diversification and output. Thus, he said, the acquisition or introduction of a new brand might help elevate its profitability.

In a move to diversify its business, Indofood CBP also cooperated with the Japan-based Asahi Group Holdings, Ltd. to establish a non-alcoholic beverage business back in 2012.

The joint venture acquired Pepsi-Cola Indobeverages for S$30 million late last year to support its business expansion.