(Yicai) Nov. 5 -- Danone inaugurated its Shanghai R&D and Innovation Centre on Nov. 2, marking the opening of the French food giant’s second R&D hub in China. The facility houses the company’s third gut microbiome laboratory worldwide and is a key part of its nutrition business strategy in the Asia-Pacific region.

The newly opened Shanghai center extends beyond traditional R&D functions. While Danone’s Open Science Research Centre for Life-transforming Nutrition, launched in 2020, focuses on breast milk research, gut health as well as food safety and quality, the Shanghai facility also houses a 700-square-metre pilot production plant and a 300-square-metre space dedicated to science demonstrations and consumer engagement. These facilities are intended to accelerate the translation of research findings into market-ready products and provide the space for them to be tested and validated.

The gut microbiome laboratory is the center’s most significant investment, according to sources. The lab will generate billions of data points, and with China’s advanced data infrastructure and artificial intelligence capabilities, the firm will be able to extract valuable insights more quickly, Le Xintao, vice president of R&D and innovation for Danone Asia-Pacific and China, told Yicai.

Meanwhile, China’s innovation ecosystem and vast consumer market will allow Danone to test product solutions more rapidly and assess how well they meet consumer needs. The Paris-based company will then share these insights and findings with its global R&D and innovation network.

Danone’s substantial investment in local R&D comes as the Chinese market undergoes significant changes. The firm’s Chief Financial Officer Juergen Esser previously disclosed that China accounts for one-third of Danone’s infant nutrition revenue.

A declining birth rate has slowed growth in China’s infant formula market, which is now worth around EUR20 billion (USD22.5 billion).

As competition intensifies in an increasingly saturated market, rivalry has shifted from branding and distribution channels to advanced formulations and scientific evidence, Song Liang, an independent dairy industry analyst, told Yicai. This transition requires substantial investment in capital, technology and talent, putting companies’ overall strength and R&D capabilities to the test.

Danone sees specialized nutrition as its next major growth opportunity in China. Over the past few years, the firm has set up specialized medical nutrition plants in Qingdao and Changsha. In October 2025, it carried out a modernization and expansion project at its existing production facility in Wuxi.

In the first three quarters, Danone’s sales in the Asia-Pacific region climbed 4.9 percent from the year before to EUR4.7 billion (USD5.2 billion), making it the company’s fastest-growing region. Revenue from its specialized nutrition business in the Asia-Pacific region jumped 7.9 percent to EUR1.1 billion (USD1.2 billion) over the same period. Esser said at the earnings call that the Chinese market made an outsized contribution to the category’s performance.

Against this backdrop, Danone’s management is optimistic about the long-term growth prospects of China’s nutrition sector. The firm estimates that China’s population aged 60 and above will reach 300 million by 2030 and 350 million by 2040, fueling further demand for medical nutrition products among older consumers.

Editor: Kim Taylor