(Yicai Global) Jan. 7 -- Shanghai Milkground Food Tech's stock price jumped by the 10 percent exchange-imposed daily limit after the cheese maker said China Mengniu Dairy, one of Asia's biggest milk producers, will take a 5 percent stake in the firm.

Shares of Shanghai-based Milkground [SHA:600882] ended trading today at a 52-week high of CNY16.24 (USD2.34) each.

Mengniu plans to invest a total of CNY745 million (USD107.2 million) in Milkground to diversify its own product line and cater to Chinese consumers' emerging new tastes, the target company said in a statement yesterday.

Hohhot, Inner Mongolia-based Mengniu will pay CNY287 million for 5 percent of Milkground at a cost of CNY14 (USD2) a share, becoming its sixth-largest shareholder, the statement said. It will also inject CNY458 million into Milkground's cheese making unit Jilin Guangze Dairy Technology for a 42.88 percent stake. Milkground will own the rest.

Cheese is not a food that traditionally features in the Chinese diet. But as living standards improve and people are more exposed to Western culture, their eating habits have changed and the appetite for cheese has grown quickly in recent years. Mengniu said it is optimistic about the market's prospects.

Milkground has been successful in marketing processed cheese products with a Chinese twist. It has developed original snacks such as stringy cheese, cheese sticks and cod-flavored cheese which are particularly popular among children.

Sales of its cheese sticks more than quintupled in the first half of last year from the same period in 2018. First half revenue was up over 50 percent year on year to CNY714 million (USD103 million) in 2019 and net profit came to CNY10.7 million (USD1.5 million), according to Milkground's half-year earnings report.

In 2018, Mengniu set up a cheese division to develop products and last year it formed a joint venture with Scandinavian dairy group Arla Foods to enter the premium market. Mengniu has seen rapid growth in its cheese product sales, especially among children.

Editor: Kim Taylor