Held equally by the French and Japanese group, the new company will be called Yakult Danone India Private Limited.
Danone and Yakult believe that India has great potential as a successful probiotic market with "a fast-growing population of one billion, an economy that grew by around 7 per cent in 2004 and a long tradition in dairy products".
Yakult Danone India will initially market Yakult brand products, beginning at the end of 2005, and Danone probiotics products and brands may be added later, according to the companies.
The move is part of the agreement announced in March 2004 calling for cooperation between Danone and Yakult Honsha.
Yakult recently signalled a strong interest in expanding its opportunities outside its home territory of Japan, announcing in February its plans to open its first research centre outside of its home market in Belgium.
The centre, scheduled to open sometime soon - no definite date has yet offically been set - will be built at a science park in Ghent at an initial cost of €2.5 million.
It is designed to offer scientific support for the European operations, in a similar way to the Yakult Central Institute for Microbiological Research, set up in Japan in 1955.
"The basics of probiotics have been laid in Europe and the concept is accepted in the scientific world, so it is time to build up our scientific base in the region," said a Yakult Europe spokesperson.
Europe remains one of Yakult's smaller markets, generating sales of €67 million in fiscal 2004, or 576,000 bottles of the fermented drink daily, compared to more than 9 million bottles being produced everyday in Japan.
However the region has seen explosive growth in probiotics in recent years - probiotic drinking yoghurt has been the fastest growing dairy product in the last five years, according to Euromonitor research, with a 52 per cent growth in probiotic 'little bottles' during 2003 giving them a retail sales value in the core European markets of £28 million. This compares to a decline in plain and natural yoghurts of almost 2 per cent.
Science is set to become increasingly important in the probiotics sector under forthcoming European legislation for health claims that will require higher standards of evidence to support marketing claims. It is also becoming a key selling point for cultures suppliers as they look to hold onto their share of a market becoming dominated by the consolidating dairy companies.
Yakult says its new research centre will study the intestinal microbial flora of Europeans and investigate how its products can be better formulated to improve gut function among Europeans.
The bacteria present in the gut is known to differ in different populations, influenced by diet and lifestyle.