Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

China begins to challenge in domestic infant formula market

China begins to challenge multinationals in domestic infant formula market, says GlobalData
CITIC Agri Fund Management, backed by Chinese state-owned CITIC Group, has recently agreed to buy a 25.18% stake in Hong Kong-based Ausnutria Dairy, one of the leading local suppliers of infant formula in the Chinese market. This clearly marks a change in direction for the government, which has hitherto been focusing its efforts on regulation in this sector, says leading data and analytics company GlobalData.

Local suppliers in China are yet to recover from the melamine contamination scandal in 2008, with parents continuing to put their faith in foreign-made milks even after a decade.

Consequently, the government introduced stringent composition and labeling laws, strict controls on production technologies and plants, and most recently mandated all brands to register through a complex approval system.

While these measures have undoubtedly improved the safety and traceability of infant formulae, they have done little to address the dominance of the multinational suppliers, with the top four – Nestlé, Danone, Mead Johnson and Abbott – holding a combined 48.3% of the market in 2016, according to GlobalData’s report, ‘The Baby Food Sector in China, 2017’.
Valerie Lincoln-Stubbs, Research Director of Baby Food at GlobalData, comments: “The Chinese government has supported local infant formula companies in the form of investment in subsidies, such as that announced in 2013 for leading companies Mongolia Yili Industrial Group, China Mengniu Dairy, Heilongjiang Wondersun Dairy, Feihe International and Treasure of Plateau Yak Dairy.

“However, this has done little to stem the tide towards imported brands. Even the strongest of the subsidized companies, Mongolia Yili Industrial Group, ranks only fifth with just a 6.8% value share of China’s baby food market in 2016.”
Now, the investment by Citic in Ausnutria represents a ramping up of the State’s involvement in the baby food industry, giving it a direct interest in an up-and-coming player focused almost entirely on infant formula, to add to its existing 31.4% stake in China Mengniu Dairy via COFCO Corporation. Mengniu currently holds about 2.5% of the infant formula category via its Yashili subsidiary.
Ausnutria Dairy’s main business is in cow’s milk and goat’s milk infant formula. In 2017, the company reported 43.3% rise in sales to CNY3, 926.5m.

Lincoln-Stubbs concludes: “With the backing of a state-owned investment arm, the future of Ausnutria Dairy looks even more positive. There is a long way to go before the Chinese can wrest back control of their infant formula sector but at least they have made the first step in the journey.”
ENDS

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Stats NZ: Consents For New Homes At All-Time High

A record 41,028 new homes have been consented in the year ended March 2021, Stats NZ said today. The previous record for the annual number of new homes consented was 40,025 in the year ended February 1974. “Within 10 years the number of new homes ... More>>

Stats NZ: Unemployment Declines As Underutilisation Rises

The seasonally adjusted unemployment rate decreased to 4.7 percent in the March 2021 quarter, continuing to fall from its recent peak of 5.2 percent in the September 2020 quarter but remaining high compared with recent years, Stats NZ said today. ... More>>

ALSO:

Digitl: The Story Behind Vodafone’s FibreX Court Ruling

Vodafone’s FibreX service was in the news this week. What is the story behind the Fair Trading Act court case? More>>

Reserve Bank: Concerned About New Zealand's Rising House Prices

New Zealand house prices have risen significantly in the past 12 months. This has raised concerns at the Reserve Bank of New Zealand – Te Putea Matua about the risk this poses to financial stability. Central banks responded swiftly to the global ... More>>

Westpac: Announces Strong Financial Result

Westpac New Zealand (Westpac NZ) [i] says a strong half-year financial result has been driven by better than expected economic conditions. Chief Executive David McLean said while the global COVID-19 pandemic was far from over, the financial effect on ... More>>

MYOB: SME Confidence In Economic Performance Still Cautious

New insights from the annual MYOB Business Monitor have shown the SME sector is still cautious about the potential for further economic recovery, with two-in-five (41%) expecting the New Zealand economy to decline this year. The latest research ... More>>