August 2, 2006

Market speculates about Uni-President's bid to buy into Sanyuan dairy

Taiwan food and drink group Uni-President is rumoured to have bought a 35 percent stake in Beijing dairy Sanyuan Foods, according to reports to speculating on the group's interest in China's dairy sector.

Media reports suggested in the last six months that the Taiwan group has made Sanyuan an offer but both companies have repeatedly denied the reports.

According to a source at the Sanyuan Group, the biggest shareholder of Shanghai-listed Sanyuan Food, the company has rejected more than ten investment firms and companies such as Danone and Mengniu seeking to acquire shares in its dairy business.

If confirmed, Uni-President may help Sanyuan not in terms of production but in its sales, which had been suffering losses over the last two years. Sanyuan has been losing market share and profits as China's rapidly growing dairy market becomes more competitive.

However, some doubt that Uni-President's sales channels would be of any help to Sanyuan.

Uni-President is keen to grow its presence in China's dairy sector. Although it is among the top three in Taiwan's dairy market, in Mainland China, it only has a 15 percent share in Wandashan Dairy, a second-tier dairy.

Sanyuan's brand and its share of Beijing's market is expected to help Uni-President gain more than a toe-hold in China's dairy market.