September 27, 2013

China to restructure dairy industry

In a move toward restructuring the country's dairy industry, five dairy firms - Mengniu, Yili, Feihe, Wondersun, and Treasure of Plateau from Tibet - are to benefit from the government's RMB30 billion (US$4.9 billion) subsidy package.

The Chinese government is encouraging mergers and acquisitions to fight the dominance of the domestic market by foreign brands.  They will be backed by project funds that come as part and parcel of policies, loans from China Development Bank, provincial subsidies and tax benefits formulated by the Ministry of Industry and Information Technology.

The aim is to help local brands win back consumer confidence lost in the 2008 melamine scandal and expand their shrinking market share.

According to 2012 sales data from market research firm Eurominotor, the latter stands in the single digits for each of the five firms, with the largest - Yili - having a mere 7.8% of the dairy sector. Foreign brand Mead Johnson holds almost double that - 14% - of the mainland market.