June 23, 2017
Acquisition enables Mengniu to expand into pasteurized milk market
China's Mengniu Dairy Company has invested more than CNY5 billion (US$73.2 million) in Modern Farming Group Co Ltd, China Daily reported.
The acquisition marked Mengniu's expansion into the production of pasteurized milk products and other low-temperature dairy products. It also underscores the domestic dairy industry's shift to this sector in order to get ahead of its international competitors.
Modern Farming is China's leading farm company, with the largest number of cattle and a leading provider of raw milk. The company operates 26 farms with 229,200 cows. Mengniu, which controls about 61.25% of Modern Farming, has been acquiring raw milk from the farming company.
Mengniu's 2016 annual financial report showed that the company had grew 9.7% annually to CNY53.8 billion (CNY8 billion) in revenue. In regards to pasteurized milk and yoghurt, the company's acquisition will allow it to reach the East, Central and South Chinese market via Modern Farm's operations in these regions.
However, challenges remain in China's supply chains for pasteurized milk, said Song Liang, a dairy analyst. "The cold chains for delivering pasteurized milk are not strong even in 'first-' and 'second-tier' cities, not to mention the third- and fourth-tier cities," Song explained. "Raw milk supply in South China is also limited."
- China Daily
