SHANGHAI Aug 16 The Chinese government is set
to issue a formal proposal to prompt consolidation among
domestic infant formula firms, a state-run newspaper said on
Friday, naming Inner Mongolia Yili Industrial Group
as one of the likely beneficiaries.
The proposal is part of the government's drive to slash the
number of domestic infant formula manufacturers over the next
five years to 50 from about 200 now, the China Securities
Journal said, citing an unnamed source.
By 2018, China expects the top 10 local companies to account
for 80 percent of the domestic market, with the largest
three-to-five firms targetting annual sales of over five billion
yuan ($818.00 million), the report said.
The newspaper said Feihe International and
Wondersun Dairy were also likely to gain from the consolidation
plan, but gave no further details.
Analysts said the consolidation drive is part of a broader
plan to boost consumption of local product and allay fears about
food safety following a 2008 scandal, when formula tainted with
melamine killed at least six infants and made thousands ill.
Last week, the country's price regulator also handed down
record fines to foreign milk powder makers, including Mead
Johnson,, Danone and New Zealand dairy giant
Fonterra, for anti-trust behaviour.
"The government sees a lot of room for consolidation and the
real motive here is to improve the overall standards of infant
milk formula products," said Sandy Chen, a Shanghai-based senior
analyst for food and agribusiness at Rabobank.
Consumers in China are highly sensitive to food safety after
persistent problems such as chemical-laced pork.
China's infant formula market is worth around $12.4 billion
in 2012, and is set to double in size by 2017, according to data
In 2012, the ten biggest Chinese infant formula firms by
market share were Zhejiang Beingmate, Yili, Biostime
International Holdings, Yashili, Daqing
Dairy, Feihe International, Wissun Group, Wondersun
Dairy, Synutra International and Ausnutria Dairy
, the data showed.