Economic Perspective: Foreign Investment “hit” will rewrite the pattern of China’s dairy industry

New Zealand’s Fonterra Group, Shijiazhuang Sanlu Group, China reached an agreement to subscribe for Sanlu Group, 43 percent of the shares, capital injection for the 864 million yuan. This is said so far the foreign enterprises in China dairy industry’s biggest investment. Analysis of the industry, Sanlu and Fonterra cooperative, there may once again change the structure of Chinese dairy market, Rhapsody competition pattern in China’s dairy industry evolutions.

 Fonterra in China, operating more than two decades, dairy products are mainly exported raw materials, has become China’s largest importer of dairy raw materials. Prepared in the Chinese market for many years Fonterra, through a joint venture with Sanlu, become the Danone, Parmalat, Italy, Switzerland, Nestle and later a foreign capital into China’s liquid milk market and dairy giant.

 Over the past decade, can be said that the Chinese dairy industry’s “Golden Age”, doubling dairy production, consumption matures. From the China Dairy Industry Association figures show that in 2004 China’s dairy industry production reached 9.49 million tons, up eight-fold compared with 1995, including liquid milk four times the growth 14:00 .

 Dairy consumption associated with heating, large and small dairy plant in the country increased from the original hundreds more rapidly to 1500. Over the past year or two, Guo Zihao army occasion to Happy Valley enclosure, vigorously scale expansion; the local Legion also refused to yield, stick to natural position. The rapid expansion of production capacity led to the competition has become fierce and cruel than ever.

 After several years of fierce competition, China’s dairy industry has now basically ended the state of development of this disorder.

Especially in the past year, with dairy giants vertical and horizontal alliances, mergers and acquisitions, China’s dairy industry structure has changed significantly, some less competitive small and medium enterprises or large enterprises dairy merger, or closure. Shanghai China formed a bright, Inner Mongolia Yili and Mengniu, Sanlu and other ten Hebei-based dairy dairy enterprise backbone, the major dairy companies, the “base” shape.

 The industry believes that the dairy industry consolidation has speed, industry consolidation is expected to be completed in the next two to three years, those with resources and cost advantages, strong management will win.

 Experts pointed out that international dairy giant has been closely watching the development of China’s dairy industry, they will at the right time selected local giant as a partner, direct sharing of the fruits of victory after the industry consolidation, the investment will also be directly business management into capital shares.

 At present, this “opportunity” has come, the international dairy giant comeback in the Chinese market momentum has been faintly visible.

 2005, domestic dairy frequent flashes of strong combination can not but exclaim: Mengniu Dairy and the world’s second-largest conglomerate Danmaiela? Mahfouz hand, the United Kingdom RichKeen companies and unity with Subscription Wanda Percentile of 50 shares, the third largest shareholder of Bright Dairy Danone Asia Limited announced that the bright holdings of shares, the equity ratio rose to 11.55 percent.

 Fonterra chief executive AndrewFerrier confidently said: “The investment in Sanlu, reflecting China’s dairy industry, Fonterra confidence in the future, also shows that our efforts to resolve China’s domestic dairy industry.”

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