Dairy firms brace for competition
Print Edition
CHINA’S dairy enterprises, especially infant formula makers, are gearing up for intense rivalry with foreign counterparts following the country’s new regulation to streamline imported dairy products.
So far, more than 1,000 overseas dairy producers have received entry approval from the quality watchdog. Of these, 41 are makers of infant formula milk powder from 13 countries, including New Zealand, Ireland and Singapore.
According to the new rule that took effect on May 1, foreign dairy firms have to ensure their products are consistent with China’s safety standards and registered with the General Administration of Quality Supervision, Inspection and Quarantine. It is the only way to gain access into the market.
The move was regarded as a fresh attempt by the Chinese government to further regulate the country’s dairy market for better product quality, keeping the excellent and weeding out the unqualified.
Industry analysts predict around 50 percent of small foreign milk powder producers that lack research capabilities will be ruled out of the Chinese market by the restriction.
The regulation, although seemingly harsh for overseas companies, is unlikely to hinder the operation of international giants like Danone, Wyeth and Mead Johnson, which are included in the approval list.
Song Liang, a senior analyst at the Distribution Productivity Promotion Center of China Commerce, said firms that have been rejected hardly had a significant market share and main competitors still remain, indicating tough competition for the country’s local brands.
In 2013, overseas milk powder brands had a 54 percent market share in terms of sales revenue. Beingmate, China’s largest milk powder maker, only had 8.5 percent of the market, dwarfed by 13.3 percent of Wyeth and 14.5 percent of Mead Johnson.
In addition, Song said the first batch of approvals only targeted the world’s major producers and the state watchdog will certify brands from countries, including Japan and the United States, in the next phase.
To tackle the fiercer competition, Chinese dairy firms are already taking measures.
Sanyuan, a Beijing-based dairy producer, has received 10 million yuan (US$1.6 million) in financial aid from the municipality for research on infant formula milk powder, dubbed as the corporate’s attempt to improve product quality and project a sound image for homegrown brands.
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