China to boost domestic dairy company M&A

The Ministry of Industry and Information Technology (MIIT) has finished a draft to promote mergers and acquisitions of infant formula companies, Friday's China Securities Journal reported.

The MIIT has submitted the draft to the country's top leadership, said the newspaper.

According to the draft, the ministry will foster the growth of large dairy companies over the next five years and aim to cultivate three to five companies each with an annual sales revenue exceeding five billion yuan (806.5 million US dollars) by the end of 2018.

The total number of infant formula companies will be reduced to around 50, said the draft.

The move aims at developing the global competitiveness of domestic infant formula companies and improving the quality of infant formula, said an industry insider.

The State Council, China's cabinet, has required that the quality of infant milk powder be strictly supervised under drug regulations.

On June 18, the MIIT summoned 127 milk powder producers to a meeting and told the companies to improve the quality of infant formula and restore customers' trust.

Representatives from the top 10 domestic companies, including Yili, Mengniu, Wandashan and Feihe, were present at the meeting.

There are a total of 127 infant formula companies in China with a total annual output of 600,000 tonnes. Only three companies have an annual output of 30,000 tonnes or more. Revenues for top 10 domestic brands are around 18 billion yuan.