Chinese food and beverage group Tingyi Holdings plans to form a joint venture with Japanese food and drinks maker Asahi to sell infant formula and baby products in China.
The venture will be formed by Tingyi and Wakodo, the infant nutrition unit of Asahi. The venture’s registered capital will stand at HK$5m (US$645,000) and Tingyi will hold a 45% stake in the business, the Chinese firm said in a statement to the Hong Kong stock exchange.
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Tingyi said the venture would be focused on marketing and selling infant formula and baby food supplements.
The Chinese infant formula market is valued at around US$12.4bn and sales are expected to double in the next four years.
However, competition in the high profile category is intensifying.
In a bid to improve food safety standards, the Chinese government is backing sector consolidation. Beijing has argued that fewer, bigger companies will have higher standards and be easier to regulate. Officials reportedly aim to reduce the number of domestic infant formula firms to between three and five companies with revenues of over CNY50bn (US$8.17bn) by 2018.
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By GlobalDataAs part of this drive, the government is preparing to invest CNY30bn in selected Chinese infant formula firms – including China Mengniu Dairy Co., Feihe International, and Inner Mongolia Yili Industrial Group – to help them compete with international rivals.
Beijing has also also clamped down on alleged price manipulation of infant formula products. In August, the authorities fined international formula manufacturers following a probe that found the companies – including Mead Johnson, FrieslandCampina and Danone – were guilty of breaching competition regulations.
Earlier this month, reports surfaced that Japan’s Meiji Holdings will exit the market. The company was said to be withdrawing from China due to the “harsh environment”, which prevented higher costs associated with using an Australian milk supply being passed down the chain.
Details of where the Tingyi-Asahi JV will manufacture infant formula are yet to be confirmed.
