Hong Kong-listed infant formula producer Biostime International Holdings has said its acquisition of Changsha Yingke Nutrition Products Co. will enable it to target fourth- and fifth-tier cities in China.
Biostime has entered into an agreement to pay Hunan AVA Dairy Company and Hunan Changsha AVA Dairy Company CNY350m (US$57.8m) for Changsha Yingke.
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Changsha Yingke’s facilities have been earmarked for production of Biostime’s high-end infant milk powder, Adimil. The acquisition will enable Biostime to increase production of Adimil by 30,000-50,000 tonnes annually, the group said.
The company introduced Adimil to China in September as part of its tie-up with French dairy Isigny Sainte-Mère. Biostime said the brand had “won consumers’ trust” in the highly-sensitive Chinese infant formula category.
A series of high-profile safety scares has largely undermined Chinese consumer confidence in the safety of domestic infant formula, resulting in a growing reliance on international manufacturers. According to government statistics, foreign companies accounted for up to 80% of premium infant formula sales in the country last year.
In the back half of 2013, the Chinese government moved to tighten safety standards and increase oversight of the sector. Regulators have also called for consolidation in the sector and a number of domestic manufacturers are working to win sales in the hotly-contested premium infant formula market.
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By GlobalDataAs it works to expand the brand in the high-end market of fourth- and fifth-tier cities, Biostime said it would focus on developing new products to meet the needs of consumers in these areas.
In August, Biostime was among six baby formula manufacturers fined a total of CNY670m by the Chinese government for fixing prices.
