Business     

Wyeth cuts prices amid formula probe

Shanghai Daily, July 4, 2013

• Brand recognition

  Some Chinese infant formula companies have started forming partnerships with foreign firms to try to boost brand recognition and gain technical know-how.

  "Since consumer confidence in the Chinese products is seen as improving, it can be a chance to test if confidence in local brands can hold its own against the foreign competition," said Linus Yip, chief strategist at First Shanghai Securities.

  Foreign brands may also soon have to rely on their Chinese partners if they want greater access to the Chinese market.

  China has expressed interest in bringing the supply chain under the control of Chinese firms as part of its goal to reduce the number of domestic formula producers to 10 from more than 200 within two years.

  The Ministry of Industry and Information Technology said in June that integration of the milk powder industry was expected to lead to 10 companies with revenue exceeding 2 billion yuan.

  As part of this consolidation, China Mengniu Dairy Co Ltd signed a takeover deal last month to buy Carlyle-backed Yashili International Holdings Ltd in a deal worth about HK$12.5 billion (US$1.6 billion). In May, Mengniu announced a joint venture involving France's Danone.

  Domestic milk powder brands want to appeal to Chinese residents who can afford the baby formula made by international rivals.

  At supermarkets in large cities such Shanghai, 900 grams of infant formula made by an international firm can cost up to 275 yuan (US$45), compared to about 100 yuan for domestic formula in lower-tier cities.

  Milk producers boasting foreign ingredients have raised prices to the same range as global brands in an effort to distinguish themselves from the local crowd.

Copyright © China.org.cn. All Rights Reserved