Asahi Unit, Tingyi to Form China Baby Milk Tie-Up on High Demand

Asahi Group (2502) Holdings Ltd., the Japanese beermaker, said it will form a joint venture with Tingyi (Cayman Islands) Holding Corp. to start importing its milk formula into China next spring.

Asahi’s Wakodo baby nutrition unit signed an agreement in October to form the venture in Shanghai, which will have a market capitalization of $5 million, according to a statement from the Japanese company today. Asahi would own 55 percent of the tie-up, while the Chinese food company would own the rest.

The Japanese company said it is importing infant formula into China because of a rising demand for high-quality products in the world’s most populous nation amid food safety concerns.

China’s infant-formula market is expected to expand more than 70 percent to 133.5 billion yuan ($22 billion) by 2015, according to Euromonitor International. The industry is currently dominated by international companies including Mead Johnson Nutrition Co. (MJN) and Danone.

Chinese consumers’ distrust of local milk has driven them to source products overseas or turn to foreign brands after milk powder tainted by chemical melamine killed six infants in China in 2008.

Asahi’s announcement comes as its domestic rival Meiji Co., the Japanese confectioner and dairy products company, said last month it would pull out of the infant nutrition market in the world’s second-largest economy due to rising costs and intensified competition.

Fonterra Cooperative Group Ltd., the world’s largest dairy exporter, said last week it will introduce its first baby milk formula across China as it expands its consumer business there.

To contact Bloomberg News staff for this story: Liza Lin in Shanghai at llin15@bloomberg.net; Yuki Yamaguchi in Tokyo at yyamaguchi10@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.