Asahi Unit, Tingyi to Form China Baby Milk Tie-Up on High Demand
Stock Chart for Asahi Group Holdings Ltd (2502)
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.
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