According to an article published by People’s Daily, mergers and acquisitions in the dairy industry have started and will peak prior to May of this year. In 2013, the central administration introduced the series of policies driving this phenomenon in order to improve the quality of the products in the baby formula industry. The article stated that the Ministry of Industry and Information Technology set a target to allow two years for the dairy industry to consolidate and transform into ten large enterprises, each with annual revenue of over two billion yuan (US$330 million), its own patents, and the ability to compete in the world market.
Currently there are 128 dairy manufacturing companies. The article said that most are small to mid-size companies. China’s Food and Drug administration has ordered that all dairy manufacturers complete an audit and inspection for their license renewal by May 31. If the manufacturer fails to do so, it will be shut down and be given two years to come back. The article continued with the prediction that this policy will allow those companies who fail to meet the requirements to find another way to survive. Estimates are that close to 1/3 of the companies will close. According to an industry expert quoted in the article, most of them are small size businesses. Therefore some experts predict that the small size dairy manufacturers will be better off putting themselves up for sale to get some money back instead of facing elimination.
Source: People’s Daily, February 7, 2014