Food Compliance
Intelligence & Solutions
Home / News / Details

Japanese Dairy Giant Meiji Doubles Down on China Market

Japan’s biggest dairy company Meiji announced the purchase of a 25% stake in AustAsia for 28 billion yen (1.84 billion yuan), the most significant in its M & A history. AustAsia is a Singapore-based dairy company that operates seven pastures in China. This acquisition is seen as a move by Meiji to increase its presence in China’s fresh milk and yogurt sector by securing a stable raw milk source supply.

On April 15, Japanese dairy company Meiji announced the purchase of a 25% stake in AustAsia translating to a 28 billion yen (1.84 billion yuan) in the Singapore-based dairy company that operates pastures in China. The 28 billion yen investment amount is the largest in Meiji’s M & A (mergers and acquisitions) history.

This is also the third investment of Meiji in the Chinese market in less than a year, totaling about $4 billion (27.95 billion yuan):

  • In September 2019, Meiji set up its first factory in north China in Tianjin, with a total investment of $300 million (2.1 billion yuan) to produce and sell Meiji’s fresh milk and yogurt products.

  • In March 2020, Meiji announced a 148.5 million yuan expansion of its milk and yogurt production line in Suzhou.

In response to the latest acquisition, Meiji said in a statement [1] that in order to increase its value over the long term, it is laying the foundation for business growth in overseas markets as detailed in "the Meiji Group 2026 Vision". The acquisition, which aims to establish stable raw milk supply in China, will improve Meiji’s industry chain from raw milk procurement to production and lay the foundation for its sustainable growth in China.

Meiji is bullish on China market potential

Meiji's China business covers milk, yogurt, ice cream, catering products, and snacks, and its performance in the Chinese market is on an upward growth trajectory. Meiji’s low-temperature pasteurized milk business is a prominent part of its business, which has witnessed significant growth in market size, especially in the East China regions, due to consumers' satisfaction with the taste and their trust in the milk source and quality. 

_20200417181855.png

According to the Meiji group fiscal year 2018 report, its low-temperature dairy product sales in China grew more than 20%. China is also seen by Meiji as the most important overseas market in its 2020 Medium-Term Business Plan. Behind this major acquisition is Meiji's ambition to further expand its investment in the fresh milk and yogurt market in China. In 2018, the low-temperature milk market capacity in China exceeded 42.7 billion, with an annual growth rate of 6.1% [2]

Competition in the milk source supply

Before this acquisition, Meiji had no stake in or no self-built milk sources in China. Since its entry into the Chinese market, Meiji mainly relied on milk sourced from pastures in Jiangsu and Hebei. However, considering that Meiji's China business focuses on cold-chain products, ensuring a stable supply of high-quality milk source is an integral part of its market expansion plan. AustAsia, the takeover target, has seven farms with 10 thousand cows in east and north China, with daily raw milk production exceeding 1000 tons [3]. According to AustAsia's website, it has been operating large pastures in China since 2009, and in 2018, it ranked No.6 among the 38 farms that boast annual yielding exceeding more than 11 tons [4].

As the production volume of fresh milk in China is declining [5], many dairy giants have begun to buy up pastures through acquisition or shareholding to ensure stable milk supply and to help them better control costs. The current pinch point in the market is sourcing a supply of raw milk. The two largest dairy companies Yili and Mengniu, have been busy buying up pastures or engaging in JVs. For example, Mengniu is cooperating with China Shengmu (the largest organic dairy company in China) to guarantee the supply of raw milk and organic raw milk. 

We provide full-scale global food market entry services (including product registration, ingredient review, regulatory consultation, customized training, market research, branding strategy). Please contact us to discuss how we can help you by food@chemlinked.com
Copyright: unless otherwise stated all contents of this website are ©2024 - REACH24H Consulting Group - All Rights Reserved - For permission to use any content on this site, please contact cleditor@chemlinked.com