China's Dairy Market Sees Fierce Competition

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Last updated at: (Beijing Time) Friday, July 19, 2002

China's Dairy Market Sees Fierce Competition

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The changing attitudes of Chinese people toward dairy products and potentially high economic returns are luring more and more companies into the industry, causing fierce competition and even an ill-advised price war.

Since last year, a large number of poorly-run dairy producers have been stuck in the financial mire, while others, like Shanghai-based Guangming, Beijing-based Sanyuan, and Inner Mongolia-based Mengniu, have expanded their market share by upgrading technology and improving product quality.

While domestic dairy producers were being split by competition,overseas dairy giants began to eye the Chinese market. So far, allthe world's top 20 dairy brands have entered the Chinese market and four of them have built production plants in the country, including Switzerland's Nestle and Italy's Parmalat.

In 2001, foreign-funded dairy producers provided one third of China's total, National Statistics Bureau figures show.

Eating dairy products is now becoming a trend for the Chinese, who have no tradition of drinking milk. Each Chinese person consumes 7.2 kilograms on average of dairy products a year, compared with the world average of nearly 100 kilograms.

While hailing the competitive atmosphere, experts point to problems, such as poor bovine breeding techniques and an ill-advised price war in the milk market. In China, one cow produces 3,500 kilograms of raw milk per year, much lower than the world average of 5,500 kilograms.

Calling the current dairy market "too hot", experts also urge companies eager to enter to think twice before investing. Thoroughfeasibility studies should be done, they warn, citing that some companies enter the sector blindly, without securing a stable raw milk supply or advanced processing and storage techniques.

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