Dairy industry moves to rebrand amid crisis

A 2012 report by AC Nielsen said that four foreign brands, namely MeadJohnson, Dumex, Wyeth and Abbott, had taken over nearly half of the Chinese market, with sales totaling 38.52 billion yuan ($6.25 billion).

Wang said foreign brands are expanding from high-end markets in large cities to smaller markets throughout China, making it even more difficult for their domestic counterparts to rebound.

Song Liang, a dairy industry analyst at the Distribution Productivity Promotion Center of China Commerce, said foreign companies have even raised their prices due to shattered consumer confidence in domestic companies.

Data from the Ministry of Commerce showed that the average retail price of foreign milk powder stands at 200.71 yuan per kg, while that of domestic brands is just 153.79 yuan per kg.

The Dairy Association of China (DAC) has said that finding "clean" milk sources for domestic companies through the construction of new pastures will be key to regaining consumer confidence.

Yang Wenjun, former president of Mengniu Dairy, a company that was also implicated in the 2008 scandal, agreed that Chinese dairy companies should construct their own pastures to ensure a clean and high-quality source for their milk.

The National Development and Reform Commission is expected to allocate 1 billion yuan this year for the construction of new milk sources, said Gu Jicheng, DAC secretary-general.

However, Li Hui, an analyst at Southwest Securities, said the construction will require a great deal of time and funding, which may cause the domestic dairy industry's production and operation costs to rise.